Economics of Technology – Page 96

“Economics of Science” Published Today in The New Palgrave Dictionary of Economics (2nd ed.)

Source of image of the books: http://www.buy.com/prod/the-new-palgrave-dictionary-of-economics-second-edition/q/loc/106/204470936.html

Today (May 30, 2008) is the publication date of the second edition of The New Palgrave Dictionary of Economics, which includes my “Economics of Science” article. The article surveys the history and current status of research on the economics of science, and the relationship of the economics of science to the economics of technology.
For a much earlier, and much longer, take on some of the same issues, see “The Economics of Science.”

References to both articles:
Diamond, Arthur M., Jr. “Economics of Science.” In The New Palgrave Dictionary of Economics, 2nd Edition, edited by Steven N. Durlauf and Lawrence E.Blume. Basingstoke and New York: Palgrave Macmillan, 2008.
Diamond, Arthur M., Jr. “The Economics of Science.” Knowledge and Policy 9, no. 2 & 3 (1996): 6-49.

Private Space Companies Compete on Price and Quality

“A rendering of XCOR’s Lynx rocket-powered vehicle.” Source of the caption and image: online version of the WSJ article quoted and cited below.

(p. B1) A price war already is brewing among companies seeking to sign up would-be space tourists, years before the first privately financed rocketplanes are scheduled to begin flying.
XCOR Aerospace of Mojave, Calif., the latest entrant to the derby to blast thrill-seekers into the upper reaches of the atmosphere, is expected to unveil plans Wednesday for a rocket-powered vehicle that is substantially smaller, slower and less expensive to build than any of those proposed by rivals. With tickets projected at $100,000 a pop, the low-fare carrier to the heavens would hardly be cheap.
Anticipated to cost less than $10 million to build and to be more compact than many propeller planes used by recreational pilots, XCOR’s Lynx vehicle is intended to carry a pilot and a single passenger at twice the speed of sound to about 37 miles above the earth. The entire outing, which would begin and end at a conventional airport and include about two minutes of suborbital zero gravity, would take less than half an hour.
That is a significantly shorter trip — and only about half the ticket price — envisioned by British billionaire Sir Richard Branson on his Virgin Galactic spaceship. A sleek and more powerful six-passenger craft, it is designed to travel at about four times the speed of sound and zoom completely out of the atmosphere — reaching true space more than 60 miles above the earth.

For the full story, see:
ANDY PASZTOR. “Economy Fare ( $100,000) Lifts Space-Tourism Race.” The Wall Street Journal (Weds., March 26, 2008): B1-B2.

“Virgin Galactic will launch its rocket from a plane.” Source of the caption and image: online version of the WSJ article quoted and cited above.

How Corning Invests in Major Innovations

Source of graphic: online version of the WSJ article quoted and cited below.

(p. B1) Corning Inc. has survived for 157 years by betting big on new technologies, from ruby-colored railroad signals to fiber-optic cable to flat-panel TVs. And now the glass and ceramics manufacturer is making its biggest research bet ever.
Under pressure to find its next hit, the company has spent half a billion dollars — its biggest wager yet — that tougher regulations in the U.S., Europe and Japan will boost demand for its emissions filters for diesel cars and trucks.
. . .
An investment 25 years ago has turned Corning into the world’s largest maker of liquid-crystal-display glass used in flat-panel TVs and computers. But another wager, which made it the biggest producer of optical fiber during the 1990s, almost sank the company when the tech boom turned into a bust.
In Erwin, a few miles from the company’s headquarters in Corning, the glassmaker is spending $300 million to ex-(p. B2)pand research labs. There, some 1,700 scientists work on hundreds of speculative projects, from next-generation lasers to optical sensors that could speed the discovery of drugs.
“Culturally, they’re not afraid to invest and lose money for many years,” says UBS analyst Nikos Theodosopoulos. “That style is not American any more.”
Corning also goes against the grain in manufacturing. While it has joined the pack in moving most of its production overseas, it eschews outsourcing and continues to own and operate the 50 factories that churn out thousands of its different products.
Corning argues that retaining control of research and manufacturing is both a competitive advantage and a form of risk management. Its strategy is to keep an array of products in the pipeline and, once a market develops, to build factories to quickly produce in volumes that keep rivals from gaining traction.

For the full story, see:
SARA SILVER. “Corning’s Biggest Bet Yet? Diesel-Filter Technologies.” The Wall Street Journal (Fri., March 7, 2008): B1-B2.
(Note: ellipsis added.)

“Corning DuraTrap diesel-engine filter.” Source of caption and photo: online version of the WSJ article quoted and cited above.

United States Making More Output with Less Physical Input: An Almost Lighter Economy

(p. 492) The long-standing trend away from value produced by manual labor and natural resources and toward the intangible value-added we associate with the digital econnomy can be expected to continue. Today it takes a lot less physical material to produce a unit of output than it did in generations past. Indeed, the physical amount of materials and fuels either consumed in the production of output or embodied in the output has increased very modestly over the past half century. The output of our economy is not quite literally lighter, but it is close.
Thin fiber-optic cable, for instance, has replaced huge tonnages of copper wire. New architectural, engineering, and materials technologies have enabled the construction of buildings enclosing the same space with far less physical material than was required fifty or one hundred years ago. Mobile phones have not only downsized but also morphed into multipurpose communication devices. The movement over the decades toward production of services that require little physical input has also been a major contributor to the marked rise in the ratio of constant dollars of GDP to tons of input.

Source:
Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.
(Note: italics in original.)

Have You Hugged Your Venture Capitalist Today?

“Apple’s chief executive, Steven P. Jobs, left, and the venture capitalist John Doerr at Apple headquarters in Cupertino, Calif.” Source of caption and photo: online version of the NYT article cited below.

(p. C3) CUPERTINO, Calif. — Steven P. Jobs, Apple’s chief executive, is hoping to expand the iPhone’s appeal by luring software developers to create programs for it.
John Doerr, the venture capitalist, is adding an incentive: his firm is putting up $100 million to invest in the work of those programmers.
At an event Thursday at Apple headquarters, Mr. Jobs announced a low-cost software development kit that outside programmers can use to create programs for the iPhone, much as they now write the vast majority of the programs created for the Macintosh. Until now, iPhones have officially been able to run only the limited assortment of applications that Apple includes. (Some buyers have modified the phones to add unauthorized software.)
“We’re very excited about this,” said Mr. Jobs, who also announced that the company was adding features to make the iPhone more appealing to business users. “We think a lot of people, after understanding where we are going, are going to want to become an iPhone developer.”
Sharing the stage with Mr. Jobs, Mr. Doerr announced that his firm, Kleiner Perkins Caufield & Byers, had established a $100 million venture capital fund for iPhone entrepreneurs. Called the iFund, it is the largest fund the company has created for a specific technology.
“The potential for iPhone is huge,” Mr. Doerr said.

For the full story, see:
LAURIE J. FLYNN. “Apple to Encourage iPhone Programmers.” The New York Times (Fri., March 07, 2008): C3.

Google Does Evil: How to Succeed by Lobbying the Regulators

(p. A14) You’re saying to yourself, haven’t Google and friends been gnashing their teeth over the landline practices of the Verizons and Comcasts, demanding “net neutrality” regulations to be erected against crimes to be named later? Yes, and without much success. Consider a recent Rensselaer Polytechnic Institute study that found that imposing Google’s idea of “net neutrality” (i.e., restricting a network operator’s ability to prioritize urgent and non-urgent data) would end up cutting a network’s peak capacity in half.
Now Google and friends are turning to wireless, which they hope will prove a softer target. Here operators traditionally have built networks for the restricted purpose of letting customers make voice calls with an operator-supplied cellphone. But most operators have also started rolling out all-purpose broadband on their wireless networks, albeit high-priced and painfully slow (evidence of their need to ration capacity carefully to protect higher-priority voice traffic).
Verizon offers BroadbandAccess, a service that allows a customer, with a laptop card, to use Verizon’s wireless network for Web surfing. AT&T, T-Mobile and Sprint offer similar services. Likewise, Sprint and Clearwire are building out a new kind of wireless network, WiMax, for truly fast mobile broadband.
That’s not good enough for Google and its allies, who want the government to require wireless operators to provide unrestricted Web surfing to buyers of basic phone plans. Don’t be misled by the “net neutrality” and “open access” masquerades. This is nothing but business-model chauvinism, aided not a little by the mental clottedness of regulators, who evidently can be led to believe that any network operating on digital principles must be packaged and sold to customers in only one way.
. . .
Make no mistake: Google understands that restricting a wireless operator’s ability to design its own business model can, by definition, only reduce its incentive to invest. But Google has bigger fish to fry. It wants to make sure it can continue to free-ride on your broadband subscription bills, even in the mobile world. It wants to make sure it won’t have to share the proceeds of its massive search and advertising dominance with suppliers of network capacity.
Most of all, it wants to replicate in mobile search and advertising the overpowering position it has achieved in the fixed broadband world — something that might not be possible if wireless operators are left any opportunity to carve out a business model other than as simply suppliers of the proverbial “dumb pipe.”

For the full commentary, see:
Holman W. Jenkins, Jr. “Business World: Sort of Evil.” Wall Street Journal (Weds., July 18, 2007): A14.
(Note: ellipsis added.)

The Free Market Works

The story quoted below tells how outsourcing high-tech jobs to India has bid up the salaries of high-tech Indian engineers, thereby reducing the appeal of further outsourcing. Marvelous how the market works!
Another lesson from the story applies to forecasting: mechanical extrapolation of current trends is inferior to prediction that takes account of predictable changes in prices (in this case, salaries).

(p. A15) Around the century’s turn, when U.S. companies first began flooding to India for its cheap labor, pundits warned that the subcontinent could increasingly rob the U.S. of high-end white-collar jobs. Debate was especially sharp in Silicon Valley, then in a slump, because India annually turns out nearly 500,000 engineering graduates.
. . .
Several years on, the forces of globalization are starting to even things out between the U.S. and India, in sophisticated technology work. As more U.S. tech companies poured in, they soaked up the pool of high-end engineers qualified to work at global companies, belying the notion of an unlimited supply of top Indian engineering talent. In a 2005 study, McKinsey & Co. estimated that just a quarter of India’s computer engineers had the language proficiency, cultural fit and practical skills to work at multinational companies.
The result is increasing competition for the most skilled Indian computer engineers and a narrowing U.S.-India gap in their compensation. India’s software-and-service association puts wage inflation in its industry at 10% to 15% a year. Some tech executives say it’s closer to 50%. In the U.S., wage inflation in the software sector is under 3%, according to Moody’s Economy.com.
Rafiq Dossani, a scholar at Stanford University’s Asia-Pacific Research Center who recently studied the Indian market, found that while most Indian technology workers’ wages remain low — an average $5,000 a year for a new engineer with little experience — the experienced engineers Silicon Valley companies covet can now cost $60,000 to $100,000 a year. “For the top-level talent, there’s an equalization,” he says.

For the full story, see:
Pui-Wing Tam and Jackie Range. “Second Thoughts: Some in Silicon Valley Begin to Sour on India; A Few Bring Jobs Back As Pay of Top Engineers In Bangalore Skyrockets.” Wall Street Journal (Tues., July 3, 2007): A1 & A15.
(Note: ellipsis added.)

Entrepreneur Calls 2008 “The Year of the Spaceship”

Burt Rutan’s current design for WhiteKnightTwo, carrying the smaller SpaceShipTwo spaceship. Source of image: http://www.techno-science.net/?onglet=news&news=4993

(p. A18) Virgin Galactic, the company that hopes to fly well-heeled tourists to the edge of space by the end of 2009, provided a peek Wednesday at the craft that will take them there.
During a news conference at the American Museum of Natural History in Manhattan, Richard Branson, the British entrepreneur whose Virgin Airways is the parent company of the project, said 2008 would be “the year of the spaceship.”
Mr. Branson showed models of two vehicles, both created by the airplane designer Burt Rutan. WhiteKnightTwo, a two-fuselage, four-engine plane, is designed to ferry a smaller spacecraft, SpaceShipTwo, high into the sky and release it. The pilot of SpaceShipTwo will then fire the craft’s rocket engine, which burns a combination of nitrous oxide and a rubber-based solid fuel, shooting the vehicle to an altitude of more than 62 miles into the realm of black sky.

For the full story, see:
JOHN SCHWARTZ. “Built to Fly Into Space With the Greatest of Ease (They Hope).” The New York Times (Thurs., January 24, 2008): A18.

Artist’s rendering of SpaceShipTwo spaceship. Source of image: http://www.techno-science.net/?onglet=news&news=4993

Government Post-Doc Funding Creates “Glut” of Scientists

The quotes below from a WSJ summary of a Nov. 16, 2007 The Chronicle of Higher Education article, suggests that we do not need to worry about the sometimes-alleged “shortage” of scientists and engineers:

(p. B14) The federal dollars pumped into university science departments has created more scientists and engineers than the market wants, said Michael S. Teitelbaum, vice president of Alfred P. Sloan Foundation, which sponsors research, at a hearing in Congress last week. Mr. Teitelbaum said the federal government should find a way to adjust how it funds university research so that university departments don’t end up using the extra money to add graduate students and postdoctoral fellows

For the full summary, see:
“The Informed Reader; Science; U.S. Faces a Glut (Really) of Scientists, Engineers.” The Wall Street Journal (Tues., November 13, 2007): B14.

Controversial Patent Reform

Source of graph: online version of the WSJ article quoted and cited below.

(p. A3) The sweeping patent initiative — backed by a business coalition dominated by technology companies such as Cisco Systems Inc. and Microsoft Corp. — would . . . shift the balance of power of the U.S. patent system. It would make it a bit harder for holders to protect patents. Advocates of the legislation contend the current system encourages patent litigation and costly judgments against infringers — and stifles innovation. They say the proposals are designed to bring patent rules in line with the rapidly changing U.S. economy, where inventions often reflect hundreds of potentially patentable ideas.

Mark Chandler, Cisco’s general counsel, dismissed concerns that non-U.S. companies might gain some advantage by the bill. He said the proposed changes would strengthen companies at “the heart of innovation in the American economy,” better positioning them to compete at home and abroad.

Opponents of the legislation argue that it would make it easier for foreign competitors to legally copy patented methods and products.

For the full story, see:
GREG HITT. “Patent System’s Revamp Hits Wall; Globalization Fears Stall Momentum in Congress; AFL-CIO Sends a Letter.” The Wall Street Journal (Mon., August 27, 2007): A3.
(Note: ellipsis added.)

Racetrack Memory May Become a General Purpose Technology

Source of graph: online version of the NYT article quoted and cited below.

The article quoted below suggests that an important new “disruptive” memory technology may be on the horizon. It sounds as though it would be what economists call a “general purpose technology” that would be useful in generating a large number of innovative applications.

(My guess is that in Christensen’s terminology, this technology would be more sustaining, than disruptive, since the technology seems as though it would be of immediate interest to the mainstream market.)

(p. C1) SAN JOSE, Calif. — The ability to cram more data into less space on a memory chip or a hard drive has been the crucial force propelling consumer electronics companies to make ever smaller devices.

It shrank the mainframe computer to fit on the desktop, shrank it again to fit on our laps and again to fit into our shirt pockets.

. . .

Mr. Parkin thinks he is poised to bring about another breakthrough that could increase the amount of data stored on a chip or a hard drive by a factor of a hundred. If he proves successful in his quest, he will create a “universal” computer memory, one that can potentially replace dynamic random access memory, or DRAM, and flash memory chips, and even make a “disk drive on a chip” possible.

. . .

(p. C8) Mr. Parkin’s new approach, referred to as “racetrack memory,” could outpace both solid-state flash memory chips as well as computer hard disks, making it a technology that could transform not only the storage business but the entire computing industry.

“Finally, after all these years, we’re reaching fundamental physics limits,” he said. “Racetrack says we’re going to break those scaling rules by going into the third dimension.”

His idea is to stand billions of ultrafine wire loops around the edge of a silicon chip — hence the name racetrack — and use electric current to slide infinitesimally small magnets up and down along each of the wires to be read and written as digital ones and zeros.

. . .

Mr. Parkin said he had recently shifted his focus and now thought that his racetracks might be competitive with other storage technologies even if they were laid horizontally on a silicon chip.

I.B.M. executives are cautious about the timing of the commercial introduction of the technology. But ultimately, the technology may have even more dramatic implications than just smaller music players or wristwatch TVs, said Mark Dean, vice president for systems at I.B.M. Research.

“Something along these lines will be very disruptive,” he said. “It will not only change the way we look at storage, but it could change the way we look at processing information. We’re moving into a world that is more data-centric than computing-centric.”

This is just a hint, but it suggests that I.B.M. may think that racetrack memory could blur the line between storage and computing, providing a key to a new way to search for data, as well as store and retrieve data.

And if it is, Mr. Parkin’s experimental physics lab will have transformed the computing world yet again.

For the full story, see:

JOHN MARKOFF. “Redefining the Architecture of Memory.” The New York Times (Tues., September 11, 2007): C1 & C8.

(Note: ellipses added.)

Of the two photos at the bottom of the entry, the first is of Stuart S. P. Parkin’s lab at I.B.M, and the second is of Parkin in the lab. Source of photos: online version of the NYT article quoted and cited above.