Well done, Lynne. These are my favorite sentences - "In electricity, this means innovation cannot reach its potential if regulation protects incumbent arrangements such as rate-of-return models, vertically integrated utilities, and static market rules." "Data are the twenty-first century’s “useful knowledge.” Regulators should treat grid and customer data as shared intellectual infrastructure—protected where necessary, but open enough to enable third-party innovation."
Lynne, this is useful energy for me and touching. The dismal science; not so dismal after all. This is one of your best essays and sparks many thoughts for me. Keep going! Lawrence from London
Great essay thank you Lynne, as a recovering regulator I have the sense that we risk fossilising current industrial structures and foregoing huge potential for a digitalised productivity revolution in electricity if we persist with the current level of regulatory prescription in regulation of networks and physics blind pricing rules for generation, storage and interconnection.
This is a wonderful synthesis. One question it raises for me: Mokyr warns that the culture of growth is fragile and needs vigilance. But what about the institutions that turn discovery into deployment? Bell Labs was dismantled by shareholders in a society that still celebrated innovation. The culture of improvement remained intact; the infrastructure for acting on it was stripped for parts. Does Mokyr's framework address why societies might maintain the culture while losing the institutions that make it productive? Or is that a different phenomenon?
Great stuff as always, Lynne, and I appreciate you making the prize relevant to the important work of utility regulation. And while it doesn't at all change or affect the validity of your comments (or the reasoning behind the prize), I have to take issue with the chart of world economic output. Seems like these data should be plotted on a logarithmic y-axis. That would show whether or not the RATE of growth has increased over time, not just that growth has occurred, and that would more clearly support the authors' arguments about the relationship between growth and the policies we choose or institutions we enable.
“Aghion and Howitt, meanwhile, show how competition and entry drive innovation. In monopoly systems, incumbents have little reason to disrupt their own revenue models.”
The public sector is a virtual monopoly which is why it acts as a brake on progress. Also, the public sector enjoys the financial power of taxation which enables it to promote technologies that wouldn’t otherwise survive the rigours of the free market.
Really like this but “In the end, energy innovation is the driver of economic growth” seems crude. If that’s the Nobelists’ conclusion then I think there’s still a level deeper to go.
Thanks; any crudeness is due to me and not them! Without abusing the time and patience of you as readers, I wanted to connect their important work with the ideas and issues that animate my work and consume my daily attention. And I do think that if it were possible to do some kind of factor decomposition of the determinants of economic growth, the coefficient on energy innovation would be high.
Mokyr’s Lever of Riches (1990) has a chapter enumerating 21 (I believe, don’t have it close to hand) factors that influence why economic growth occurs when, where, and how it does. Energy resources aren’t called out specifically as one of them, but are scattered across several (e.g., abundant natural resources, institutions conducive to innovation, etc.). Another worthwhile article from a Schumpeterian perspective is Foster (2014), which has a good bibliography: https://link.springer.com/article/10.1007/s00191-014-0348-6.
I instinctively want to divide energy innovation from machine innovation and compare them, but the more I think about it the harder it seems to put hard boundaries on them. It feels a bit like science and technology, but even blurrier.
Still, “the coefficient on energy innovation would be high” must be right because energy is a cost in everything mechanised and making it cheaper in some particular way will always make new activities viable.
Makes me wonder about food, which is a cost in everything non-mechanised. Presumably innovation in food production plays a similar role before the industrial revolution and then starts to fade out.
Or maybe we should just count food as a kind of energy.
Well done, Lynne. These are my favorite sentences - "In electricity, this means innovation cannot reach its potential if regulation protects incumbent arrangements such as rate-of-return models, vertically integrated utilities, and static market rules." "Data are the twenty-first century’s “useful knowledge.” Regulators should treat grid and customer data as shared intellectual infrastructure—protected where necessary, but open enough to enable third-party innovation."
Lynne, this is useful energy for me and touching. The dismal science; not so dismal after all. This is one of your best essays and sparks many thoughts for me. Keep going! Lawrence from London
Great essay thank you Lynne, as a recovering regulator I have the sense that we risk fossilising current industrial structures and foregoing huge potential for a digitalised productivity revolution in electricity if we persist with the current level of regulatory prescription in regulation of networks and physics blind pricing rules for generation, storage and interconnection.
This is a wonderful synthesis. One question it raises for me: Mokyr warns that the culture of growth is fragile and needs vigilance. But what about the institutions that turn discovery into deployment? Bell Labs was dismantled by shareholders in a society that still celebrated innovation. The culture of improvement remained intact; the infrastructure for acting on it was stripped for parts. Does Mokyr's framework address why societies might maintain the culture while losing the institutions that make it productive? Or is that a different phenomenon?
Great stuff as always, Lynne, and I appreciate you making the prize relevant to the important work of utility regulation. And while it doesn't at all change or affect the validity of your comments (or the reasoning behind the prize), I have to take issue with the chart of world economic output. Seems like these data should be plotted on a logarithmic y-axis. That would show whether or not the RATE of growth has increased over time, not just that growth has occurred, and that would more clearly support the authors' arguments about the relationship between growth and the policies we choose or institutions we enable.
I came across this by chance and jumped in. I am glad I did, it’s a great essay about a very important subject
“Aghion and Howitt, meanwhile, show how competition and entry drive innovation. In monopoly systems, incumbents have little reason to disrupt their own revenue models.”
The public sector is a virtual monopoly which is why it acts as a brake on progress. Also, the public sector enjoys the financial power of taxation which enables it to promote technologies that wouldn’t otherwise survive the rigours of the free market.
Really like this but “In the end, energy innovation is the driver of economic growth” seems crude. If that’s the Nobelists’ conclusion then I think there’s still a level deeper to go.
Thanks; any crudeness is due to me and not them! Without abusing the time and patience of you as readers, I wanted to connect their important work with the ideas and issues that animate my work and consume my daily attention. And I do think that if it were possible to do some kind of factor decomposition of the determinants of economic growth, the coefficient on energy innovation would be high.
Mokyr’s Lever of Riches (1990) has a chapter enumerating 21 (I believe, don’t have it close to hand) factors that influence why economic growth occurs when, where, and how it does. Energy resources aren’t called out specifically as one of them, but are scattered across several (e.g., abundant natural resources, institutions conducive to innovation, etc.). Another worthwhile article from a Schumpeterian perspective is Foster (2014), which has a good bibliography: https://link.springer.com/article/10.1007/s00191-014-0348-6.
For a Europe-focused analysis, Power to the People (Princeton University Press, 2014) is good: https://press.princeton.edu/books/hardcover/9780691143620/power-to-the-people
Thanks! Very thoughtful.
I instinctively want to divide energy innovation from machine innovation and compare them, but the more I think about it the harder it seems to put hard boundaries on them. It feels a bit like science and technology, but even blurrier.
Still, “the coefficient on energy innovation would be high” must be right because energy is a cost in everything mechanised and making it cheaper in some particular way will always make new activities viable.
Makes me wonder about food, which is a cost in everything non-mechanised. Presumably innovation in food production plays a similar role before the industrial revolution and then starts to fade out.
Or maybe we should just count food as a kind of energy.