Innovation is key to the economy, but creating a society that values and encourages the constant turnover of the old for the new can be a difficult balance. In reality, one innovation can block the next, as products and companies strive to stay relevant.
This is why economists at the Canadian Institute for Advanced Research are tackling this problem from many angles.
Philippe Aghion, professor of economics at Collège de France, looks at the conflicts between growth and competition, and how creativity needs to be destructive to continue to disrupt the new status quo.
“The problem is the poverty trap, the problem is the mobility trap – (it’s) the fact that people at the bottom cannot get to the top,” says Aghion.
Daron Acemoglu, professor of economics at the Massachusetts Institute of Technology, defines true progress as the creation of shared wealth, producing the lowest levels of poverty. Sustained economic progress can’t come at the expense of certain people at the bottom, or at the expense of freedom and social progress.
“What if we are creating more and more wealth, but at the same time we’re taking a lot more civil liberties away, we’re muzzling the press, we are getting rid of the freedom of speech?” says Acemoglu.
“Well, that would not just be a very impoverished society, socially and culturally, but it would also, I claim, in the long run not enable that enrichment, that economic progress.”
So how can societies encourage this type of economic growth? Economic decisions are largely defined by a society’s institutions. Laws and regulations create the framework under which research and innovation functions, by creating opportunities and incentives, says Acemoglu.
Institutions also decide on major capital projects, such as building a dam for hydroelectric power, or improving educational systems, explains Daniel Trefler, professor of economics at the University of Toronto.
“The big question about institutions are how do they change and adapt so that we can become more successful?” says Trefler.
By creating frameworks in which success looks like a better life for every member of society, innovation will look like progress from every angle.