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Innovation is a primary driver of economic growth and of the rise in living standards, and a substantial body of research has been devoted to documenting the welfare benefits from it (an example being Trajtenberg’s 1989 study). Few areas have experienced more rapid innovation than the Personal Computers (PC) industry, with much of this progress being associated with a particular component, the Central Processing Unit (CPU). The past few decades had seen a consistent process of CPU innovation, in line with Moore’s Law: the observation that the number of transistors on an integrated circuit doubles every 18-24 months (see figure below). This remarkable innovation process has clearly benefitted society in many, profound ways.

A notable feature of this innovation process is that a new PC is often considered “obsolete” within a very short period of time, leading to the rapid elimination of non-frontier products from the shelf. This happens despite the heterogeneity of PC consumers: while some (e.g., engineers or gamers) have a high willingness-to-pay for cutting edge PCs, many consumers perform only basic computing tasks, such as word processing and Web browsing, that require modest computing power. A PC that used to be on the shelf, say, three years ago, would still adequately perform such basic tasks today. The fact that such PCs are no longer available (except via a secondary market for used PCs which remains largely undeveloped) raises a natural question: is there something inefficient about the massive elimination of products that can still meet the needs of large masses of consumers?

Consider, for example, a consumer whose currently-owned, four-year old laptop PC must be replaced since it was severely damaged. Suppose that this consumer has modest computing-power needs, and would have been perfectly happy to keep using the old laptop, had it remained functional. This consumer cannot purchase the old model since it has long vanished from the shelf. Instead, she must purchase a new laptop model, and pay for much more computing power than she actually needs. Could it be, then, that some consumers are actually hurt by innovation?

A natural response to this concern might be that the elimination of older PC models from the shelves likely indicates that demand for them is low. After all, if we believe in markets, we may think that high levels of demand for something would provide ample incentives for firms to offer it. This intuition, however, is problematic: as shown in seminal theoretical work by Nobel Prize laureate Michael Spence, the set of products offered in an oligopoly equilibrium need not be efficient due to the misalignment of private and social incentives. The possibility that yesterday’s PCs vanish from the shelf “too fast” cannot, therefore, be ruled out by economic theory alone, motivating empirical research.

A recent article addresses this question by applying a retrospective analysis of the U.S. Home Personal Computer market during the years 2001-2004. Data analysis is used to explore the nature of consumers’ demand for PCs, and firms’ incentives to offer different types of products. Product obsolescence is found to be a real issue: the average household’s willingness-to-pay for a given PC model is estimated to drop by 257 $US as the model ages by one year. Nonetheless, substantial heterogeneity is detected: some consumers’ valuation of a PC drops at a much faster rate, while from the perspective of other consumers, PCs becomes “obsolete” at a much lower pace.

The paper focuses on a leading innovation: Intel’s introduction of its Pentium M® chip, widely considered as a landmark in mobile computing. This innovation is found to have crowded out laptops based on older Intel technologies, such as the Pentium III® and Pentium 4®. It is also found to have made a substantial contribution to the aggregate consumer surplus, boosting it by 3.2%- 6.3%.

These substantial aggregate benefits were, however, far from being uniform across different consumer types: the bulk of the benefits were enjoyed by the 20% least price-sensitive households, while the benefits to the remaining 80% were small and sometimes negligible. The analysis also shows that the benefits from innovation could have “trickled down” to the masses of price-sensitive households, had the older laptop models been allowed to remain on the shelf, alongside the cutting-edge ones. This would have happened since the presence of the new models would have exerted a downward pressure on the prices of older models. In the market equilibrium, this channel is shut down, since the older laptops promptly disappear.

Importantly, while the analysis shows that some consumers benefit from innovation much more than others, no consumers were found to be actually hurt by it. Moreover, the elimination of the older laptops was not found to be inefficient: the social benefits from keeping such laptops on the shelf would have been largely offset by fixed supplier costs.

So what do we make of this analysis? The main takeaway is that one has to go beyond aggregate benefits and consider the heterogeneous effects of innovation on different consumer types, and the possibility that rapid elimination of basic configurations prevents the benefits from trickling down to price-sensitive consumers. Just the same, the paper’s analysis is constrained by its focus on short-run benefits. In particular, it misses certain long-term benefits from innovation, such as complementary innovations in software that are likely to trickle down to all consumer types. Additional research is, therefore, needed in order to fully appreciate the dramatic contribution of innovation in personal computing to economic growth and welfare.

The post Out with the old? appeared first on OUPblog.

        

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1. Flip the premise around. Let's take a tired idea as an example. Girl falls for mysterious guy who is really a demon/werewolf/vampire/paranormal creature. Eh. How about if he tries to get her to fall for him, but she isn't interested and it turns out she's actually a demon hunter who has become the hunted? A little better...
2. Change the gender roles. What if it's a girl that's the creature and the normal boy falls for her? Still not great, but it's got more promise.
3. Take a necessary supporting character and look at it from her POV. Maybe it's about a girl who knows the guy's secret all along and has loved him for years, but has to watch as he makes a fool of himself going after the other girl.
4. Combine several: The girl above has to protect the demon from the hunter because he can't see the danger ahead. Yeah, I like that one. What do you think? 

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1. I can give it the full attention it deserves when I'm ready.
2. I will have the satisfaction of knowing that my other project, which was once the shiny new idea, worked out.
3. If I can't stay focused on the other idea, what makes me think this will go any better?

The readers and writers of this blog understand our mission: to get kids to learn the material taught in their curricula by reading interesting, well-written books on the various topics. Simple idea, right? There’s a larger mission out there: to get kids to read, period. Again, our answer is to give them interesting and entertaining books to read and show that fiction doesn’t have a lock on reader appeal. Another simple idea that we each reiterate in blog after blog, book after book.

The world doesn’t yet get it. If it had, we authors would all be making decent, secure livings. Some of the impediments come from the vested interests of textbook publishers who have a political stronghold on classroom reading via the factory mentality of education—feed kids all the same gozintas to produce standardized-testing gozoutas. (How’s that working for us?) Another comes from harried, overworked and frightened teachers who have no time to invest in learning about alternative reading materials and believe that their job security depends on sticking with the prescribed books. Still another comes from frustrated school librarians who don’t have enough administrative support to help them work with teachers.

Jay Gabler, who did his doctoral dissertation at Harvard on a " Social History of Children's Literature" gives us authors credit, along with progressive publishers, for the dramatic and welcome changes in children's nonfiction literature. He says, "It's important to note, though, that my time frame is on the order of decades,such changes don't occur overnight, but one book at a time. Authors and critics, it seems, have long been on the forward edge of the progressive movement in children's literature (as in literature generally) with publishers and the audience catching up over time"

My preK-1 “Science Play” series, published 6-8 years ago, is very innovative. I disguised the books to look like traditional picture books designed to be read aloud by a loving adult to a child. (Julia Gorton did a great job with the illustrations.) Since the best picture books promote unscripted interactivity between the reader and the child, (read my piece in Booklist about such books) I built the interactivity right into the script itself. The reader is to read a few pages, an activity is suggested, the kid and reader do the activity and then come back to the book and read some more. Ultimately, the reading and stopping to do stuff culminate in a non-intuitive understanding of a scientific concept worth cheering about, in physics no less. The books were well reviewed and I Face the Wind was the only Sibert Honor book of 2004, which gave that title a slight bump in sales. Over the years sales leveled off and despite the awards and great reviews HarperCollins has declined to commission any more books like this. Since timing may be the key ingredient to success, I can only conclude that, once again, I’m ahead of my time. (Sigh!)

Jay’s observations seem to be confirmed by a recent royalty statement. Much to my delight I discover that in the last royalty period thousands of copies of each title in the Science Play series were sold instead of hundreds and the winning title was I Fall Down about gravity, not the big award-winner about wind

Recent blogs about the author’s process have been personally helpful and reaffirming, so I’d like to continue the discussion by writing about the author’s pre-process – ways to uncover the perfect, albeit illusive, idea. Even more to the point, how does the author deal with that period of time just before the kernel of an idea breaks out? Hint: space.

Consider this: The last book has just gone through its final edit and it is out of your hands. The baby is on its own, to sink or swim, to sing or clunk. What’s next? Everyone and their mothers-in-law seem to ask the big question: “So, what are you doing next?” Gulp! Next? Is there a next? How often does this happen to you?

If you are lucky a new and exciting project awaits. But that’s not always the case. And it’s one thing to have a next project, and another to have a next project that is desirable. For example, when I finish a demanding human rights topic for young adults, I like to follow it with a colorful photo essay for very young children. Professionally, it gives me a sense of balance and breathing space. It acknowledges both the joys and the sorrows nonfiction undertakes as we realistically depict the world around us.

But there are times when I’ve experienced the absolute reality that I have no new ideas. There will never, ever be an idea as interesting, fun, saleable as my last book! “So what are you working on now?” That phrase haunts my waking hours. It creeps into dreams. It’s the 500 pound gorilla in the room – along with how old are you? and how much money do you make? – asked during school visits. Nothing. Nada. No idea. Try saying this at a party. It’s a great way to drink alone.

Over the years I’ve developed a few tricks – do’s and don’ts – to get me over the no-idea hump. Here are but a few. Please feel free to add, subtract, or challenge this list.


Don’ts

Don’t devote entire days to household projects. It only keeps you from thinking about writing. You can clean closets anytime, even when on a deadline. Don’t try to make every recipe in the Barefoot Contessa’s latest cookbook. Again, it takes away from literary thinking and you will gain about eight pounds. Trust me, I know this. If you don’t heed my advice on this one, change the quantity of butter to olive oil.

Don’t take on your craziest family members’ problems and try to reform them. It will only lead to a fight and won’t change anything. You will still have no new ideas – that are legal or printable. Don’t go shopping. It’s depressing to see all the beautiful things you can’t afford because you have no new ideas to help pay for them. On second thought, maybe this should go into the “do” section as it reaffirms that you will have a new idea eventually, hopefully before the bills arrive. You’re on your own with this one. Don’t indulge the notion that you will never have a new idea for more than 72 hours. After that, it gets old and boring to those near and dear. Of all the don’ts, if you can handle the time frame of the last don’t, feel free to indulge in the other four, but try to keep it down to as few hours as possible.

All these “don’ts” are getting me down. Let’s move on to …

Do’s

Isabel Allende, in a Q & A about writing, said, “Few people know how to be still and find a quiet place inside themselves …. From that place of silence and stillness the creative forces emerge; there we find faith, hope, strength, and wisdom.” I couldn't agree more.

Give yourself the gift of silence. Let silence, like the pause between musical movements or the white spaces around Asian poetry and art, give your creative juices time to recoup. Visit someplace beautiful: spend time with a favorite painting in a museum, walk along the river, look up at a big sky. The ocean and a white sandy beach work best for me, but that’s not a