Baumol 4 [William J. Baumol, Professor Emeritus at Princeton University, The Free-Market Innovation Machine : Analyzing the Growth Miracle of Capitalism, The “Somewhat Optimal” Attributes of Capitalist Growth: Oligopolistic Competition and Routinization of Innovation, Princeton University Press, 40-41 , SMarx, JTong]
I turn next to yet another way in which innovation facilitates innovation, one that is also not widely recognized. Ultimately, one of the prospective impediments to innovation is the finite character of the economy’s natural resources that are critical to utilization of the new products and processes that innovation provides. Thus, it may well be suspected that, in a world in which the economy’s finite natural resources can only be depleted, this will raise problems for innovation that will grow more serious with the passage of time. After all, most inventions must be embodied at least partly in concrete material objects, requiring metals, fuels, and other scarce resources for their utilization, and this may well become an impediment to innovation— both to its production and to its contribution to the economy’s output. However, it can be argued that, in an important sense, the available quantities of the economy’s natural resources can be expanded and, indeed, that this has actually happened. This notion may seem bizarre, yet the fact that, over the decades, the real prices of so many of these resources have not been increasing, and that at least some of them have actually declined, must surely suggest that there is something to this notion. And there is a straightforward explanation. Suppose that inventions constantly decrease the percentage of petroleum that is lost in the process of extraction from a well, and that another stream of inventions constantly increases the number of miles a given quantity of petroleum will enable a vehicle to travel. Suppose both of these developments move far faster than the rate at which the earth’s fixed physical stock of oil is used up. Then it should be clear that the inventory of prospective miles of transportation by petroleum-driven vehicles can actually have been expanded. The intellectual input will, in effect, have served to increase the supply of the physical input in the one sense that really counts: the still available capacity of that input to contribute to future output of the economy.
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