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Innovation and complexity

17 October 2016
by Guest author

NAECAndrew Wyckoff, Director, OECD Directorate for Science, Technology and Innovation

Since its creation in 1961, the OECD has influenced how governments approach science, technology and innovation, and how economics as a discipline tries to understand these phenomena. The OECD Working Party of National Experts on Science and Technology Indicators (NESTI) was created in 1962, and in 1963, Science, economic growth and government policy convinced governments that science policy should be linked to economic policy. In 1971 Science, growth and society anticipated (also called the “Brook Report” after  the Chair, Harvey Brooks) many of today’s concerns by emphasising the need to involve citizens in assessing the consequences of developing and using new technologies.

For many experts though, the major contribution was the concept of national innovation systems, presented in 1992 in a landmark publication, Technology and the Economy: The Key Relationships. The origins of the concept go back to the 1970s crisis, which had provoked an in-depth re-examination of previous economic thinking on how growth came about and why growth in productivity was slowing. A 1980 OECD report, Technical Change and Economic Policy, is now widely recognised as the first major policy document to challenge the macroeconomic interpretations of the 1970s crisis, and to emphasise the role of technological factors in finding solutions, arguing for instance that innovation can be more powerful than wage competitiveness in stimulating an economy.

Economists working at the OECD were pioneers of a new approach that saw innovation not as something linear but as an ecosystem involving interactions among existing knowledge, research, and invention; potential markets; and the production process. In national innovation strategies, one of the key issues is the interactions among the different actors: companies, public research institutions, intermediary organisations, and so on. And contrary to the dominant thinking in policy circles in the 1980s and early 1990s, the OECD also saw it as something that governments should play a central role in – hence the term national innovation strategy.

Today, services are becoming the focus of innovation, with some companies even blurring the distinction between the value-added of products and services, smartphones being a good example. This is a logical outcome of the increasing digitalisation of the economy. Digital technologies are now so ubiquitous that it is easy to forget how recent they are. The World Wide Web we know today for example was created in the 1990s, and Microsoft thought it was possible to launch a rival to Internet (called MSN) as late as 1995.  Google was only founded in 1998 and it would be 6 years before it went public.

With the digital economy and society coming so far in such a short time, it is hard to predict what they will look like in the future. We can however identify some of the drivers of change. Big Data will be among the most important. In The phenomenon of data-driven innovation, the OECD quotes figures suggesting that more than 2.5 exabytes (EB, a billion gigabytes) of data are generated every single day, the equivalent of 167 000 times the information contained in all the books in the US Library of Congress. The world’s largest retail company, Walmart, already handles more than 1 million customer transactions every hour. Because so many new data are available, it will be possible to develop new models exploiting the power of a complexity approach to improve understanding in the social sciences, including economics. Also, the policy making process may benefit from new ways of collecting data on policies themselves and vastly improving our evaluation capabilities.

The analysis of data (often in real time), increasingly from smart devices embedded in the Internet of Things opens new opportunities for value creation through optimisation of production processes and the creation of new services. This “industrial Internet” is creating its own complex systems, empowering autonomous machines and networks that can learn and make decisions independently of human involvement. This can generate new products and markets, but it can also create chaos in existing markets, as various financial flash crashes have shown.

Two sets of challenges, or tensions, need to be addressed by policy makers to maximise the benefits of digitally-driven innovation, and mitigate the associated economic and societal risks. The first is to promote “openness” in the global data ecosystem and thus the free flow of data across nations, sectors, and organisations while at the same time addressing individuals’ and organisations’ opposing interests (in particular protecting their privacy and their intellectual property). The second set of tensions requires finding policies to activate the enablers of digital-driven innovation, and at the same time addressing the effects of the “creative destruction” induced by this innovation. Moreover, there is a question concerning the efficacy of  national policies  as digital-driven innovation is global by definition. As a policy maker you can promote something in your country, but the spillovers in terms of employment or markets can be somewhere else.

With so many new technologies being introduced, more firms and countries being integrated into global value chains, and workers becoming more highly educated everywhere, you would expect productivity growth to be surging. In fact it is slowing. But that average trend hides the true picture according to an OECD study on The Future of Productivity . Labour productivity in the globally most productive firms (“global frontier” firms) grew at an average annual rate of 3.5 per cent in the manufacturing sector over the 2000s, compared to 0.5% for non-frontier firms.

Diffusion of the know-how from the pioneering frontier firms to the bulk of the economy hasn’t occurred – either because channels are blocked or because we are in a transformative period and the expertise for how best to exploit the technologies is still in the heads of a few.  Most likely, it is a combination of the two.  We therefore have to help the global frontier firms to continue innovating and facilitate the diffusion of new technologies and innovations from the global frontier firms to firms at the national frontier. We can try to create a market environment where the most productive firms are allowed to thrive, thereby facilitating the more widespread penetration of available technologies and innovations. And we have to improve the matching of skills to jobs to better use the pool of available talent in the economy, and allow skilled people to change jobs, spreading the know-how as they move.

In a complex system, you can’t forecast outcomes with any great degree of certainty, but many of the unintended outcomes of interactions in the innovation system are beneficial. The policies mentioned above would each be useful in themselves and would hopefully reinforce each other beneficially.

Useful links

The OECD organised a Workshop on Complexity and Policy, 29-30 September, OECD HQ, Paris, along with the European Commission and INET. Watch the webcast: 29/09 morning; 29/09 afternoon; 30/09 morning

OECD work on innovation

The Innovation Policy Platform (IPP), developed by the Organisation for Economic Co-operation and Development (OECD) and the World Bank is a web-based interactive space that provides easy access to knowledge, learning resources, indicators and communities of practice on the design, implementation, and evaluation of innovation policies.


Can African agriculture significantly contribute towards feeding the world by 2050 and beyond?

16 October 2016
by Guest author

world-food-day-2016Ousman Tall, Sahel and West Africa Club (SWAC) Secretariat

There are growing concerns about the world feeding itself in 2050 and beyond, and many consider that Africa has the potential to positively impact this enormous, though not insurmountable, challenge. Is this wishful thinking or reality based on the success stories of agricultural production and productivity on the African continent? Or, is it based on Africa’s untapped potential and its readiness to ensure that everything is put in place to make this dream a reality?

According to Akinwumi Adesina, President of the African Development Bank, “Africa may have the potential in agriculture, but you cannot eat potential”. Discussing Africa’s potential requires an understanding of the challenges impeding agricultural growth and development on the continent. Based on my experience and understanding of agricultural development trends in Africa, the continent is far from feeding itself in 2050, due to a combination of several factors, which are equally reinforcing and which affect all sectors of the agricultural economy. Take for example, the food crops sub-sector in Africa.

Yields in Africa for a majority of food crops are below the world average and substantial progress can be made. However, boosting yields requires more and better research to generate new and appropriate technologies as well as increased funding for the dissemination and adoption of these technologies to ensure that essential farming inputs are available and affordable. Agricultural research institutes in Africa lack the funding to carry out the research required to address yield deficits. Similarly, farmers cannot afford the high cost of inputs and most countries are not in the position to provide subsidies.

Rice paddy yields by continent (2007-14)


Source: FAOSTAT-Agriculture (database), Food and Agriculture Organization, Rome

Furthermore, if the plan to increase yields in Africa were to be based on the context of the Asian Green Revolution, the costs for Africa could outweigh the benefits. The Green Revolution was based on the massive introduction of improved varieties, agro-chemicals and investment in infrastructure. Africa simply cannot introduce the use of agro-chemicals on a colossal scale to increase yields. Sub-Saharan Africa accounts for less than 2 percent of the total fertilizer used in the world, not as a matter of choice, but partly due to its high cost or to a lack of understanding of its usage. Moreover, the misapplication of agrochemicals is detrimental to the environment and human health. Rather, the development of appropriate varietal technologies to increase yields, amidst a decline in the agricultural labour force, should focus on improvements in labour-saving technologies and farmer field schools.

The rate of urban growth in Africa is one of the highest in the world. In West Africa alone, the urban population will reach 500 million in 2050. Increased urbanisation translates into a substantial decline in agricultural workers, who are predominantly rural dwellers. In fact, the ratio of the non-agricultural to the agricultural population in West Africa is expected to increase by 250 percent in 2050. Urbanisation is moving in the same direction for the rest of sub-Saharan Africa and keeping up the pace of food production on the continent will require massive transformation in the agricultural production system.

Africa is already feeling the effects of climate change. The continent is experiencing recurrent droughts and floods for which tolerant and resistant crop varieties need to be developed. Using different climate models, the World Bank predicts that many parts of sub-Saharan Africa will become hotter and drier and that the extent of drylands might increase up to 20% by 2030. Land for crop production in some African countries, especially those in the tropical rainforest zones, will become scarce as a result of the global pressure to spare the forest and preserve the environment. Further warming of the earth will increase land unsuitable for farming and at the same time affect crop yields. In a World Bank report on extreme climate and its impacts, a warming of 1.5°C would reduce sorghum yields alone by 10%.

Notwithstanding these challenges, the continent offers numerous opportunities for agricultural growth and development. There is a huge market potential, supported by an increasing demand in food staples as a result of increased population growth and per capita consumption. The level of regional integration and co-operation taking place within the Regional Economic Communities will stimulate agricultural production and market linkages. Whereas agricultural land in other parts of the world is becoming scarce, Africa is home to 60% of the world’s uncultivated arable land. The continent is presently home to 19 percent of the world’s youth population, which is expected to double by 2030. This young, and largely unemployed and unskilled population could become the engine of agricultural growth.

The theme of this year’s World Food Day is Climate is changing. Food and Agriculture Must too. If Africa is to be an example for the rest of the world in how to sustainably increase food production to feed a growing population, then the policy trajectory of the food and agricultural economy must be rethought in order to appropriately factor in not only climate change, which is vital, but all of the issues mentioned above. African researchers and technicians can play a crucial role in addressing these issues by actively and emphatically guiding their policy makers. Unless we do so, per capita food production will diminish and African agriculture’s opportunity to show the world how to feed itself by 2050 will remain an illusion.

Useful links

Food-related information on the West Africa Gateway

World Food Day 2015: Building Resilient Societies and Breaking the Cycle of Rural Poverty in the Sahel and West Africa Region Ousman Tall on OECD Insights

We don’t need rebels, we just need to create effective policies to support young people

13 October 2016
by Guest author

sag-2016Alastair Wood and Stéphane Carcillo, OECD Employment, Labour and Social Affairs Directorate

In the 1955 film Rebel without a cause, Jim Stark (played by James Dean) is an alienated and unhappy young man in mid-1950s America. He and his friends form a trio that evokes youthful pain, torment and bewilderment. The film’s focus is on teenage rebellion and parental neglect, and it conveys an important message about listening to the needs and desires of our youth population. Today’s youth (aged between 15-29) have been hit particularly hard by the financial crisis and Great Recession; they have been struggling to make a successful start to their working lives in very difficult times. At its peak, youth unemployment reached an average of 17% in OECD countries (far higher than the rest of society) and hit an astonishing 60% in Greece. OECD’s Society at a Glance 2016 puts young people under the spotlight, looks at how they are holding up in society and shows which of their needs are not being met.

But it is not just about unemployment. Many young people are not at school and are not even looking for a job. Taking the unemployed and the inactive together shows that in 2015, about 40 million young people, a total of 15% of all OECD youth, were not in employment, education or training (the so-called NEETs). Beyond the moral dilemma, the opportunity cost of having such a large number of young people being isolated from society is estimated to have been between 360-605 billion US dollars in 2014 alone (0.9-1.5% of OECD-wide GDP, depending on the wage level used to impute income – minimum wage or median wage) – this is the income that could have been generated had they been better integrated into society.


Low-skilled youth are particularly at risk of long-term isolation and disengagement from society. Those who have not finished high-school are 3 times more likely to be unemployed or “inactive” while only one quarter of NEETs have higher education qualifications. People with low-skilled parents or unemployed parents are also more likely to be NEET, suggesting an intergenerational transmission of disadvantage. Lower educated parents may not be able to encourage higher education as much, they may not be able to help as much with homework, and they often lack social networks to help their children get their first work experience. For similar reasons, and due to language difficulties and possibly also discrimination, youth born outside their country of residence are 1.5 times more likely to be NEET than native youth. Being female adds to the NEET risk. Young women are one and a half times more likely than men to be unemployed or “inactive”, often because they are caring for children and other family members, especially in Mexico and Turkey.

Fortunately, for many young people, inactivity and unemployment is only temporary. But for a significant fraction, it is a lasting curse. About half of all NEETs experience such isolation for more than a year. The low educated account for 17% of the youth population, but represent 30% of those who spend more than 12 months as a NEET; young people with health problems are also over-represented. Taking a short time out of work to care for children or to travel can be great and have no negative effects, but longer periods risk harming future employment opportunities and earnings.

Better policies are needed to foster self-sufficiency among young people and bring back their trust in society and politics: the report shows that we need to continue fighting early school leaving; it also documents how apprenticeships are a valuable alternative to academic schooling and can help bring more young people smoothly into the labour market. Intensive second chance programmes targeted at high-school dropouts motivated to catch up on their skills are also needed. For women, ensuring access to high quality childcare helps them re-join the labour market (France, Denmark and Sweden are good examples), and improving uptake by fathers in parental leave can also help young women’s careers. Efforts are also being made at the international level. Policy makers from the G20 economies collectively committed to reduce the share of young people most at risk of being left permanently behind in the labour market by 15% by 2025. At the EU level, the Youth Guarantee is also a good opportunity to reduce the number of youth who fall through the cracks and make them an employment or training offer.

Not surprisingly, NEETs are less satisfied with their lives compared with their peers – 22% reporting low levels of life satisfaction compared to 14% overall. Feeling isolated and disconnected means that they often have no interest in society  and only 18% report that they trust others compared to 29% of youth overall. Sixty years after Nicholas Ray’s film, they can probably understand Jim when he says “Boy, if, if I had one day when…I felt that I belonged someplace, you know?”

Useful links

OECD work on youth




Australia: the biggest loser in future viability

12 October 2016
by Guest author

bertelsmann-sgiDaniel Schraad-Tischler, Senior Expert at Bertelsmann Stiftung where he heads the Sustainable Governance Indicators (SGI) project, and Christof Schiller, project manager for the SGI project and associated Fellow at the Potsdam Center for Policy and Management.

In the past two years, Australia’s viability for the future has dramatically decreased and its need for reform with regards to economic, social and ecological sustainability has increased enormously.

This of one of our findings in this year’s Sustainable Governance Indicators (SGI) by the German Bertelsmann Stiftung. It’s an international monitoring tool which sheds light on the future viability of all 41 countries of the OECD and European Union. On the basis of 136 indicators we assess government actions and reforms. More than 100 international experts are involved in our study.

In comparison with the other developed industrialized nations, Australia is now ranked just 25th in future viability, dropping ten places in comparison with our 2014 survey. It is now 13 places behind neighboring New Zealand and on a similar level to Poland. Thus with regards to the need for reform in important economic, social, and ecological policy fields, Australia is one of the biggest losers in our study this year.

We found major reform needs in many policy areas, including research and development, social inclusion, and environmental policy. Australia must improve considerably here if it wants to secure its future viability in the long term.

However, when assessing the steering and reform capacity of the political system Australia receives above-average scores in our study, ranking 11th out of 41 nations.

Overall, the Scandinavian countries achieved the best results, with Sweden ranking first, followed by Switzerland and Germany. Of the largest national economies, only two G7 nations (Germany and the United Kingdom) are among the top ten. The U.S. moved up one rank, but is still below average. Greece continues to come in last in the comparison among countries.

With the end of the commodity boom, a growing need for reform

In our Policy Performance Index, sharp contrasts were revealed between excellent scores for integration policy and massive deficits in the areas of research and development, social inclusion, and the environment.

One reason Australia scored so well in integration policy is that job opportunities for immigrants are approximately as good as those for native-born Australians. No other OECD country – with the exception of Hungary – does so well in this regard. Our study praises the effectiveness of Australian integration policy, but we also found weaknesses and challenges, including the country’s uncompromising treatment of asylum seekers who try to reach the country by boat from Southeast Asia.

Australia’s increasing need for reform is mainly due to the end of the commodity boom, which has led to stagnation in living standards and a rise in unemployment rates since 2011. We found that with the end of the boom, Australia must develop new growth industries. Manufacturing, tourism, and education services appear unable to fill the gap.

In research and development, Australia ranks just 26th out of 41 countries in our study. Although it provides significant public financial support for research and development, the results are quite disappointing. For example, Australia registers just 77 patents per million inhabitants per year, compared with 335 in top-ranked Japan.

Australia is generally in need of significant public investment to bring its infrastructure to a level comparable to other advanced economies. The price for Australia’s low level of public debt has been inadequate roads, ports, and railroads. Yet the structural fiscal deficit impedes large new spending programs for infrastructure.

Lagging in social inclusion and environmental protection

In social inclusion, too, Australia ranks no higher than the lower mid-table range. The poverty level in the population is 13.8 percent. By contrast, in the Czech Republic or Finland just 5 percent of the population have to manage on less than 50 percent of the median income.

We found that the situation for indigenous Australians in particular continues to be the most serious social failure of the country’s policymakers. There have been numerous policy initiatives over recent decades seeking to address the appalling outcomes experienced by indigenous people, but there is little evidence of substantive progress. Remedying this must remain a priority over the coming years.

Australia also has a lot of catching up to do when it comes to its environmental policy. In the past, the country has addressed environmental challenges haphazardly. Considering the country’s climate, there is much room for the development of sustainable policies on energy and the environment. Transport could be made much greener, for instance by using higher excise duties on fuel to improve too often inadequate public transport systems.

With regard to the governmental system’s general reform and steering capacity, however, our study comes to a positive conclusion: Australia achieves 11th place in our Governance Index. Only the Nordic countries plus New Zealand, Luxembourg, the U.S., the United Kingdom, Canada, and Germany rank higher.

Among the strengths of the Australian governmental system, we found the efficient coordination between ministries as well as the parliament’s role in helping to shape policy and its supervisory competence.

Thus, there are reasons to be confident that Australia will be able to overcome the challenges outlined above. But the country’s performance in our international assessment of policy-making and governance should be a wake-up call.

Useful links

OECD Society at a Glance 2016: How does Australia compare?

OECD environmental tax profile for Australia

OECD Australia economic forecast survey


Keynes: the partly-known Colossus of economics

12 October 2016
by Guest author

jmk-writingsProfessor Rod O’Donnell, University of Technology Sydney, Australia

Alongside Smith and Marx, Keynes is one of the triumvirate of economists on whom more ink has been expended than on any others. And, as the most recent of the three, he speaks more directly to our times and our troubles. His multi-sidedness also makes him a fascinating figure for non-economists. But more expended ink does not more knowledge guarantee, especially if the information sources being used are seriously incomplete. It is the aim of my JMK Writings Project to remedy this situation.

A grave misapprehension pervades the discussion of Keynes’s many contributions. It is widely believed that the Royal Economic Society edition, The Collected Writings of John Maynard Keynes, in its 30 volumes, contains everything that Keynes wrote that is important in understanding his thought and activities.

This, however, is far from the truth. Although that edition was enormously valuable in promoting Keynes scholarship, it only made accessible a relatively small proportion of the total amount of his unpublished writings as a result of its narrow terms of reference, limited budget and largely single-archive focus. Only about 40% of the edition (11-12 volumes) contained new material, the rest being reproductions of already published output. The terms of reference, “Keynes as an economist and public figure”, for example, excluded vast domains in his writings, including all his unpublished philosophical output and most of his huge private correspondences. And the focus on only one primary archive, that at King’s College Cambridge (albeit supplemented by some selections from the UK National Archives) meant that vast swathes of documents held elsewhere in the UK and other countries were excluded.

Discoveries by a small band of hardy Keynes archive explorers over recent decades have revealed that huge amounts of Keynes’s academically significant writings remain unpublished. In the UK, large portions of even the Keynes Papers at King’s College Cambridge languish unpublished, not to mention the extensive holdings of other archives, both large (the National Archives and the British Library), and small (various university archives). Outside the UK, at least four countries have important holdings. The US has many medium to small collections, followed by Japan with a smaller number of key holdings resulting from its purchases of Harrod’s Papers. (Why portions of Keynes’s writings finished up in Harrod’s personal papers is a story for another day, but their existence remained entirely unknown until the latter’s international auction in the early 1990s). Australia has five archival holdings, Canada has at least one, and there may be one or two holdings in France and Germany. My current estimate is that approximately 60 archives world-wide have valuable unpublished collections.

The object of my JMK Writings Project is to make publicly accessible the treasure trove of information presently tucked away in his scattered unpublished writings. The Further Collected Writings of John Maynard Keynes, as the supplementary edition will be called, is estimated to run to around 20 to 25 volumes, although the number cannot be accurately predicted. No global catalogue of his writings has been compiled, so that nobody in the world knows their full extent.

Why crowdfunding? Sadly, official sources of funding for scholarly editorial research concerning the writings of a brilliant mind with non-orthodox views, a more discursive style of theorising, and much practical policy wisdom, have dried up due to the heavy influences of orthodox economic thinking, mathematical formalisation and econometric technique. To obtain the resources needed for the project, I have turned to the less conventional avenue of crowdfunding. The campaign launched on 11 October 2016 on the Indiegogo website, and may be located using the URL:–2#/

Much more information about the edition, its structure and planned expenditure may be gained via the above link. Donations of any size are welcome, but it may be of interest for readers to know that for each USD100,000 raised (in the aggregate or by single donation), it is planned, with publisher co-operation, to provide a university in a developing country with free online access to the edition.

Organised largely on chronological lines, the supplementary edition starts with Eton and early Cambridge before proceeding through the succeeding stages of Keynes’s crowded life. The volumes will be produced in batches of roughly 3 to 6, with future crowdfunding campaigns being run as required for the later batches. The present campaign is for the first batch, these covering Keynes’s Eton years (both early and late) and his initial Cambridge years. It may surprise readers to learn − as it surprised me, being the first thorough investigator of Eton’s records concerning Keynes – that his Eton years contain much unknown exciting and insightful material. The conventional view of Eton, as but a stepping stone to Cambridge where his real intellectual foundations were laid, will need to be completely revised.

Naturally, preparing the edition is a huge task. To expedite execution, I am seeking to build teams of scholars in different countries interested in taking responsibilities for particular volumes, or parts thereof, in a voluntary capacity. Please contact me via [email protected] if you have questions about participating in this way.

Keynes’s writings are also relevant to philosophers, political scientists, historians (economic and social), and everyone seeking to improve our struggling economies, politics and societies. This is the time to give the world access to the full range of wisdom in all his writings. Motivated and dedicated people are available now, but if we postpone these labours into the future, the chances are that the bounty will never arrive, and that would be a great loss to the world’s knowledge.

Useful links

On 24 October, Georgios Krimpas, Greek Ambassador to the OECD, will be giving a talk on “Keynes: The General Theory in Three Acts – Employment, Interest and Money”. You can watch the webcast here

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