New Is Not Better

“As a non-American, I don’t completely understand it, but there is a phenomenon in the U.S., the latest and the greatest. … There was a patient demand to get these implants on the misconception that the latest was the best.” …“The vast majority of the ‘innovations’ on which we have spent money with respect to orthopedics over the past two decades have not resulted in improved patient outcomes.” (more; HT Tyler)

Assuming no side-effects, if users gain from innovations then innovators must gain less than the social value of their innovations, which risks their having insufficient incentives to innovate. This effect can be countered, however, by giving extra social status to the creators and users of innovative products, services, and behaviors.

United States culture gives such extra status to creators and users of innovations, and so probably deserves some credit for encouraging innovation. But alas much of this is wasted via merely rewarding things things that are new, rather than innovative. And if your reaction to reading that was “what is the difference?,” that just shows the depth of the problem.

Innovative things must be new, but new things need not be innovative. To be usefully innovative is to be better some how. Innovators try many new things, most of which are not better, but a few of which are. On average new things are w0rse, but those that are eventually retained are hopefully on average better. And with the right incentives, the retained better things are so much better that they pay for all the other new worse things.

If our culture waited until it was clear which new things were actually better, and gave more status to the creators and early adopters of those things, culture would promote innovation. But alas culture instead mainly showers status on those who merely create and use new things, regardless of whether they are better. While in small amounts even this status effect can promote innovation, in larger amounts it can hurt. After all, when there is too little added reward for creating or using something that is both new and better, relative to something that is just new, people will mainly focus on the new part.

The problem comes from an excess focus on current behavior, relative to past track records. In enforcing social status norms, it is relatively easy to just see that someone is today affiliated with with something that is new today, and give that person credit for their newness. It is much harder to remember that a person was once affiliated with something that was then new, and which later turned out to actually be better. A mechanism that made it easier to collect and view such track records could be of great social value, at least if combined with new matching social norms on who deserves social credit for being “innovative.”

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  • Buck Farmer

    The problem comes from an excess focus on current behavior, relative to past track records.

    You knock our basically risk-loving willingness to reward to secondary characteristics of innovation (i.e. newness) without grappling with the very real difficulty in figuring out what new things are better in time to reward the innovator.

    If this mismatch between “revealed betterness” and “innovator solvency” were easy to rectify…or if past achievements were a good guide for this sort of thing…then we wouldn’t have this problem you note.

    Similarly we reward professors who publish quantity, not quality, because by the time quality is revealed the professors may not be around to be rewarded.

    Honestly, I would rather err on the side of wasting money on useless “newness” to encourage enough experiments to generate “innovation” than err on the side of caution and delay rewards until we’re certain there is a benefit.

    An excellent piece of economics would let us figure out empirically what the right level of risk-loving vs. risk-averting-ness is to drive innovation…and I’d love to see you survey the research on that.

    • Drewfus

      Similarly we reward professors who publish quantity, not quality, because by the time quality is revealed the professors may not be around to be rewarded.

      If we reward quantity, we get quantity. You seem to be assuming that with enough quantity, we will get quality as a bonus.

      Can there be such a thing as planned quality?

  • Drewfus

    On average new things are bad, but those that are eventually retained are hopefully better

    For progress to occur, new things must on average, be better than existing things, so if new things on average are bad, existing things must be crap. Or have I fallen for the flaw of averages?

    • Buck Farmer

      Couldn’t new things on average be as good as existing things but with a wider variance…time filters out the bad ones?

      • Drewfus

        Possibly, but that filter removes existing firms/institutions also, so the filtering must be fairly severe to result in net progress. Milton Friedman noted that economic losses were probably more important than economic profits for economic development. How exactly this filtering is occurring in a world of pre-determined preferences, I’m not sure. Income effects alone don’t seem to cut it.

    • Konkvistador

      Thinking about mutations will clear this up right away.

      • Drewfus

        Innovations reflect intelligent design, mutations do not.

    • http://daedalus2u.blogspot.com/ daedalus2u

      Yes, you have made the ecological fallacy.

      http://en.wikipedia.org/wiki/Ecological_fallacy

      Individuals in a group do not have the characteristics of the average of the group unless the group is extremely homogeneous, i.e. composed of identical units. The error of stereotypes is common because most individuals don’t have the ability to recognize the differences that are important in groups they are not familiar with.

      New things can be mostly crap, provided there is a way to weed out and abandon the crap. If the crap gets grandfathered in because of the high status of grandfathers, then we are stuck with the old crap and what ever new crap the grandfathers like.

      Since usually new good stuff is more fragile than old crap, there is an extremely strong barrier to entry for new good stuff. The old grandfathers with their crap can usually beat down the new stuff unless it is much better.

      • Drewfus

        Since usually new good stuff is more fragile than old crap, there is an extremely strong barrier to entry for new good stuff.

        Who knows that it is more fragile? Perhaps this is where asymmetric information can actually be of benefit, in the medium-long run.

  • candy

    Though you are probably not even aware of the situation, I can’t help but read this as being about indie video games.

  • Jason

    I think evolution is a good guide here. Newer things only form part of the inventory from which things more adapted to the present conditions are selected. And sometimes that selection is random.

    Hip implants in the past were probably designed to satisfy doctors whereas newer hip implants may have been designed to satisfy insurers. Policy changes in health care funding are like climate changes.

    • http://daedalus2u.blogspot.com/ daedalus2u

      I think the newer hip implants were designed to satisfy Wall Street investors. As was the testing, the marketing, the FDA approval process, the post-marketing, the press releases, in short, everything.

      I think Robin’s comments are spot-on, but not for the reasons he thinks. If people choose items purely for status reasons, then because status is a zero-sum exchange, then Robin’s premise would be correct.

      If people choose items because of the functionality the users derive from them, then Robin’s premise makes no sense. Is there anyone who chooses a replacement hip based on the status a particular replacement hip provides? I don’t think so.

      Maybe some people choose what ever is the most expensive version just because the most expensive version provides the most status, or because the marketer has successfully obscured the quality of the products so the customer can’t make a rational decision. That is good marketing and lousy medical care. But the purpose of these hips wasn’t to provide good medical care, it was to provide good profits. The managers who cut the corners and made the bad decisions have already cashed out. It is the later investors (i.e. suckers) who are left paying the cost.

      Managers hire engineers and tell them what to design, purely for status reasons. They can’t choose based on engineering criteria because they don’t understand engineering. They do understand status though.

  • William H. Stoddard

    What on earth are you saying? if users gain from innovations then innovators must gain less than the social value of their innovations, which risks their having insufficient incentives to innovate? That sounds like a zero-sum model of exchange, where anything that makes X better off must make some Y worse off. Aristotle believed this, and it follows from the labor theory of value, and inspired Marx’s exploitation theory of profits; but I didn’t think it had been part of serious economic thought since the marginalist revolution of the late 19th century.

    If I am X, and have A, and you are Y, and have B, and B has more value for me than A, and A has more value for you then B, then we can swap, and I will be better off, and you will be better off, at least ex ante. And if either of us stands to lose, ex ante, we will not normally agree voluntarily to the swap. So, in the normal operation of markets, exchanges will make people better off, and that means people on both sides of each exchange. I don’t see why you would suppose that the fact that my buying an innovative product from the innovator is an exception.

    This is not merely an abstract theoretical argument, or an appeal to subjective concepts of value. Consider a farming village that grows plants, and a fishing village that catches fish. The farming village gets lots of calories per gram of protein; its limiting ecological factor is protein scarcity. The fishing village gets fewer calories per gram of protein; its limiting ecological factor is energy scarcity. Trading fish for vegetables loosens the ecological constraint on each village’s population, allowing it to support more people on the same ecological base (which includes people who can do the added work of trading); that is, it is ecologically productive, enhancing the carrying capacity of the same environment through redistribution of food resources, and thus increasing the fitness of the traders.

    The claim that innovators are not getting rewarded sufficiently for their innovations just seems bizarre. Am I misunderstanding your argument in some way?

    • http://daedalus2u.blogspot.com/ daedalus2u

      I think that Robin is so caught up in a status hierarchy (which is zero-sum) that he is having trouble thinking outside it. This is not an uncommon problem. It is the sentiment behind the “misery loves company” meme. The idea that misery is a zero-sum and that if I make someone else miserable, I make myself better off.

      Once you reach a certain level of wealth, where all of your reasonable material wants are satisfied, the only reason to pursue more wealth is to achieve greater status, and since status is zero-sum, there can never be enough.

      • William H. Stoddard

        What are “reasonable material wants?”

        Chaucer describes his “clerk of Oxenford”:

        For him was lever have at his bed’s head
        Twenty bookes clad in black or red
        Of Aristotle and his philosophy
        Than robes rich or fiddle or gay psalt’ry.
        But albeit that he was a philosopher,
        Yet hadde he but little gold in coffer,
        But all that he might of his friendes hent
        On bookes and on learning he it spent
        . . . .

        That is, he dreams of having so much money that he can own twenty books! Well, I own somewhere between 20 and 100 times that number . . . and there are several more I’m currently planning to buy when I have money to spare. I dream of being well off enough to own a vastly bigger library, with some expensive books, and living space large enough to hold it. The Clerk of Oxenford surely would not have called that a “reasonable material want”: he might not even have imagined having that many books in Heaven. But by my standards it’s a modest wish.

        And I don’t think it’s driven by status to any significant degree. It’s driven by my loving books and reading.

        Talking about “reasonable material wants” is begging the question. What does “reasonable” mean other than “those we can afford for most people to have now?” If that’s your restriction, then if everyone’s wealth increased tenfold, of course we wouldn’t be spending much of it on reasonable material wants; by definition, ninety percent of it would be spent on unreasonable things! But that doesn’t mean that spending would be driven solely by status motives. A large part of it could very well be spent on entirely material wants that people now don’t think are “reasonable” because they know they’ll never be able to afford them and have trained themselves not to think about them.

        When I can take a vacation trip to see Saturn’s rings close up, and carry the entire Library of Congress in an e-reader, and pay for serious life extension, and have imagery of the quality of the Lord of the Rings films for my roleplaying campaigns, and have a polity to live in where the government takes 2.5% of what I make instead of 25% . . . we can talk about whether my material wants are exhausted. Until then, I think this is a case of what Arthur Clarke called “failures of imagination.”

        Though I will say that if Robin is having that kind of failure of imagination, to where he can only envision status wants, it surprises me.

      • http://daedalus2u.blogspot.com/ daedalus2u

        William, you miss my point. It is not spending that is driven by status acquisition it is wealth acquisition that is driven by status acquisition. That is why the super wealthy are never satisfied with whatever wealth they have because what they want is status and that is the one thing that is zero sum.

        You already could move to a place that has low taxes. I hear that the income tax in Somalia is less than 2.5%.

      • William H. Stoddard

        A place with nothing approach effective and consistent law enforcement is likely to have a tax that’s way higher than 2.5%, or even 25%; it may reach 100%. It’s just not consistently applied.

        I rather thought that when I said “I want a place with low taxes” you would take it as having the subtext “without giving up military defense, police, and courts, or a viable market economy,” just as when I said “I want to see Saturn’s rings close up,” I assumed you didn’t need to have me spell out, “without giving up oxygen, food and water, or an environment near standard temperature and pressure.”

      • http://daedalus2u.blogspot.com/ daedalus2u

        I only consider things that are actually within the realm of possible reality to be “reasonable”. Things that are impossible are never reasonable.

        You are being delusional if you seriously think that a government could exist taking only 2.5% in taxes “without giving up military defense, police, and courts, or a viable market economy.”

        If you are not being delusional then you are being disingenuous. If not disingenuous then hypocritical.

        Unless you want the 2.5% tax to only apply to yourself and for everyone else to be taxed at 25%. Then you are a status seeker too, with your measure of “status” being what fraction of your income you pay in taxes.

  • Russell Wallace

    This is an argument of the form current institutions are flawed, let’s tear them down and build better ones. But flawed as they are, current institutions are a lot better than nothing. You say you want to build something better? Great! I would certainly encourage you by all means to do that. You can do that now, without having to destroy anything first. After you’ve done that – in this case, come up with a practical way to track and reward proven success beyond the ways we currently do it – and demonstrated it to be better, then we can talk about tearing down the way of doing things that your new way replaces.

    • Buck Farmer

      On average new thingsinstitutions are bad, but those that are eventually retained are hopefully better

      Made some corrections for those that like fences in the middle of the road.

  • paulfchristiano

    Designing an improvement seems pretty easy; the hard part is having society actually want to implement it.

    Crudely, we could just have professionals in an area publicly upvote or downvote new ideas as they appear, and then look back a couple of years to evaluate. Would anyone argue that the current status allocation method is better? (That’s an honest rather than rhetorical question.)

    • http://hanson.gmu.edu Robin Hanson

      Your suggestion needs a lot more detail before I could evaluate it. Who lists “ideas”, how do you decide who is a “professional,” and how looks back how to evaluate in a “couple of years”?

      • http://www.gwern.net gwern

        An example of a modern community which lets a few interested expert members use new technologies, watches them to see what happens to them, and then communally discusses their results and collectively bans or permits innovations is…. the Amish.

        http://www.kk.org/thetechnium/archives/2009/02/amish_hackers_a.php
        http://www.kk.org/thetechnium/archives/2008/07/neoamish_drop_o.php

        I suspect an American society which was like the Amish in this regard would be much poorer than it is now.

        So, if one were to try to implement your suggestions, in practice, would we end up with a more efficient scientific society which fully rewards innovators… or Amish America?

      • paulfchristiano

        It doesn’t seem like it matters if the set of professionals or ideas is too expansive, so if the expectation of participation were actually sufficient to drive participation then the details seem pretty immaterial. Here is a particular minimal implementation.

        The community (read: whoever wants to) creates pages for arbitrary new things (google, metal on metal hip implants, a particular war, a trendy software development paradigm), which are merged liberally. Anyone who wants to participate can like or dislike any of these pages.

        Wikipedia pages are an example where the community already maintains similarly detailed structure (and would be passable if co-opted for the purpose). If you want to know who actually hosts and administrates the stuff, lets say some random startup that has some creative, vague proposal to one day convert its popularity into money.

        The community could also cite particularly suggestive commentary or decisions of visible authorities (who weren’t themselves participating). For example, if I say ‘X is the future’ or ‘X is a destructive fad’ today, it could get put in with the stream of likes and dislikes of X for today (and Wikipedia again provides a reasonable example of community-enforced standards for verification, though this might be enough of a sticking point to kill this part of the proposal).

        No one officially reviews past activity, in the same way that no one officially reviews current endorsement of innovation to allocate status. There are a handful of gimmicky tricks that could make past activity salient. All activity could replayed on some fixed delay(s) (“Two years ago, Paul Christiano approved of ” appearing in feeds of people who follow Paul Christiano or , etc.), activity could be hidden for some fixed period before being displayed publicly, or ideas of current significance could be highlighted with a focus on the pattern of likes / dislikes early in their history; for example, an article on metal-on-metal hip implants could link to such a page. Or you could display a community driven featured page, a la Wikipedia.

        I doubt such a website would ever get social traction, particularly because you have to have a lot of people participating for a while before you start getting the data you are interested in (so you’d probably have to stick it as a rider on some other business model); if the question is how to get people to replace their current status allocation mechanism with an alien one, then that seems much harder. I originally intended to reply to Russell Wallace, who seemed to suggest that the hard part was thinking of a replacement for the status quo.

  • Yu-hsin Chen

    The blog post is about allocating scientific reward to maximize social good. In particular, how “new” is a far worse heuristic than “innovative”.
    So here’s a humorous tangent: a theory paper (STOC’11) about how mis-allocation of scientific reward can increase the collective productivity of the scientific community:
    Mechanisms for (Mis)Allocating Scientific Credit by John Kleinberg and Sigal Oren

  • John Hamilton

    I currently shadow an orthopedic surgeon, and I think the article misrepresents the situation a bit.

    The metal-on-metal hips are good. One manufacturer–DePuy–messed up. The metallic ion worry still has not been tested. Orthopedic surgeons do yearly follow-ups on all their hip replacement patients; it is a successful procedure. It rids people of chronic pain and allows them to walk and exercise again.

    Metal-on-plastic hips have a much worse displacement rate.

  • http://www.ideaarchitects.org Jeffrey Cufaude

    “On average new things are w0rse … “

    And you know this how?

    I also think the phrase “usefully innovative” is unhelpful. If you look at a frequently cited definition of innovation like Peter Drucker’s it refers to “changes that adds value or a new dimension of performance.” The usefulness of “betterness” of what is dfferent is what qualifies it to be considered an innovation; otherwise it is just different.

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