As Nobel laureates show, the US can’t take tech lead over China for granted

China and the United States are locked in a contest for technological supremacy. While it’s impossible to predict the ultimate winner and loser, this year’s Nobel Prize winners in economics may serve as a useful guide to where the two rivals are heading.

The US is currently still ahead when it comes to science and technology. But when it comes to STEM (science, technology, engineering and mathematics) education, China has a clear edge, which is likely to grow even larger in the coming years.

Beijing’s heavy investment in STEM education and research as a national priority is a big reason why China is closing the gap with the US. The country’s whole-of-government commitment to tech as a main driver of economic growth is as good a bet as any. It certainly follows the playbook of Nobel winners Joel Mokyr, Philippe Aghion and Peter Howitt.

Meanwhile, despite its lead, the US can no longer take its long dominance in tech innovation for granted. The crackdown by the Donald Trump administration on leading US universities and immigration certainly goes against the insights of the Nobel trio.

Large corporations, especially those in tech, increasingly stifle competition by buying out innovative upstarts or killing their market shares, and by lobbying regulators for favourable treatment. But in the mathematical modelling of Aghion and Howitt, as explained by the Royal Swedish Academy of Sciences in announcing the award, this undermines growth.

People visit a Huawei booth at the World Artificial Intelligence Conference in Shanghai, on July 26. Photo: Reuters

“When a new and better product enters the market, the companies selling the older products lose out,” said the academy, citing the work of Aghion and Howitt. “The innovation represents something new and is thus creative. However, it is also destructive, as the company whose technology becomes passé is outcompeted.”

South China Morning Post