General – Soft Machines, by Richard Jones

Rock climbing and the economics of innovation (revisited)

The rock-climber Alex Honnold is in the news again, thanks to his live, televised ascent of a skyscraper in Taiwan. This gives me an excuse to recycle this post from October 2019. Here I explain that just because Honnold climbs without a rope, that doesn’t mean that his achievement doesn’t rely on technological progress over many decades, contrary to the claim of a well-known economist.

The rock climber Alex Honnold’s free, solo ascent of El Capitan is inspirational in many ways. For economist John Cochrane, watching the film of the ascent has prompted a blogpost: “What the success of rock climbing tells us about economic growth”. He concludes that “Free Solo is a great example of the expansion of ability, driven purely by advances in knowledge, untethered from machines.” As an amateur in both rock climbing and innovation theory, I can’t resist some comments of my own. I think it’s all a bit more complicated than Cochrane thinks. In particular his argument that Honnold’s success tells us that knowledge – and the widespread communication of knowledge – is more important than new technology in driving economic growth doesn’t really stand up.

The film “Free Solo” shows Honnold’s 2017 ascent of the 3000 ft cliff El Capitan, in the Yosemite Valley, California. The climb was done free (i.e. without the use of artificial aids like pegs to make progress), and solo – without ropes or any other aids to safety. How come, Cochrane asks, rock climbers have got so much better at climbing since El Cap’s first ascent in 1958, which took 47 days, done with “siege tactics” and every artificial aid available at the time? “There is essentially no technology involved. OK, Honnold wears modern climbing boots, which have very sticky rubber. But that’s about it. And reasonably sticky rubber has been around for a hundred years or so too.”

Hold on a moment here – no technology? I don’t think the history of climbing really bears this out. Even the exception that Cochrane allows, sticky rubber boots, is more complicated than he thinks. Continue reading “Rock climbing and the economics of innovation (revisited)”

Anglofuturism and the Shock of the Old

As the UK endures the second decade of its crisis of economic stagnation, a loose group of commentators, activists and think-tanks have emerged to argue that this stagnation isn’t inevitable, and to call for more houses and infrastructure to be built, for energy to be cheaper and more abundant, and for a restoration of the technological optimism of earlier times. It’s not an entirely homogenous movement – some call themselves “Anglofuturists”, others organise under the banners of “progress” and “abundance”. As I wrote a year ago in my piece “Taking Anglofuturism seriously”, I am sympathetic to some of the goals of this movement. I agree that our economic stagnation isn’t inevitable and that the UK’s physical infrastructure needs upgrading, I regret the failure of recent new nuclear build plans, and I think that technological innovation is a key driver of productivity growth. Yet to me there seems to be a gap in the movement between willing the ends and identifying the means, with the suggested remedy all too often coming down simply to calls to deregulate more and reform the planning laws.

There is perhaps a lesson from history here, emphasised by some comments the historian David Edgerton made in a podcast last week. The kind of nation that Anglofuturists call for looks rather like what was delivered by post-war British governments between 1950 and 1980. Then, the UK was one of the most R&D intensive economies in the world, with a cross-party consensus that technological innovation would deliver economic growth. Despite persistent national soul-searching about a ruling-class trained in the humanities, a number of scientists and engineers rose to powerful and influential positions. The world’s first nuclear power station was designed and built in just four years, following which there was a large-scale roll out of nuclear power stations. A national capability for launching satellites was developed (and subsequently abandoned). This period saw the construction of most of our current motorway network, and, as my plot shows, new houses were built at a rate that has never since been matched. In this sense there is a certain retro quality to Anglofuturism, a harking back to a time when the UK seemed to look to the future with technological self-confidence.

Putting fusion power on the UK grid

The UK government has a very ambitious plan for nuclear fusion, which I don’t think is widely enough known about. The plan is to build a pilot nuclear fusion plant able to deliver electrical power to the grid by 2040 – the Spherical Tokamak for Energy Production (STEP). The project was launched in 2019, and the current government has guaranteed funding for it at the very significant level of £500m a year for five years.

At a time when many people from different political positions agree that a big problem of the UK state is its inability to deliver big projects, this is a huge investment to build state technological capacity.

This post is a brief introduction to the STEP project. Nuclear fusion does generate some reflexive scepticism – we all know the jokes: “it’s twenty years in the future, and always will be”. I want to get beyond that, while still being realistic about the huge challenges this programme faces. I’ll describe some of the technological and engineering issues, and the approaches being proposed to overcome them.

The Year in Soft Machines

The Soft Machines blog has been going for more than twenty years, I’m astonished to say. It’s good to see a substantial increase in the number of readers in 2025’s later months – no doubt helped by the fact that, with a bit more time on my hands, I’ve been writing a bit more regularly. For the benefit of new readers and old, here’s a review of some of the year’s posts, set in the context of some of this blog’s recurring themes.

The UK’s productivity and economic growth problem

The UK’s continuing economic stagnation remains a continual preoccupation, unfortunately. A recent post presents the most recent data for GDP per capita, showing that the country is around 30% worse off than if the pre-2008 trend had continued. Such a dramatic change in economic fortunes must have a cause – or causes. Stating what should be obvious, but doesn’t seem to be, to many commentators, I insist that the causes must precede the big break in 2008, and that there may be long lags between cause and effect. But one can always make things worse with subsequent bad decisions.

The UK’s continuing economic growth crisis

Fundamentally, our economic problems are problems of productivity growth – or lack of it. I’ve been writing about this for about a decade, with a post from earlier in the year summarising some of the arguments:

Ten Years of Banging on about Productivity

Why does this matter? From the government’s perspective, projections of future productivity growth make a big difference to how much public spending can grow or how much taxes have to rise to keep the government within its fiscal rules. The role of the Office of Budgetary Responsibility in making forecasts is key here, but its record in predicting future productivity growth is frankly risible, as I discussed in the context of the Spring Statement:

Why productivity growth is important – Spring Statement 2025 Edition

Productivity and GDP per capita are technical concepts, so it might be thought that these issues aren’t relevant to people’s everyday lives. Nothing could be further from the truth – the slowdown in productivity is directly reflected in peoples’ earnings, shown dramatically in this plot from:

The End of Wage Growth in the UK

Average real weekly UK wages. Green: Composite Average Weekly Earnings series, corrected for inflation using consumer prices index. Thomas, R and Dimsdale, N (2017) “A Millennium of UK Data”, Bank of England OBRA dataset. Brown: ONS, Real Average Weekly Earnings, total pay, using CPI (seasonally adjusted). 18/2/2025 release.

Everything that’s wrong with politics and economics in the UK can be traced back to stagnating productivity.

Towards economic growth, energy and progress

Is this economic stagnation inevitable? I don’t think so – I believe it to be the result of policy choices the country has made, and different choices are possible. I welcome a growing movement of commentators and think-tanks exploring concrete policy ideas to break the stagnation, though I don’t always agree with their priorities. At the end of last year, I wrote what I hope comes across as a sympathetic critique of one strand of thought –

Taking Anglofuturism Seriously

One theme that is at the centre of much of this kind of writing prioritises cheap, abundant energy, with a new roll-out of nuclear power put centre-stage. I’m in sympathy with this, though I don’t think the analysis of the recent failure of the UK to build new nuclear power stations goes far enough. In 2014, the government planned to build 18 GW of new nuclear power; as I write, none has been delivered, and only 3.2 GW is under construction. Much emphasis is placed on the need to remove regulatory barriers; this in my view is necessary, but not sufficient: more thought needs to be given to how to rebuild national capabilities, as I argue here:

Ownership, Control, National capability: learning lessons from the UK’s nuclear new build debacle

Another recent feature of the UK economy is a rapid decline in the share of the economy accounted for by manufacturing – a decline shared by other developed economies, but which has been particularly large in the UK. Manufacturing now accounts for 8% of UK economy; should we try & increase this? I think so, but it’s important to distinguish some good arguments for this from bad ones (and recognise some uncertainties). Manufacturing matters for its potential for productivity growth – what’s important is the value it creates, not the jobs. Manufacturing capability is also important for national security, but realism is needed about UK’s position as <3% of world high tech economy – we need to aim for security, not autarky.

Good reasons and bad reasons for supporting manufacturing (and some uncertainties)

On artificial intelligence

Inevitably, I have written about artificial intelligence. I don’t think anyone knows how this story is going to play out, least of all me, so back in May I sketched out three scenarios for the economic impact of AI:

1. Intelligence explosion – the Silicon Valley vision of AI entering a state of recursive self-improvement, leading to artificial general intelligence, and a winner takes all economy, in which the controllers of the new technologies enjoy unprecedented political and economic power.

2. Excel in prose – in which AI is understood as a powerful normal technology, whose applications lead to significant productivity gains across a number of sectors, but with a delay as business processes have to be adapted to make the most of the new technology.

3. Crash and burn – in which the revenues generated by applications of AI are disappointing, and can’t justify the huge capital investments have been made in AI infrastructure. The subsequent bursting of a financial bubble leads to systemic damage to the world financial system and the real economy.

Writing in May, I described “Crash and burn” as a contrarian scenario, but in the last few months it seems to have become mainstream; one can’t open up the Financial Times app without coming across an AI Bubble article.

The economic impact of AI: three scenarios

One aspect of the AI story that I think has been neglected is the state of the material base that underlies the technology – the integrated circuits that are used to train and run the AI models. For many decades, we came to rely on an exponential increase in computer power, arising from the miniaturisation of the circuit components expressed in Moore’s Law.

Moore’s Law is still evoked by commentators as a symbol of accelerating technological change, but in fact the rate of increase in raw computer power has slowed substantially over the last two decades. Available computer power for applications such as large language models is still increasing, but this increased power is coming, less from miniaturisation, more from software, specialised architectures optimised for particular tasks, and advanced packaging of chips.

Minimum transistor footprint (product of metal pitch and contacted gate pitch) for successive semiconductor process nodes. Data: (1994 – 2014 inclusive) – Stanford Nanoelectronics Lab, post 2017 and projections, successive editions of the IEEE International Roadmap for Devices and Systems

In the classical heyday of Moore’s Law, from the mid 1980’s to the mid 2000’s, computer power grew at a rate of 50% a year compounded, doubling every two years. In this extraordinary period, there was more than a thousandfold cumulative increase over a couple of decades.

Now, in contrast, it is not the supply of computer power that is increasing exponentially; we have an exponential increase in demand, while the increase in supply has more of a linear character.

Moore’s Law, past and future

In “AI and the manufacturing firm of the future”, I ask how AI will change ht world of manufacturing. Sam Altman, CEO of OpenAI, has written about a manufacturing singularity, with AGI powered humanoid robots building factories to make more robots. I ask, as politely as I can, whether this vision reflects his lack of understanding of the material base of our industrial world, is a somewhat overheated metaphor, or is just bullshit (in Harry Frankfurt’s sense – i.e. an utterance whose intended effect is uncoupled to any truth value).

An alternative scenario is of AI driving process & system optimisation in increasingly automated factories. If Altman’s vision is driving strategies in the USA, I think the latter scenario is the one being aggressively pursued in China. We’ll see which is closer to reality.

AI and the manufacturing firm of the future

UK science and university policy

Until my retirement at the end of September this year it was very much part of my day job to think about science and university policy in the UK. UK Universities have been under huge financial pressure in recent years, so some might be tempted to step back from their role in their communities. In this piece I argued that this would be a big mistake, and instead they should take even more seriously their role supporting regional economies.

The civic university in hard times

The next piece offers a much more personal view of the role of universities in their regions – it’s a retrospective on my time as Vice-President for Regional Innovation and Civic Engagement at the University of Manchester, reviewing the progress we have made working with partners in the city-region to realise the University’s potential to support Greater Manchester’s economy.

On leaving the University of Manchester

Finally, my most popular post of the year was this rather provocative piece: UK Science in a post-liberal world. Here, I argue that a multi-decade period of consensus in UK science policy is likely soon to come to an end, and that the UK’s research system must respond to a new focus on re-building, re-energising, re-arming and re-industrialising for a changed & hostile world.

UK Science in a post-liberal world

Family matters

To turn to personal matters, my mother, Sheila Jones, died on October 31st this year, a little more than two years after the death of my father, Robbie Jones. I found it helpful to write these two pieces to celebrate their lives, and to reflect on where I have come from.

Sheila Howell Jones (1934 – 2025) , Robert Cecil Jones (1932 – 2023)

AI and the manufacturing firm of the future

How will artificial intelligence change the world of manufacturing? Sam Altman, CEO of OpenAI, has no doubt that the effect will be transformational [1]:

“If we have to make the first million humanoid robots the old-fashioned way, but then they can operate the entire supply chain—digging and refining minerals, driving trucks, running factories, etc.—to build more robots, which can build more chip fabrication facilities, data centers, etc, then the rate of progress will obviously be quite different.”

It’s difficult to know what to make of this vision. Taking it at face value, it seems to represent a profoundly unimaginative view of the future, in which there is a straight replacement of workers in factories by humanoid robots. Factory automation has developed hugely since my brief period as a production line worker in 1980, but this hasn’t occurred by a one-for-one replacement of people by robots.

Most people have seen pictures of modern car factories, with robot arms carrying out repeated operations like welding with great precision. But, as Tim Minshall explains in his excellent book on manufacturing [2], robots are just one example of the many devices that can carry out physical operations in an automated factory. If you are automating a chemical factory, you don’t do it by getting a humanoid robot to open the valves and stir the tanks. The most sophisticated factories that currently exist – the chip fabrication facilities that produce the GPUs that underpin AI, as well as the CPUs in our phones and computers – are almost entirely automated. In the fab, a silicon wafer goes through hundreds of complex process steps without being handled by a human – but the robots that move the wafers from tool to tool run on wheels, not legs.

So is Altman just saying that automation makes capital goods cheaper, and that leads to a self-reinforcing process of increasing productivity? That’s certainly true, but it’s a process that is neither new, nor having much to do with large language models or generative AI.

Sheila Howell Jones (1934-2025)

Sheila Jones, my mother, died on Friday 31 October 2025. Born and raised in West Wales, she spent much of adulthood in England, as a primary teacher in a variety of schools. She returned to Wales when her husband, Robbie Jones, became a priest in the Anglican Church in Wales, finally moving to Derbyshire to be close to her son’s family.

Sheila Jones, née Lewis, was born in the Pembrokeshire village of Letterston. Her father, John Lewis, was one of thirteen children of Arnold and Alice Lewis. Arnold Lewis was an agricultural merchant – and, by all accounts, something of a domestic tyrant. He assigned careers to all his sons; John was to be a priest, and was sent to train in St David’s College, Lampeter. Rebelling against this, John dropped out of theological college to become a Conservative Party activist.

What makes a manufacturing superpower?

Some reflections on Breakneck: China’s quest to engineer the future by Dan Wang.

Dan Wang’s new book on China is rightly getting great reviews. It’s a compelling read, engagingly written, reflecting both the author’s deep understanding of China’s developing economy, and his personal sympathy with the Chinese nation. It is admiring of Chinese achievements over the last couple of decades , while being entirely clear-eyed about the deficiencies of the political system and its human costs.

The big idea behind the book is to compare and contrast the two great powers of the world today – China and the USA, summarising that comparison in a neat formula. For Wang, China is the Engineering State, while the USA is the Lawyerly Society – and from that contrast, the complementary strengths and weaknesses of the two nations can be derived.

What kind of state is China? According to Wang, it is a “Leninist Technocracy with Grand Opera tendencies”.

Another Modern Industrial Strategy

This is a slightly expanded version of an article published last week in Research Professional – The latest industrial strategy has made choices

Last week’s Industrial Strategy Policy Paper is the latest chapter in the chequered history of UK Industrial Strategies. For nearly three decades after Thatcher’s ascent to power, the UK’s strategy was not to have an industrial strategy, which was a concept associated with money-losing supersonic airliners and cars with square steering wheels. But that conventional wisdom has been challenged by a global financial crisis and nearly two decades of economic stagnation, so after a number of stops and starts over the last decade, a fully developed Industrial Strategy has now arrived. Continue reading “Another Modern Industrial Strategy”

Why productivity growth is important – Spring Statement 2025 edition

Last Wednesday saw the UK Government’s Spring Statement on the economy: essentially a response to a new forecast from the Office of Budgetary Responsibility. This was politically painful – a deteriorating forecast means that the government needs to either reduce public spending or increase taxes in order for the forecasts to meet its self-imposed constraints on public borrowing and the deficit. Those forecasts are always uncertain, and highly dependent on what assumptions are made about the future. This set of forecasts underline how important productivity growth – or the lack of it – is for the ability of the government to meet its commitments.

First, where are we now? Here is the latest productivity data. To recap, as I have been discussing for some time now, for much of the postwar period, productivity in the UK grew at a steady rate of 2.1% a year. That changed in the mid-2000s, in the run-up to the global financial crisis; the growth rate rather abruptly dropped to about 0.5% a year. The cumulative effect is that the productivity of the UK economy is now some 28% below what it would have been if earlier trend had continued.

UK Labour Productivity index, quarterly data. The solid blue line is a best fit to a function which assumes two periods of exponential growth continuous at a break point. See my post When did the UK’s productivity slowdown begin? for details of the fitting methodology. The best fit parameters are: pre-break growth rate: 2.1%, post-break growth rate: 0.48%, break at year 2005.2. Data: ONS, Feb 18th 2025 release.

Taking a more close-up look at the last twenty years, one sees that there is no sign of any recovery of productivity growth. On the contrary, the last few quarters seem discouraging. I think it is probably too early to conclude that we are moving into a period of even lower productivity growth – one needs to wait a while to see the long-term trends, and data is often revised. In addition at the moment there is a worry about quality of the survey data ONS uses to estimate total hours worked, which adds further uncertainty.

UK Labour Productivity index, quarterly data. Data: ONS, Feb 18th 2025 release, fit as in the plot above.

What is the OBR predicting for the future? It’s central forecast is based on the assumption that productivity growth increases by 2029 to a value which is more or less the average of the pre-break and post-break values – 1.25%, with an increase of 0.2% to the growth rate attributed to planning reforms leading to more house-building. It has also modelled the effect of an upside scenario, where productivity growth of 1.2% is achieved in 2025, and a downside scenario continuing recent lower trend growth of 0.3% a year.

UK Labour Productivity index, annual data, together with the OBR’s March 2025 scenarios for productivity growth up to 2029. Grey is the main March forecast, yellow & green are high and low productivity growth scenarios.

The next plot, from the OBR report, shows how much difference assumptions about productivity growth make to the fiscal projections. Without the assumption that productivity growth is about to increase significantly over the trend it’s followed for the last 15 years, the government’s fiscal targets for the debt and the deficit can’t be met. In this scenario, the government would need either to cut public spending further or increase taxes to meet those targets.

Effect of the different productivity growth scenarios on the OBRs fiscal forecasts. From the March 2025 Economic and Fiscal Outlook.

So, big decisions about the UK’s fiscal policy are being made on the basis of predictions of future productivity growth, and the question of whether the government will meet its fiscal targets are very sensitive to the assumptions being made. How much credence can we place on these forecasts? It does have to be stressed that the OBRs record on predicting productivity growth has been consistently overoptimistic since its establishment, as the plot below shows. I think this reflects a wider failure by the UK’s economic and policy-making community to appreciate the scale of the change to the UK economy in the 1990s and 2000s and its long term effects. There is no more important economic policy question than to understand the causes of the productivity slowdown – and to find policies to reverse this.

Successive OBR forecasts of productivity and outturn. Source: OBR

The end of wage growth in the UK

I’ve been writing about the UK’s slowdown in productivity growth for about a decade, as I discussed here. I think it’s fair to say that this issue is well-understood amongst economists and some policy people, but productivity is an abstract concept. So, it’s perhaps unsurprising that, even now, the seriousness of our economic situation isn’t fully understood by commentators and journalists, let alone the wider public.

But there’s one way in which our productivity slowdown has very visible everyday consequences – and that’s in the end of wage growth. As my plot shows, wages have flatlined in the UK over last 15 years. This long period of stagnation is unprecedented in living memory, & marks a decisive & unwelcome break from the UK’s postwar economic trajectory.

The period from the end of the Second World War right up to the mid 2000s shows a remarkably consistent record of wage growth. There are moments of economic turbulence that are reflected in deviations from the trend of continuous 2.8% pa growth; a short-lived period of more rapid growth in the late 60s and early 70s – the Barber boom – with the excess growth unwinding in the mid-1970s crisis. And again, more rapid growth in the late 1980s Lawson boom, with the excess gains lost in weaker wage growth in the subsequent recession.

But nothing compares to the stagnation that we’ve seen since the global financial crisis. By the economic measure that arguably matters most to people at large – how their wages grow – the last decade and a half is by far the worst period since the war. In comparison, the economic turbulence of the 1970’s looks like a golden age.

UK labour productivity, index 2022=100. Data: ONS, 15/11/2024 release. Line: non-linear least squares fit to two exponential functions, continuous at the break point, which occurs at 2005 for the best fit. See When did the UK’s productivity slowdown begin? for more details of the fitting approach.

The end of wage growth in the UK is a direct consequence of the end of productivity growth. It’s worth making a couple of points about the link between productivity growth and wage growth. In the USA, that link is weaker than it was. But the UK is not the USA; while in the USA the labour share of GDP – the share of overall economic activity that goes to wages, rather than rewarding the owners of capital – has significantly fallen, this is not so in the UK. For whatever reason, in the UK, over the last decade, the labour share of GDP has actually increased.

Of course, my plot of wage growth presents a single average, and it’s a fair question to ask how the distribution of wages has changed with time – has this become more unequal, with more of the benefits of productivity growth going to higher earners? It turns out that, while there was a substantial increase in inequality in the 1980s, overall measures of income inequality have been relatively steady since then.

The wage growth plot explains so much about state of UK politics today. Few people have an intuitive feel in the abstract for what productivity growth – or its absence – means, but the sense of stalling living standards, and worse prospects for young people, is all too palpable.