The Demographics of Innovation: Why Demographics is a Key to the Innovation Race

PRAISE FOR THE DEMOGRAPHICS OF INNOVATION

"His research on demographics and innovation has been very influential and will have profound implications for economic and social policies."
—Jack Ma, Chairman, Alibaba.com

"James Liang′s The Demographics of Innovation: Why Demographics is a Key to the Innovation Race is a fascinating account of a new subject, namely the link between demographics, particularly population size and age structure, and innovation. Liang argues that demographics and population play the major role in affecting innovation. Population works through three primary channels: scale, agglomeration and aging. The scale effect is both supply and demand. Just as countries with large populations are more likely to win Olympic medals than small countries because they have a larger group of athletes on which to draw, so too are more ideas likely to be generated in countries with large populations. Also, markets are important. The larger the country, the larger the market, and the more chance to make innovation profitable. Agglomeration means that large, concentrated cities are helpful in providing supply chains that contribute to the rapid implementation of new ideas. Highly populated countries tend to have larger cities. Finally, older societies prohibit the young from getting the opportunities that generate the skills important for entrepreneurship.

The book covers much ground and considers some of the potential adverse effects of large populations including wage effects and even climate change. The last section deals with specific examples and applications to major economies and large population centers, including the US, Europe, China, Japan and India. The book is a great read. It is full of information, facts and new insights and is easily digested."
—Edward Lazear, Economics Professor, Stanford University; former Chairman, President′s Council of Economic Advisers, The White House, 2006–2009

"As people become wealthier and more urbanized, they tend to live longer and have fewer children. Our societies are therefore getting much older, especially in Japan, China, the U.S., Europe, and India. In this important book, James Liang rigorously shows how an aging population can endanger innovation. The leaders of those countries should pay careful attention to his clarion call for new public policies that promote fertility, education, and immigration."
—Jeffrey S. Lehman, Vice Chancellor, NYU Shanghai; former President, Cornell University

"Demography is destiny. But, in China, people and policy have played extreme and historic roles in shaping that destiny. China′s miracle growth, the nation′s draconian one–child policy experiment and its extreme rural–urban inequality have created a set of population dynamics, present and future, that will have absolutely huge effects on the economy, on society and on politics and more. Unfortunately, there is a lot of myth and confusion about what is happening today, what will happen in the coming years and what can be done (and what can′t be done) about the consequences. James Liang, one of the most influential economists and entrepreneurs in China in the realm of the nation′s demographic transition, has written an absolute must–read book. He describes in readable, accessible terms what the demographic future in China is and what it means for the nation and its people. He also puts the changes in China into an international perspective. James helped China′s government make the landmark decision to end the one child policy. This book, if they read it, will help them manage the nation in the coming years as China faces unprecedented pressures from the coming demographic changes."
—Scott Rozelle, Economics Professor, Stanford University

Acknowledgments vii

About the Author ix

Introduction xi

PART I THEORY AND POLICY 1

CHAPTER 1 Global Demographic Trends 3

CHAPTER 2 Demographics and Innovation 21

CHAPTER 3 Demographics and the Economy 63

CHAPTER 4 Resource and Environment 85

CHAPTER 5 Public Policy 107

PART II THE RACE OF INNOVATION 133

CHAPTER 6 Japan 135

CHAPTER 7 China 149

CHAPTER 8 The United States of America 173

CHAPTER 9 Europe 191

CHAPTER 10 India 209

Conclusion 225

Epilogue: Historical Competition Among Civilizations: An Essay on Transportation Technology, Demographics and the Race of Innovation 229

References 233

Index 235

JAMES LIANG, PhD, is both a prominent business leader and an accomplished economist. He is the co–founder and Chairman of the Board of Ctrip, now China′s largest travel portal. James is also a professor at Peking University. As a trained economist and founder of successful Internet companies, he brings his unique insight and academic rigor to The Demographics of Innovation. James is a leading authority on demographics issues in the world.