Economic Growth and Innovation

As Matt Yglesias notes, economists can't explain economic growth:

The embarrassing heart of economics as a discipline is that absolutely nobody has any idea what the sources of long-term prosperity are. Instead, you get phlogiston economics grounded in a mathematical model that tells us the most important thing is the unexplained residual. Then economists fight over how to label the residual. The residual is often labeled "technology" which people associate with the idea of "innovation" so it's often deemed important to try to research where innovation comes from.

Searching for a way to measure innovation, many economists have settled on the number of patents granted. This is crazy; most patents, indeed almost all patents, are granted for economically useless things, and the main variable determining how many patents a country grants is how willing its patent office is to grant patents for new versions of perpetual motion machines. But economists take this stupid datum and perform lots of calculations on it, figuring out, for example, that European countries with generous welfare benefits grant fewer patents per capita than Latin American or Eastern European countries do. But have any of these economists actually read through the patent application to figure out how many are for new interstellar drives relying on magnetic impulse flux control? No,  they have not. So their results are, as Yglesias says, "garbage in / garbage out."