Making Things in 2030 –

Implications for Policy

Andy Wyckoff, Director

Alistair Nolan, Senior Economist Directorate for Science, Technology and Innovation, OECD

TA CR Day, Prague, October 20th 2016

The NPR will be a confluence of new

technologies…..

….underpinned by digital

technologies.

Autonomous machines and

systems

Artificial Intelligence

Cloud computing

Human-Machine

integration

System integration

Internet of Things

Big data

Simulations

Additive manufacturing(3D printing)

Contribution to potential per capita output growth (% pts unless otherwise noted)

Source: OECD Economic Outlook 2016, Volume 1.

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Capital per worker MFP

Potential employment rate Active population rate

Potential per capita growth (%)

Pre-crisis: MFP story Post-crisis: K story

The possible productivity benefits of digital

technologies are urgently needed.

-Output and productivity in US firms that adopt data-driven decision making are 5% to 6% higher than expected given those firms’ other investments in ICTs

- (Brynjolfsson, Hitt and Kim, 2011).

-The Internet of Things reduces costs among industrial adopters by 18% on average.

- (Vodatafone, 2015). -Autonomous mine haulage trucks could increase output by 15-20%, lower fuel consumption by 10-15% and reduce maintenance costs by 8%.

- (Citigroup-Oxford Martin School, 2015).

Selected themes – digital

technologies

Autonomous machines and

systems

Artificial Intelligence

Cloud computing

Human-Machine

integration

System integration

Internet of Things

Big data

Simulations

Additive manufacturing(3D printing)

Policy challenges include

-Broadening access to critical ICT infrastructures. -Reducing barriers to diffusion, increasing interoperability. -Resolving issues of liability, transparency and ownership. -Managing digital security and privacy.

Selected Themes - 3D printing

Selected Themes - 3D printing

Selected Themes - 3D printing

Could have positive environmental effects E.g. It permits many materials to be shaped in ways previously possible only with plastics. E.g. 3D-printed parts can also lower the environmental impacts of some products (3D-printed nozzles in jet engines lower fuel consumption).

Selected Themes - 3D printing

Could have positive environmental effects E.g. It permits many materials to be shaped in ways previously possible only with plastics. E.g. 3D-printed parts can also lower the environmental impacts of some products (3D-printed nozzles in jet engines lower fuel consumption).

But how widespread will 3D-printing be in manufacturing ?

Much machining work is now replaced by 3D-printing : Boeing has replaced hundreds of parts. But machining is a small part of manufacturing (+/- 5% by value).

Selected Themes - 3D printing

Could have positive environmental effects E.g. It permits many materials to be shaped in ways previously possible only with plastics. E.g. 3D-printed parts can also lower the environmental impacts of some products (3D-printed nozzles in jet engines lower fuel consumption).

But will 3D-printing become widespread in manufacturing ?

Much machining is now replaced by 3D-printing – and Boeing has replaced hundreds of parts. But machining is a small share of all production (+/- 5% by value).

From a ‘green’ standpoint, policy challenges include:

• Create a voluntary certification system to label 3D

printers with different grades of sustainability; • Remove intellectual property barriers to enable 3D

printing of repair parts for products no longer in production.

• X-border shipment of “printer” cartridges (toxic materials)

• Purity of required feedstock precludes using recycled materials.

Bio-based products are becoming

widespread and familiar

Automotive

– Tyres– Bioplastics, interior paneling– Textiles- biobased surfactants and

lubricants

Consumer Goods– Enzymes in Detergents– Biobased Cosmetics– Biological Dental Care

– Biobased Packaging– Biobased Sweeteners– Enzymes as Additives

Health, Medical Tech.– Biological Coatings– Implants– Diagnostics

Building Industry– Biological Insulating Materials– Biobased Building Material– Biobased Construction Chemicals

Nutrition– Food Security– Healthy Diets and Additives– Biobased Flavourings

Medicine– Biopharmaceuticals– Antibiotics– Tissue Replacement

Energy– Biofuels– Bioenergy– Biogas

Source: Courtesy of BIOCOM AG, Germany

Bio-based production creates policy

challenges, for instance…

Automotive

– Tyres– Bioplastics, interior paneling– Textiles- biobased surfactants and

lubricants

Consumer Goods– Enzymes in Detergents– Biobased Cosmetics– Biological Dental Care

– Biobased Packaging– Biobased Sweeteners– Enzymes as Additives

Health, Medical Tech.– Biological Coatings– Implants– Diagnostics

Building Industry– Biological Insulating Materials– Biobased Building Material– Biobased Construction Chemicals

Nutrition– Food Security– Healthy Diets and Additives– Biobased Flavourings

Medicine– Biopharmaceuticals– Antibiotics– Tissue Replacement

Energy– Biofuels– Bioenergy– Biogas

Source: Courtesy of BIOCOM AG, Germany

-Screening processes for manufacture and sale of synthetic DNA (avoid dubious customers); -Public-private investments in bio-refineries; -Improve regulation, e.g. -Boost the use of standards to reduce barriers to trade in bio-based products. -Improve waste regulation. - Develop interdisciplinary skills

Selected Themes – Nantoechnology

Electron microscope image of gold mesh. Each hole is 175 nanometers in diameter, smaller than the wavelength of light. Can increase efficiency of solar cells

175%.

Nanotechnology-enabled printing of solar cells (can move away from energy-intensive zone-melting processes used for traditional silicon solar cells).

Selected Themes - New materials

Selected Themes - New materials

New policy issues: cybersecurity risks. Older policy issues: Close collaboration needed between industry, universities, research funding agencies and public laboratories.

Some Cross-Cutting Issues

Sound science and R&D policies are

essential

…but many countries have reduced

public spending on R&D…

Public R&D budgets 2008-2015 : G7,Korea and Czech

Republic, Index 2008 = 100

80

90

100

110

120

130

140

2008 2009 2010 2011 2012 2013 2014 2015

United States

Italy

Czech Republic

Germany

Korea

Japan

Canada

United Kingdom

France

Cross-country differences in resource flows to patenting firms Change in financial inputs associated with a 10% change in patent stock

(2003-2010)

Note: The black dot shows the country-specific point estimate while the grey bands denote the 90% confidence interval (note that the confidence intervals vary across countries due to differences in the number of observations). Source: Andrews, Criscuolo and Menon (2014) based on firm level data from the ORBIS-Patstat Database for the non-farm business sector

Governments must create an

environment for business dynamism

Well designed institutions needed for

technology diffusion and adoption

0

10

20

30

40

50

60

70

% All enterprises 10-49 50-249 250+

Source: OECD Science, Technology and Industry Scoreboard 2015.

Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class

0

10

20

30

40

50

60

70

% All enterprises 10-49 50-249 250+

Source: OECD Science, Technology and Industry Scoreboard 2015.

Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class

”We have to execute quickly, otherwise those who are already leading in digital will snatch the industrial production from us.”

Angela Merkel, World Economic Forum 2015

We need well designed institutions for

technology diffusion and adoption

0

10

20

30

40

50

60

70

% All enterprises 10-49 50-249 250+

Source: OECD Science, Technology and Industry Scoreboard 2015.

Enterprises using cloud computing services by employment size class, 2014 As a percentage of enterprises in each employment size class

”We have to execute quickly, otherwise those who are already leading in digital will snatch the industrial production from us.”

Angela Merkel, World Economic Forum 2015

- Just 18% of German companies familiar with the term ‘Industry 4.0’

- Only 4% of German businesses have implemented digitalised and networked production processes or have plans to begin doing so.

ZEW Mannnheim 2015 survey of 4,500 German businesses

We need well designed institutions for

technology diffusion and adoption

NPR will create new challenges for the

intellectual property system

Copyrights, patents, trademarks, designs

T M

NPR will create new challenges for the

intellectual property system

Copyrights, patents, trademarks, designs

T M

For example:

- We may need to rethink some aspects of IP rules in a world where machines can invent things.

- Will 3D printing create challenges for patent eligibility, for instance if printed human tissue improves on the original ?

- Should there be a public domain for designs that allow parts for old products to be printed?

NPR may need changes to labour

market policies

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

NPR may need changes to labour

market policies

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

A version of IBM’s Watson can act as a customer service agent (Rotman, 2013).

NPR may need changes to labour

market policies

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

A version of IBM’s Watson can act as a customer service agent (Rotman, 2013).

Computer-based managers are being trialled. These allocate work and schedules (Lorentz et al, 2015).

NPR may need changes to labour

market policies

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

A version of IBM’s Watson can act as a customer service agent (Rotman, 2013).

Computer-based managers are being trialled. These allocate work and schedules (Lorentz et al, 2015).

NPR may need changes to labour

market policies

The Quill programme writes analytic reports and Automated Insights can draft text from spreadsheets.

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

A version of IBM’s Watson can act as a customer service agent (Rotman, 2013).

Computer-based managers are being trialled. These allocate work and schedules (Lorentz et al, 2015).

NPR may need changes to labour

market policies

The Quill programme writes analytic reports and Automated Insights can draft text from spreadsheets.

Recent softwares interpret some human emotion better than humans (Khatchadourian, 2015).

Complex aspects of the work of software engineers can be performed by algorithms (Hoos, 2012).

A version of IBM’s Watson can act as a customer service agent (Rotman, 2013).

Computer-based managers are being trialled. These allocate work and schedules (Lorentz et al, 2015).

NPR may need changes to labour

market policies

The Quill programme writes analytic reports and Automated Insights can draft text from spreadsheets.

Recent softwares interpret some human emotion better than humans (Khatchadourian, 2015).

- More self-employment, as technology displaces labour and lowers start-up costs?

- Are any Labour Ministries preparing for driverless vehicles ?

- More sub-national policy, as NPR technologies amplify effects of initial skills endowments ?

Education and training systems

needs constant attention

Two thirds of people surveyed lack the skills to succeed in technology-rich

environments

very low skills or optedout of the test

low skills

medium skills

solid skills

2 out of 3

people lack

skills for the digital

age

32

Education and training systems

needs constant attention

Two thirds of people surveyed lack the skills to succeed in technology-rich

environments

very low skills or optedout of the test

low skills

medium skills

solid skills

2 out of 3

people lack

skills for the digital

age

33

-But it is not only about balancing skills supply and demand. -Increasing importance of inter-disciplinary education and research? -More interaction with industry as the knowledge content of production rises?

Other cross-cutting issues

Policy also needs long-term thinking.

This has challenges, of course: Robert Metcalfe, inventor of Ethernet, in 1995: "I predict the Internet will soon go spectacularly supernova and in 1996 catastrophically collapse”

Public attitudes have shaped regulation of new technologies in the recent past

Public acceptance might also be important.

http://www.vinnova.se/en/misc/Smart_Industry_Conference/ http://oe.cd/npr-industry

NPR Conference –

November 17th and 18th, Stockholm

Co-organised with Vinnova and Sweden’s Ministry of Enterprise and Innovation 300 policymakers, industrialists, academics and policy analysts to consider the main themes of the NPR

Thank you