Does an Older Population Spell the End for Innovation?

What's to come?
Nov. 8 2013 8:33 AM

Can Old Dogs Learn New Tricks?

How China, Japan, and the U.S. can promote innovation in an age of longer lifespans.

Respect for the Aged Day
People work out with wooden dumbbells at a Tokyo temple in 2004 to celebrate Japan's Respect for the Aged Day.

Photo by Yoshikazu Tsuno/AFP/Getty Images

It doesn’t take long to figure out where most dog owners and trainers stand on the age-old canine question. Do a quick Internet search, and you’ll find their hackles raised and example after example of old dogs learning new tricks, perhaps even faster than their puppy descendants.

But what about people? Brad Allenby in his Slate article explores a scenario where radical life extension will make an older generation “obsolete” by virtue of simply living too long and being unable to keep up with the rapid pace of technological innovation. But it may also be true that new technologies could in fact mitigate these differences. In any event, I suspect that many teachers of older adults—and older adults themselves—would relish the opportunity to learn new tricks.

But the even bigger question might better be aimed at societies, not individuals. That is, can older societies learn new tricks? As the world begins to experience the full force of plummeting fertility rates and rapid population aging, we have to ask whether aging societies will lose their entrepreneurial and innovation mojo.

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To get a sense of the answer to that question, let’s look at three very different societies—Japan, China, and the United States.

Japan by any measure is now the world’s oldest country—whether it is average life expectancy, number of centenarians, or number of individuals over the age of 75. In addition, Japan has felt the additional pinch of a sharply declining birth rate such that it has experienced an absolute population decline of 2 million people in the past several years. (Large percentages of young people aren’t interested in sex at all.) The population drop has reduced demand for everything from cars to home mortgages.

For Japan, these demographic forces and their impact on Japan’s ability to innovate represent an existential threat. Japan’s Prime Minister, Shinzo Abe, was swept into office late last year with a mandate to shake things up. That he has done. In a recent interview with Foreign Affairs magazine, Abe said, “Japan is facing an extremely rapid decline in birthrates, and Japan’s national income has lost as much as 50 trillion yen due to prolonged deflation. … That is why we are facing a very difficult financial situation, and that was the core concern that led my government to launch the ‘three arrow’ recovery plan.”

Abe’s first arrow was expansion of government spending to stimulate economic growth. The second arrow was implementation of positive monetary policy. Both of those have been shot. But Abe’s “third arrow” for Japan’s vitality takes a longer view: It aims to use structural change to foster innovation and entrepreneurial zeal.

One response is to increase the consumption tax to sustain Japan’s social security services. But the even bigger gamble was to start up the presses and begin printing money—enough money to re-inflate an economy that has been deflationary for two decades—in order to produce an annual goal of 2 percent inflation. The Wall Street Journal captured Japan’s dilemma and its bold response in an excellent article last April titled “Stagnant Japan Rolls Dice on New Era of Easy Money.”

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