Economists are divided over whether the rate of productivity growth in developed economies is down for good or is soon to pick up again. This debate is important because it bears on economic potential. It’s hard to resolve this debate, though. There are good models for understanding the emergence of new technology systems and platforms, but timing, direction and impact are very difficult to anticipate.

Physicist Mark Buchanan believes there is a bigger problem with this debate. He maintains that economists are not asking the right questions about innovation and productivity. In a Bloomberg View column (Is Innovation Over? December 11, 2014), Buchanan argued that innovation is now occurring in ways that economists don’t measure and thus can’t see, much less study or forecast. That’s because, nowadays, innovation is social.

Social innovation is everywhere, but it escapes the notice of economists because they are using traditional economic yardsticks to study the productive potential of the economy. As Buchanan put it, “Most of our technology … has come from influencing and controlling how atoms, molecules or cells interact.” So that gets measured. In the future, though, “[a]n entire realm of possibilities may lie elsewhere, especially in the social world, in learning to manage and expand human interactions.”

Buchanan foresees a big upside in social innovation. “It’s hard to imagine,” he suggested as an example, “that we’ve done anything more than scratch the surface of possible kinds of business organization.”

Of course, innovative ways of organizing employees is nothing new. Frederick Taylor’s system of scientific management arose in the late 19th century as a means of improving the workflow efficiency and labor productivity of manufacturing assembly lines. Procter & Gamble introduced brand management in the early 20th century to better focus and empower marketing and advertising talent. More recently, whole literatures have arisen on topics like flatter organizations, distributed organizations, the doughnut principle, the abundant organization, holacracy, Teal principles, and tactics in the war for talent, to mention just a few efforts at social innovation in the workplace. But despite this long history of corporate social engineering, much of the potential of social innovation has gone unrealized.

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