If the Soviets Were So Smart, Why Weren't They Rich?

Time Required

1 class period

Materials

Procedures

  1. (Non-research option)
    • Display visual #2 and explain that the items in the first column were taken from a variety of “greatest inventions” lists published at the turn of the century. Remind students of our interest in the innovations that result from inventions, and solicit examples of innovations associated with the listed inventions.
    • Invite students to guess the source of the inventions and innovations. Use visual #3 to reveal the actual origins.
  2. (Research option)
    • For homework or as a computer lab project, ask students to generate a list of the 20 greatest inventions/innovations of the 20th century.
    • Using partners, then small groups, and finally a full-class discussion, create a consensus list of from 10 to 15 items. Post the list on overhead transparency #3.
    • Make a handout from visual #3 and distribute copies. Divide students into small groups to fill in the remaining columns of the chart.
  3. As students become aware that most of the inventions and innovations came from the West, discuss possible explanations. Discussion questions:

    (Record hypotheses from the discussion on the board or overhead for future reference.)

    • Are there differences in the populations of innovating countries and those that do not innovate?
    • Are there differences in the physical characteristics of innovating countries and those that do not innovate?
    • Are there institutional differences between the innovating countries and those that do not innovate?

  4. Ask students to solve a mystery that will help them understand why so many major 20th century innovations came from western nations. Display the mystery prompt (visual #5) on the overhead. Read through the prompt with the class.

  5. Divide students into working groups. Display Visual #6 on the overhead and read through the group directions.
    • Emphasize that there are 2 tasks assigned: 1) to solve the mystery, and 2) to determine what each clue contributes to the solution.
    • Note: Especially if you have used mystery activities with students in the past, it is important to emphasize that in this activity the goal is to use as many, not as few, of the clues as possible.
    • Distribute one set of clues and, depending on the group size, 2 or 3 copies of the mystery prompt (visual #5) and the group directions (visual #6) to each group.

  6. At the end of the work time, discuss the solution to the mystery, and give each group a chance to explain how 2 or 3 of the clues helped them solve the puzzle. (See teacher guide for suggestions on sorting the clues.)

  7. Debriefing questions:

    • Compare and contrast the Soviet Union and the West in terms of who engages in research and what incentives they have to do so.

      Research in the Soviet Union was directed by the government and confined mainly to areas that had military or political significance. Researchers were employees of the government and were motivated by their interest and pay and, to some extent, by the promise of status and recognition (clues # 1, 4, 10). While there is government-sponsored research with a military purpose in the U.S., there are also significant university-sponsored and private research efforts. Researchers are private or university employees. American researchers share many of the motivations of Soviet researchers, but additionally, they have the important incentive of royalties and other monetary rewards for successful innovation (clues #7,12).

    • What rewards were offered to individual researchers and scientists in the USSR? How did this help to explain the Soviets’ relatively low level of innovation?

      The Soviet Union attempted to motivate researchers by rewarding them with recognition and status, rather than profit. Researchers were paid by the state and their reward was tied to their effort rather than to the outcome of their efforts. They didn’t profit from a successful innovation. They had neither the incentive nor the opportunity to innovate and become entrepreneurial, whereas American researchers have both incentive and opportunity by virtue of the fact that they can profit from their innovations (clues # 2, 4, 5).

    • Compare and contrast the USSR and the West in terms of the relationship between the researcher and the consumer.

      In the Soviet Union, there was little commercial innovation. The results of research and invention tended to stay in the military sector. In the West, inventions and technological knowledge pass relatively quickly from government research agencies (e.g., NASA in the United States) to the private sector, where they spawn many innovations in consumer goods (clues #3, 6, 8, 9). (Note clue #8 and check the NASA Spinoffs website for more information on the technology transfer from the space program to consumer goods: (http://www.thespaceplace.com/nasa/spinoffs.html)

    • How did the Soviet institutions of property rights and markets differ from those institutions in the West?

      The USSR claimed to recognize intellectual property rights and did issue patents and copyrights just like the US did. However, Soviet patents and copyrights did not grant the intellectual rights holder any economic rights. The inventor/innovator got only the status that goes with being able to claim an invention, while the Soviet government held the right to actually use the invention (clues #4, 10). The Soviet Union claimed to have markets, but it had no market pricing. Prices were set by the government in state stores, so there was no objective way to value an innovation (clue #2 – and students’ background knowledge of the Soviet Union).

    • What impact did differences in intellectual property rights have on incentives to innovate in the 2 countries?

      Granting economic rights with intellectual rights encourages innovation by offering the possibility of profit – which has proven in the long run to be a much more powerful motivator than medals, certificates, or public accolades. Markets in the U.S. quickly pass judgment on innovations; they either generate profit or they don’t. The profit motive prompts innovators to pay attention to those judgments in choosing which areas of innovation to pursue (clues # 5, 8, 11, 3).

    • The results of Soviet inventive genius were most frequently seen in military technology, where it increased world power and influence. Where are we most likely to see the results of American inventive genius? What benefits does it produce? Who reaps the benefits?

      While we see inventive genius in the military realm in the U.S., it quickly spins off into the commercial sector where innovation increases our ability to produce goods and services and thus raise standards of living (clues # 8, 12).

    • How do the institutional differences help to explain the difference in standard of living in the two nations in 1990?

      Because there were no incentives for innovation, the fantastic research and remarkable inventions of Soviet researchers did little to change the lives of Soviet citizens. There were no economic rights to intellectual property and no mechanisms – no markets, and therefore no market incentives of profit – motivating researchers to apply the results of research to the creation of goods and services. In market economies, these incentives lead to lower production costs and lower prices, making goods and services more affordable for more people.

      Note: Teachers may also wish to supplement the discussion with direct instruction and/or examples from the teacher background outline.

  8. (Refer back to the list of hypotheses recorded during the initial discussion.)

    • Which category of national characteristics best explains differences in nations’ level of innovative activity – population characteristics, physical characteristics, institutional characteristics? (institutional)

    • Generalize: What kind of economic institutions would you expect to find in countries with high levels of innovation? Why?

      You would expect to find relatively open markets and secure intellectual property rights, because these institutions foster incentives that encourage innovation by rewarding the successful innovator.

    • Generalize: Why did the major inventions/innovations of the 20th century come from the developed countries of the West?

      Help students to see that factors such as relative wealth, levels of education, and abundance of resources do not adequately explain differences in innovative activity. The presence or absence of institutions that provide incentives for innovators explains differences in levels of innovation. The major innovations of the 20th century came from nations with open markets and secure property rights.

    • China has not been a major innovator in the modern world. In the last decades of the 20th century, China became known for failing to respect and enforce intellectual property rights. Chinese factories produced millions upon millions of cheap rip-offs of popular branded products. Recently, China has opened its economy to more international trade and has moved toward greater dependence on markets in agriculture and other consumer goods. Predict: How will these institutional characteristics impact China’s future level of innovation?

    Accept a variety of answers. While opening markets increases incentives for innovation, failure to enforce property rights reduces such incentives. Students’ predictions must reconcile those opposing forces. For this reason, they may simply generate more questions: Will opening markets create pressures on the Chinese government to secure property rights? Will the failure to secure property rights eventually stymie the economic growth being propelled by markets? Etc.

  9. (Optional) Assessment for parts 1 & 2:

    (Display Visual #7.) How is it possible to argue that poor people benefit most from the fact that market capitalism encourages invention and creativity when rich people always have new products and innovations much sooner than poor people do?

    Rich people are always able to command more comforts than poorer people, but the marginal value of each additional unit of food or clothing, for example, is less for a rich person with much food and clothing than for a poor person with little. By reducing the cost of goods and services, innovation makes it possible for both the rich and the poor to have more, but the additional is arguably of more value to the poor.