tant factor is the rate at which new knowledge is diffused abroad. Unless the innovating country enjoys a basic cost advantage in producing the new product, its trade position is enhanced only to the extent that there is a lag in time between its production of the product and new production in other, lower cost locations.

While the evidence we have is only fragmentary, it does not seem as though the international diffusion of new techniques of production or of new products is much more rapid today than it has ever been in the past.

The point is illustrated by the quip of a few years ago which went, "In January, an American invents a new product; in February, Tass announces that a Russian had invented this product thirty years ago; and by March, Japan is exporting the product to the United States."

In times past, great efforts were taken to prevent the diffusion of technological knowledge to preserve monopoly for those with the specialized knowledge. The secret of Tyrian purple was so tightly kept by the Phoenicians that it was lost in the course of time. England, seat of the industrial revolution, was much aware of the advantage it gained by the new machinery and took stringent measures in the 18th and early 19th Century to prevent the export of machinery, especially of textile machinery. The export prohibitions on capital goods were not finally removed until 1843.

France had similar restrictions. Many Germans were worried about the export of capital goods right up to the eve of World War I out of fear that it would undercut their markets.

Knowledge can be transmitted through emigration as well as through the export of capital goods. The first spinning mill in the United States was set up by an Englishman, William Slater, in 1790, who had to memorize the machine design before he emigrated. Britain was very much aware of this possibility and imposed heavy fines on skilled English workmen. who went abroad. Those who were abroad for more than six months, despite notification from the British Embassy to return, lost their British citizenship and all their property was confiscated.

This kind of impediment to the movement of knowledge was largely swept away by the free trade sentiment of the 19th Century, and today such restrictions are generally limited to goods of military application. Even without such deliberate impediments to diffusion of technical improvements, diffusion has been slow, but it has been accelerating. The

evidence we have is largely anecdotal, but as a illustration consider the typewriter, which was in vented in the United States in 1868 and by the mid eighties had quite a large market in this country. first appears as a separate entry in U.S. expor statistics in 1897 with exports amounting to $14 million. A report of 1908, eleven years later, ind cates that American typewriting machines had on German competitors in Europe. Actually by that time there were also two British firms with exports of $90,000, a negligible amount compared with US exports of $61⁄2 million. Broadly speaking, it too twenty years from the time of heavy marketing in the U.S. to the time of modest exports by the fe leading competitors, Britain and Germany.

Compare this with more recent developments Within a year of the introduction of stainless stee razor blades by Wilkinson Sword, a British firm several American firms had competing blades on the market. This was a defensive response and it wa rapid. The inauguration of new techniques has on been slightly less spectacular in other areas. Fle glass was produced in the United States only fo years after the pioneering production began i England. Many computers have been produced in Europe within a relatively few years after they were first marketed in the United States.

Even where international trade is not directly in volved, new technology moves quickly. For instance U.S. firms introduced much more efficient methods for generating electricity from coal in 1949. By 1956, seven years later, all new French generating capacity incorporated the new technology and a substantial part of new British capacity did.

We have other indications of the rapid diffusion of technical knowledge. One is the so-called interna tional patent crisis, where the number of cross-filing has increased to such an extent that most national patent offices are in heavy arrears in their work. second is the great expansion of patent licensing across national frontiers. The United States alon earned more than $1 billion from foreigners last yea in royalties, license fees, and management fees-ex ports of knowledge, disembodied from exports goods and even, in many cases, from exports of cap ital.

Finally, there has been a large and growing amount of direct foreign investment abroad-the creation of the multi-national firm. Such investmen tends to diffuse technical knowledge and manage ment skills as well as, or even perhaps more than capital.

Leads or Lags?

I will close by venturing some speculation on hese trends. In the first place, they offer some parial explanation for the baffling conjunction of two rguments, one on the eastern side of the Atlantic, hat the so-called technological lead of the United States is increasing, and the other on this side of the Atlantic, and with some vigor only a few years ago, hat the U.S. competitive position in world markets s being weakened because of a diminution in techhological lead. In fact, both arguments probably epresent unwarranted generalizations from particuar examples and, of course, both tendencies can be observed simultaneously by looking at different industries.

A more sophisticated reconciliation would refer to the two basic dimensions that I have just been discussing. The intensity of the stream of innovations from the United States may have increased-we still await evidence on whether that is actually so-but at the same time, the rate of diffusion of this knowledge to other countries has also increased. From the viewpoint of competitiveness in international trade, It is the product of these two factors which is important, neither one alone.

Speculating on the Future Basis of Trade

The very rapid diffusion of new technological knowledge along with the great accumulation of

capital which is taking place in most countries suggests a deeper irony. It is that most large countries will become more alike over the course of time in their structure of production and levels of income, and they can become economically more self-sufficient. The basis for trade among them will be undercut. There is already some evidence that most Western countries do look more alike in the structure of their production, particularly in manufacturing production, than they did in the past.

Trade has certainly not diminished among these countries, even relative to output, but even while technological change throws up new products for trade, rapid diffusion of this knowledge reduces the underlying basis for trade.

One can even speculate-idly, for most of usthat in the course of time there will be a swingback in relative importance to the traditional trade with which we started out-trade in food and raw materials, whose production costs are rooted in climate and natural endowments-while advances in technology and rapid dissemination of new knowledge permit many countries or small groups of countries to produce their own requirements of the other commodities or services.

Perhaps this is one of those historical reversals to which Professor McLuhan has referred, like the complete cycle from a tailor-made service economy through mass production and back again.

Dr. Seitz: Thank you very much, Professor Cooper. Now, we will begin the discussion period and I would first like to call on two formal discussants. The first is Dr. Hendrik Casimir, Director of the Research Laboratories of the Philips Industries of Holland.

Dr. Casimir: I am not certain that the remarks I am going to make relate directly to what the two speakers have said, but I should like to make a few comments on the role of basic science in technology.

Fundamental science is and should be an aim in itself. It is one of the most noble endeavors of mankind to discover curious facts, to relate the apparently unrelated, to build abstract edifices of theory, to probe the universe as astronomers do, and to probe the smallest particles as the high-energy physicists do.

It creates a beauty, an understanding and harmony. One doesn't perhaps go so far as Heinrich Hertz, who, when working on his thesis, said to his mother: "Poor mother. What a pity that this type of beauty will forever remain a closed book to you." Had I said this to my mother while working on my thesis, she would have said, "Oh, yes, you are a dear little boy, but don't talk such ridiculous nonsense." But then she was a very wise woman. It happens, however, that this basic science provides increasingly the tools without which entrepreneurs and inventors and innovators would be completely helpless and without effect.

The Debt of Technology to Basic Science

I have heard statements that the role of academic research in innovation is slight. It is about the most blatant piece of nonsense it has been my fortune to stumble upon.

Certainly, one might speculate idly whether transistors might have been discovered by people who had not been trained in and had not contributed to wave mechanics or the theory of electrons in solids. It so happened that inventors of transistors were versed in and contributed to the quantum theory of solids.

One might ask whether basic circuits in computers might have been found by people who want ed to build computers. As it happens, they were discovered in the thirties by physicists dealing with the counting of nuclear particles because they were interested in nuclear physics.

One might ask whether there would be nuclear power because people wanted new power sources of whether the urge to have new power would have led to the discovery of the nucleus. Perhaps-only it didn't happen that way, and there were the Curies and Rutherford and Fermi and a few others.

One might ask whether an electronic industry might exist without the previous discovery of elec trons by people like Thomson and H. A. Lorentz Again, it didn't happen.

One might ask even whether induction coils in motor cars might have been made by enterprises which wanted to make motor transport and whether then they would have stumbled on the laws of induction. But the laws of induction had been found by Faraday many decades before that.

Or whether, in an urge to provide better communication, one might have found electromagnetic waves. They weren't found that way. They were found by Hertz who emphasized the beauty of phys ics and who based his work on the theoretical consideration of Maxwell. I think there is hardly any example of twentieth century innovation which is not indebted in this way to basic scientific thought.

Basic Science Awaits Use by the Entrepreneur

I am quite certain that sooner or later the work that is now going on in high-energy physics, on problems like parity conservation and the eight-fold way and the theory of unitary groups and so on. will in some way or other lead people of enterprising mentality and of inventive skill to come forward with entirely new branches of technology.

These basic aspects of science are common property. They are available to the whole world, for everyone who wants to study them, and by the time they are being used they are usually condensed in excellent textbooks and manuals. You don't have to repeat these studies to be able to reap the harvest. but one must have certain powers of absorption. One may ask whether these can be obtained, can be present to a sufficient degree without some involvement in the scientific field.

The Tie Between Scientific Competence and Economic Development

The case of Japan was mentioned. It is true they went into transistors without very large investments in solid state research, but in my view their proficiency in absorbing knowledge is not entirely unrelated to the fact that Japan, after all, produced two Nobel Prize winners in physics and a number of other leaders in research.

It has something to do with the fact that Japan before the World War pioneered in certain magnetic materials. It has to do with the fact that on the roofs of our houses we find television antennas of the Yagi type, invented by Professor Yagi in Japan. He was a man who encouraged Yukawa not to study atoms but nuclei, and so Yukawa was led into the study of nuclear forces. This indirect route made him not only the winner of a Nobel Prize, but also the originator and father of high energy physics. And it has something to do with the fact that, at present, in the Japanese school of theoretical solid state physics, a man like Kubo is dominating parts of the field. Is this mysticism? You will have a hard time to convince me that this is a myth that should be broken. I might conclude with one or two examples from my own country which show that proficiency in certain research may not lead to tech

nological and commercial results, without the sup port of sufficient enterprise, but that in another way it still has certain influence in the whole picture.

Let's take three cases of Dutch Nobel Prize winners: Kamerling Onnes, who liquefied helium and discovered superconductivity. It did not lead to an immediate development of cryogenic industries in the Netherlands. It didn't give us even though the primary logical circuits were also made in Holland in the thirties-it did not give us a great advance toward launching a cryogenic computer. Technology and industry weren't right for that. Yet when in Holland one decided to tackle certain aspects of cryogenic engineering, the existence of this tradition helped us quite considerably.

The fact that electrocardiography was discovered in the Netherlands did not lead at once to a great business in electromedical equipment. Yet the fac that there was a general level of medical research contributed to the fact that Holland now exports a lot of x-ray equipment to other countries.

The invention of the phase contrast electron-microscope by Zernike did not lead to a great manufacturing enterprise for such microscopes. Still, it is in my opinion related to the existence of a prosperous optical industry in the Netherlands.

These are the few remarks I wanted to make and which perhaps can be contributions to the discussions of today and tomorrow.