From Markets to Minds: Brain Capital to Drive Economic Security

Introduction

Things never “get back to normal” after a major crisis. A crisis usually reveals, amplifies, and dampens trends and characteristics that were present, if unnoticed or underestimated, before the disruption, leading to the emergence of a new situation. Before the crises provoked by the pandemic and the Ukraine war, big power rivalries and the importance of geopolitics were often left out of economic considerations, leading to an emphasis on efficiencies, cost-cutting, and outsourcing for short-term profitability. The importance of strategic sectors, critical materials, and secure supply chains was underestimated. The concentration of keystone capacities led to vulnerabilities exposed by demand- and supply-side shocks during the COVID-19 pandemic and its aftermath, and following the Russian invasion of Ukraine.

The recent G7 communique in Hiroshima highlighted that there is a new lens for thinking about these problems that focuses on industrial strategy, more resilient rather than efficient trading and investment arrangements, and increased use of government intervention in strategic sectors to counter Chinese leadership, military or otherwise. All of this has meant that economic security is now a top priority for Western nations.

In this report, we examine how the combined impacts of the COVID-19 pandemic and the Ukraine war are affecting the goals of economic policy and encouraging the growing emphasis on economic security. We concentrate on one issue that is underestimated in our opinion, namely competition to secure and exploit “brain capital” (i.e., an individual’s cognitive, emotional, and social brain resources). We will argue that this will play a central role in strategies to encourage, develop, and adopt the innovations on which future economic success will depend.

We also argue that brain capital will become even more crucial because of, and not in spite of, progress in artificial intelligence (AI). We pay particular attention to the rivalry between China and other major economies since this competition drives many of the shifts we are witnessing. Finally, we propose a brain science-inspired industrial strategy that would boost economic resilience by reducing the economic burden of brain and mental disorders while stimulating creativity and entrepreneurship. In order to develop novel data and solutions in this area, we also propose the creation of an action group on brain capital for economic security, hosted by the Brain Capital Alliance and the Baker Institute for Public Policy.

Renewed Emphasis on Economic Security in the Competition with China

Underpinning much of the new thinking about industrial policy is the notion of economic security, an essential component of economic resilience. Among the instruments of economic security being discussed are export controls of critical technologies. This is not a new idea. During the Cold War, the Coordinating Committee for Multilateral Export Controls (CoCom), which comprised 17 countries and existed between 1950 and 1994, imposed an embargo on Council for Mutual Economic Assistance (COMECON) countries. Among the contested products were submarine propellors, machines for fabricating fuselages for fighter planes, and turbine blades for jet engines. However, following the collapse of the Soviet Union, such controls became less relevant. The collapse coincided with the accelerating rise of China (never a member of COMECON), following the economic reforms of the early 1980s. In this case, rather than imposing controls, Western firms and governments accepted technology and IP transfer as a condition for being granted access to the vast and growing Chinese domestic market, even in sensitive domains such as avionics.

Now, the tide has turned and China is seen more as a threat than an opportunity. The instruments for containing China include imposing export controls, conducting investment screening on national security grounds, diversifying supply chains, limiting Chinese corporate ownership and expansion, and limiting access to sensitive technology (complicated by the existence of “dual use” technologies that have both military and civilian uses). The U.S. Department of Commerce’s Bureau of Industry and Security, for example, has introduced a sweeping set of export controls on advanced semiconductors, supercomputers, and semiconductor manufacturing equipment. Likewise, the Netherlands has banned the export of advanced microprocessor manufacturing technology. China retaliated by imposing restrictions on the exports of gallium and germanium, essential to the manufacture of semiconductors.

While the U.S. is leading the campaign to counter Chinese influence through economic measures, the official position of the United States government is to slow China’s military expansion — not economic development. The Biden administration has committed to “compete where necessary, co-operate, if possible, confront if essential.” And indeed, the G7 committed to “de-risking” rather than decoupling from China. The premise of this approach is based on the understanding that global issues such as trade, finance, climate, sustainable development, and health require an open exchange with China and pragmatic solutions wherever possible. This implies a significant increase in frankness from all sides. “We will never be shy in raising the deeply concerning issues,” said the European Commission President von der Leyen. However, as Carl Bildt argues in Project Syndicate, unless policymakers clarify what de-risking does and does not mean, it could do more harm than good, and some have warned that efforts to de-risk from China carry risks that would lead to decoupling.

Mobilizing Brain Capital to Fuel Economic Change

An important if under-appreciated dimension of the economic competition with China is the mobilization of intellectual resources. History provides plenty of examples of how what we call “brain capital” has been a vital component of economic change, from the understanding of how to harness natural processes that gave rise to the invention of agriculture and the Neolithic Revolution, through the Industrial Revolution’s need for greater literacy and numeracy in the population, to the digital skills used today in everything from shopping to warfare. It is becoming increasingly recognized that enhanced brain performance, function, and health are needed to support global leadership and to compete within a new set of geopolitical rivalries.

If great power rivalries are about competition over strategic assets — technology, infrastructure, materials, and data — then brains are an important missing dimension in much recent discourse. This was not always the case. During the Cold War, there was a “battle for brains” — in space, military, and even chess — from appropriating German scientists after World War II to competing for students in the 1980s. The Cold War was a battle for political and economic supremacy, a battle of ideologies, and ultimately of hearts and minds. Science was considered one of the most noble and successful vocations of mankind. However, the evolution of science from a largely military and state-sponsored enterprise during the Cold War, to an activity primarily subordinate to market considerations and organized by corporate actors, has led to significant strategic errors.

Whether we are seeing a new Cold War is still a contested concept. But it does seem possible that the global market economic paradigm of the last 40 years that favored market solutions over government intervention will be replaced by a new paradigm perhaps based on geoeconomics — the use of economic means to attain geopolitical objectives. This would accompany the government taking a greater role as the pendulum swings from market-led to state-led development as geopolitical competition intensifies. However, the set of economic ideas described as the paradigm of neoliberalism, which sees the market as “an information processor more powerful than any human brain,” is hard to displace. Even the recent COVID-19 experience has not yet led to a major reconsideration. That said, brain capital will inevitably play a role in both geopolitical and economic competition going forward.

The Role of Brain Capital in Driving Innovation Ecosystems and Economic Security

In this context, the battle for brain health and skills — brain capital — is an essential part of economic security. We have argued that brain capital provides a useful framework to think about many contemporary challenges in new ways. Innovation is foremost among these.

During the Cold War, innovation was largely the product of large, centralized laboratories operating under various degrees of public-private cooperation. That has changed radically, with the various functions of innovation now widely dispersed intellectually, organizationally, and geographically across multiple actors including governments, startups, investors, universities, and large corporations. Such a configuration means we must abandon the old metaphor of an innovation “pipeline” with projects proceeding in an orderly, linear way from one step to the next. Innovation today is better described as an ecosystem, and best understood in terms of complexity and systems theory.

One lesson we can draw from this approach is that within the innovation ecosystem, many subsystems are constantly interacting with each other and evolving as a result of those interactions. Any industrial policy is doomed to fail if it does not consider the multidimensional, multi-scale nature of the targets that are defined and the means identified to hit them. Within government, that means that not only industrial or economic ministries have to be involved, but a whole range of sometimes competing interests, such as education, infrastructures, or energy. More widely, the increasing importance of non-physical inputs embodied in economic growth calls for a concerted effort to increase brain capital as the key facilitator for innovating, identifying potentially useful innovations, and taking advantage of these innovations.

Global Competition for Brain Skills: The Case of AI

While much of the attention on growing geopolitical tension has focused on competition for the machinery of production, there has been less focus on human capital and brain performance. Yet competition for global talent is key. AI is a case in point. The technology itself is neither artificial nor intelligent. It is the result of the work of thousands of human beings across multiple skill sets in many countries performing tasks such as tagging and inputting the data used to train the algorithms or devising the code for pattern matching that enables a machine to perform its task.

In the race to have the best AI, countries with strong evidence-based research and education in cognitive and brain sciences will have an advantage. As Stan Dehaene has written, “only by combining the distinct forces of teachers, parents, and scientists will we attain the worthy goal of reviving the curiosity and joy of learning in all children, in order to help them optimize their cognitive potential.” Neuroscientific insights suggest that aiming at deeper understanding pays off greatly, requiring students to engage in more cognitive effort. In addition, error is an essential part of learning. “Let us not punish errors, but correct them quickly, by giving children detailed but stress-free feedback.” These and other findings need to become part of a new agenda to revive education in line with the deeper knowledge about how our brains function.

Note that this should not just be technical education. As we mentioned above, AI is made by humans, so it is a product of the decisions, objectives, and histories of people. Education must equip students with the skills needed not just to create or use AI, but to question the values underlying it and be aware of its shortcomings that reflect the experience, goals, and worldviews of those who create it and those who ask them to do so. At present, that usually means governments with varying respect for human rights or some of the world’s largest corporations.

The Chinese government has prioritized the training and retention of AI graduates and will likely become the world leader in the field by 2030. Its AI roadmap, released in 2018, called for increased education in AI at primary and middle schools. Several U.S. tech companies including Google and Facebook have operations in China to tap into this brain power (despite pressure to pull out), but China is still lacking top talent. And while a good learner, China is not yet a good innovator.

However, a recent study from an Australian think-tank, the Australian Strategic Policy Institute, suggests that China now leads 37 out of 44 technologies tracked, including in crucial areas like defense, space, robotics, energy, the environment, biotechnology, AI, advanced materials, and key quantum technologies. China’s efforts are being bolstered through the acquisition of talent and knowledge, with one-fifth of its high-impact papers being authored by researchers from the United States and other G7 countries.

Apart from a willingness to invest in multiple elements of the AI ecosystem, China’s AI ambitions benefit from a regulatory regime that contains none of the safeguards found in rival countries. Monkey studies feature in the Chinese Brain Project, and project leaders hope the virtual absence of animal rights activism in China will help lure talent from overseas. Project leader Mu-ming Poo, a neuroscientist and head of the Chinese Academy of Sciences’ Institute of Neuroscience, studied and worked in the United States for 40 years, including a decade at the University of California, Berkeley, and moved to China full-time in 2009.

In any case, China’s progress in these areas reveals that brain capital is already a highly sought resource, and Western nations that hope to compete in fields such as AI will need to invest more in education to cultivate the necessary intellectual resources. 

Moving Forward with a Brain Science-inspired Industrial Strategy

A key component of investing in brain capital and supporting the economy is recognizing and addressing the economic impact of brain disorders. Mental health disorders alone are estimated to cost the global economy $5 trillion, and this is projected to rise to $16 trillion by 2030. Every year, dementia costs the global economy more than $1.3 trillion, an amount that could increase ninefold by 2050.

A so-called “brain capital industrial strategy” could revolutionize the understanding, prevention, diagnosis, and treatment of brain and mental health disorders. Such an approach would be able to bend the curve on the cost of this group of disorders and stimulate a new wave of brain capital technologies and novel brain capital investment mechanisms and organizations.

We define brain capital technologies as neuroscience-inspired technologies addressing the confluence of mental health, neurology, education, future of work, creativity, and brain performance, both in late life and early childhood. We believe there is a need to consider a “brain mission economy” where neuroscience-inspired missions are conceptualized and launched across industries supported through the co-operation of the public and private sectors. A successful brain capital industrial strategy would boost economic resilience by reducing the economic burden of brain and mental disorders, as well as by stimulating creativity and entrepreneurship. Capacity for brain capital technology entrepreneurship will be enhanced by further basic and translational science breakthroughs and by supportive policy settings.

Conclusion

One of the main lessons from the poly-crisis provoked by COVID-19 was that the over-emphasis on efficiency in vital systems is costly. In the immediate aftermath of the pandemic, there were increasing calls for resilience to be given more weight, particularly regarding supply chains. The policy agenda has since shifted toward the concept of economic security beyond a simple focus on supply chains — particularly following the Russian invasion of Ukraine.

As Western nations continue to focus on building economic security, the risks to brain health and the importance of brain skills will be an essential part of the global economic policy agenda. Policies designed to enhance system resilience must span sectors and include an understanding of brain science. Specifically, we propose a brain capital industrial strategy to boost economic resilience by reducing the economic burden of brain and mental disorders and by cultivating creativity and entrepreneurship. We recommend that policymakers integrate brain capital into their decision-making and devote resources to optimize brain health and skills. We also propose the creation of an action group on brain capital for economic security — hosted by the Brain Capital Alliance and the Baker Institute for Public Policy — to develop novel data and solutions in this area. This task force will involve transdisciplinary participants spanning law, economics, neuroscience, ethics, mental health, education, public policy, and AI. By exploring ways to integrate brain capital into various sectors of society, this action group will be able to promote economic, social, and political growth and contribute to the creation of more resilient economies in the face of unpredictable global disruptions. 

About the Authors

William Hynes, D.Phil., is the new approaches to economic challenges coordinator within the Office of the Chief Economist of the OECD. He also holds adjunct positions with the Johns Hopkins School of Advanced International Studies, University College London, and the Santa Fe Institute.

Paweł Świeboda is CEO of EBRAINS, director-general of the EU Human Brain Project, and a member of the Steering Committee of the OECD Neuroscience-inspired Policy Initiative (NIPI) and the Brain Capital Alliance.

Patrick Love is a writer and editor. He worked in the New Approaches to Economic Challenges unit and the Futures programme at the Office of the Secretary General at the OECD.

Jo-An Occhipinti, Ph.D., is a professor, the co-director of the Mental Wealth Initiative, and head of Systems Modelling Simulation & Data Science at the Brain and Mind Centre, University of Sydney. She is also managing director of Computer Simulation & Advanced Research Technologies (CSART), an international not-for-profit.

Harris A. Eyre, M.D., Ph.D., is a fellow at Rice University’s Baker Institute for Public Policy and a senior fellow at the Meadows Mental Health Policy Institute. He leads the Brain Capital Alliance and co-leads the OECD NIPI. He is member of the Champion’s Cabinet of the Davos Alzheimer’s Collaborative and an advisor to the Latin American Brain Health Institute (BrainLat). 

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.