{"id":131,"date":"2025-06-12T07:20:49","date_gmt":"2025-06-12T11:20:49","guid":{"rendered":"https:\/\/people.bsu.edu\/econbriefs\/?p=131"},"modified":"2025-06-12T07:20:49","modified_gmt":"2025-06-12T11:20:49","slug":"how-innovation-fuels-wealth-and-well-being-by-dr-cecil-bohanon-and-dr-john-horowitz","status":"publish","type":"post","link":"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/12\/how-innovation-fuels-wealth-and-well-being-by-dr-cecil-bohanon-and-dr-john-horowitz\/","title":{"rendered":"How Innovation Fuels Wealth and Well-Being \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz"},"content":{"rendered":"<p><span data-contrast=\"auto\">How much is innovation worth to the economy? And what is crucial to reaping its benefits? We&#8217;ll begin our musings in an unlikely place: a photo of a used car lot from 1951 shared by a friend of ours, Bruce Munson, who has been both a state representative and a used car dealer. The picture featured a 1948 Tucker with a $3,000 price tag. The <\/span><a href=\"https:\/\/en.wikipedia.org\/wiki\/Tucker_48\"><span data-contrast=\"none\">Tucker 48<\/span><\/a><span data-contrast=\"auto\"> was genuinely innovative, offering numerous unique safety and engineering features not found in other cars of the time. Unfortunately, the Tucker Corporation went bankrupt and produced only fifty-one Tucker 48s.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">According to Bruce, if a person had bought the used Tucker in 1951 and reasonably maintained and stored the car, it would be worth at least $1.5 million today. So, the return from investing $3,000 in the 1948 Tucker, an innovative car of its time, would be a 500-fold nominal increase or an average annual rate of return of 9.01% over the seventy-six years since 1948.<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">In comparison, had one invested the $3,000 in &#8220;risk-free&#8221; 5-year U.S. government bonds in 1951 and reinvested all the principal and earnings, today they would have a mere $110,049, a 36-fold nominal increase or an average annual rate of return of only 5.04%.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">It seems reasonable to attribute the additional return from owning the Tucker automobile as a reward for having the <\/span><b><i><span data-contrast=\"auto\">insight <\/span><\/i><\/b><span data-contrast=\"auto\">to perceive the auto&#8217;s future value and the <\/span><b><i><span data-contrast=\"auto\">persistence<\/span><\/i><\/b><span data-contrast=\"auto\"> to maintain ownership of the asset.\u00a0<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">But had the one invested the $3,000 in the S&amp;P 500 in 1951 and reinvested all the dividends in the S&amp;P 500, the investment would be <\/span><a href=\"https:\/\/pages.stern.nyu.edu\/~adamodar\/New_Home_Page\/datafile\/histretSP.html\"><span data-contrast=\"none\">worth $5,368,476 in nominal dollars today<\/span><\/a><span data-contrast=\"none\">,\u00a0<\/span><span data-contrast=\"auto\"> a 1,789-fold nominal increase or an average annual rate of return of 10.96%. <\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">When one acquires equity in S&amp;P 500 firms, the investor is betting on the ability of those firms to generate innovations that increase social value. The differential gain of equity ownership in for-profit corporations over government bonds of over $5.2 million indicates how much innovation affects our well-being. Additional gains from innovations from S&amp;P 500 firms also accrue to those firms&#8217; customers, workers, and suppliers.<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n<p><span data-contrast=\"auto\">We think it is reasonable to attribute the additional return to investment via ownership of common stocks as a reward for having the <\/span><b><i><span data-contrast=\"auto\">insight <\/span><\/i><\/b><span data-contrast=\"auto\">to perceive the future value of U.S. corporations and the <\/span><b><i><span data-contrast=\"auto\">persistence<\/span><\/i><\/b><span data-contrast=\"auto\"> to stay the course in maintaining ownership of the asset. We hope the system stays around!<\/span><span data-ccp-props=\"{&quot;335559731&quot;:720}\">\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>How much is innovation worth to the economy? And what is crucial to reaping its benefits? We&#8217;ll begin our musings in an unlikely place: a photo of a used car lot from 1951 shared by a friend of ours, Bruce Munson, who has been both a state representative and a used car dealer. The picture [&hellip;]<\/p>\n","protected":false},"author":112,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[441],"tags":[739,578,729,1258,1068,571,1253,1257,1254,45,1255,1256,1259],"class_list":["post-131","post","type-post","status-publish","format-standard","hentry","category-investment","tag-economic-growth","tag-equity","tag-government-bonds","tag-historical-returns","tag-innovation","tag-investment","tag-returns","tag-risk-and-reward","tag-sp-500","tag-stock-market","tag-tucker-48","tag-used-cars","tag-value-of-innovation"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>How Innovation Fuels Wealth and Well-Being \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/people.bsu.edu\/econbriefs\/2025\/06\/12\/how-innovation-fuels-wealth-and-well-being-by-dr-cecil-bohanon-and-dr-john-horowitz\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How Innovation Fuels Wealth and Well-Being \u2013 by Dr. Cecil Bohanon and Dr. John Horowitz - Econ Briefs\" \/>\n<meta property=\"og:description\" content=\"How much is innovation worth to the economy? 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