A recent paper by Jonathan Huebner titled "A possible declining trend for worldwide innovation" and published this month in Technological Forecasting & Social Change, has been causing a stir among certain circles. Some love the prospects of gloom and doom, while others are offended that anyone would suggest that technology might not be carrying us forward to some kind of science fiction future. From the paper (sorry, no link):
For the purposes of this paper, the rate of innovation is defined as the number of important technological developments per year divided by the world population. This result represents the innovation of an average person in developing new technologies each year. In a simplified model of the history of technology, in which the population remains constant, the rate of innovation is nearly zero at the dawn of civilization and then gradually starts to accelerate. Halfway to the technological limit, the rate of innovation reaches a maximum value and then starts to decline. As the technological limit is approached, the rate of innovation approaches zero, but it never reaches zero, sothat the rate of innovation follows a bell curve.
...
The number of technology events per year comes from a list of 8583 important events in the history of science and technology compiled by Bunch and Hellemans...
An unexpected aspect of Fig. 1 is that the rate of innovation reached a peak in the 19th century and then declined throughout the 20th century even with
higher levels of education, major advances in science and the invention of the computer. This means that it was harder for the average person to develop a new technology in the 20th century than in the 19th century. There were more innovations during the 20th century than the 19th century, but the proportional
increase in world population was greater. One of the most famous and prolific inventors of all time was Thomas Edison, and he lived from 1847 to 1931 during the golden age of innovation.
Along with the paper was presented this graph which shows the rate of innovation by the author's estimation (I have no reason to believe that the data is incorrect, though some will probably try to quibble with it):

What really caught my attention though, and is a point which I believe is a major flaw, was that the rate of innovation was taken with respect to the global population. The problem however, is that this assumes that everyone is equally capable of making significant innovations. In reality, First World people are far more likely to be making these innovations, so we should really control for the size of First World countries. There has been a significant growth of the Third World over the course of the last few generations, which seems, and I believe the following graph will show, was responsible for at least part of the sudden drop in innovation in the last few decades.

First, let me explain how I came up with the above graph. The original data I got by simply copying/estimating the data points for the range from 1905-1999 off of the graph. Not exact, but it should be +/- 0.5 units. The second plot is controlled so that the ratio of the First World population versus Third World remains the same. I estimated this using this
UN population data, where I assumed that North America and Europe represent the First World, and everything else is not. The third plot takes into account the fact that there has been considerable immigration into the West; I chose 15% as an arbitrary estimation of the average percentage of people living in the West which are of Third World origin and have arriving in the last century, and assumed that this immigrant population was exponentially increasing (in other words, 0% in 1905, 15% in 1999, with most of the increase in the last few decades). Now please note, these are essentially back-of-the-envelope style estimates; I am not a social scientists, nor am I interested in a few percent plus or minus. My main point for making the above estimates was to get a feel for what the data looked like.
The details out of the way now, it is very interesting to look at the graph and the rate of innovation for the last century. While the original data does tend to make it look like innovation has taken a nose-dive in the last couple decades, when adjusted to maintain the ratio of Western to Non-Western people, innovation seems to have remained quite stable during this period.
A couple points. First, I realize this does not "prove" that Westerners are responsible for all/much/or a disproportional amount of ground-breaking innovation. However I think that intuitively we find the argument that innovation per person (in the West) has significantly decreased recently as a somewhat improbable.
Secondly, the type of innovation that Huebner is trying to track is not necessarily innovation in the colloquial sense, but rather really outside the box type innovations. This is where it gets tricky, and some will object. The reason I did not, and don't believe that one should, account for Asian growth is that generally speaking, Asians do very poorly in this type of innovation. As someone who is in engineering at the graduate level, I see a lot of east Asians which are talented at math or detailed oriented technology. In my view, Asians are very good at working the bugs out of systems, fine tuning, and iteratively improving things which are already fairly well defined. In fact, a lot of good Asian engineering is famous for this, especially from Japan, where their quality control is excellent. That said, Asian culture is a Borrower Culture. True ground-breaking innovation is exceedingly rare (though it has happened, as in the case of gun power and the compass). One reason is probably the fact that Asia tends to be culturally conservative and risk adverse, so innovation is not tried as often.
Another reason, which is probably much closer to a compelling explanation, is that ground-breaking innovation is often a very "holistic" process where new ideas are synthesized, with ideas or information pulled from perhaps many different directions and domain areas. This is essentially the opposite of the incremental, iterative, highly technical approach where advancements are made by many small improvements, working bugs and kinks out of current ideas. The later approach prizes the specialized, technical mind because there is little disadvantage to missing the forest for the trees. This is where Asian brains do well. The former approach happens far less often however, but is where most of the big ideas come from in the first place. This approach favors the well rounded mind, because while looking at the trees it is also important to see the forest. This is were Asian brains suffer, because their mental abilities are not equally distributed among functional areas (as I recall their IQ tend to be highest in math-ish and spatial tasks, while being below whites in the other areas).
The main point of this post was not if Asians can innovate or not however, the above is just to justify why I don't find the population growth in Asia worth considering as a significant factor.
If we really want to look at who is doing the ground-breaking innovation today, there is no reason to take my word for it. Let's just look at the names of some of the people doing hard science who have won
Nobel Prizes:
Physics2005 Roy J. Glauber, John L. Hall, Theodor W. Hänsch
2004 David J. Gross, H. David Politzer, Frank Wilczek
2003 Alexei A. Abrikosov, Vitaly L. Ginzburg, Anthony J. Leggett
2002 Raymond Davis Jr., Masatoshi Koshiba, Riccardo Giacconi
2001 Eric A. Cornell, Wolfgang Ketterle, Carl E. Wieman
2000 Zhores I. Alferov, Herbert Kroemer, Jack S. Kilby
1999 Gerardus 't Hooft, Martinus J.G. Veltman
1998 Robert B. Laughlin, Horst L. Störmer, Daniel C. Tsui
1997 Steven Chu, Claude Cohen-Tannoudji, William D. Phillips
1996 David M. Lee, Douglas D. Osheroff, Robert C. Richardson
Chemistry2005 Yves Chauvin, Robert H. Grubbs, Richard R. Schrock
2004 Aaron Ciechanover, Avram Hershko, Irwin Rose
2003 Peter Agre, Roderick MacKinnon
2002 John B. Fenn, Koichi Tanaka, Kurt Wüthrich
2001 William S. Knowles, Ryoji Noyori, K. Barry Sharpless
2000 Alan Heeger, Alan G. MacDiarmid, Hideki Shirakawa
1999 Ahmed Zewail
1998 Walter Kohn, John Pople
1997 Paul D. Boyer, John E. Walker, Jens C. Skou
1996 Robert F. Curl Jr., Sir Harold Kroto, Richard E. Smalley
Medicine
2005 Barry J. Marshall, J. Robin Warren
2004 Richard Axel, Linda B. Buck
2003 Paul C. Lauterbur, Sir Peter Mansfield
2002 Sydney Brenner, H. Robert Horvitz, John E. Sulston
2001 Leland H. Hartwell, Tim Hunt, Sir Paul Nurse
2000 Arvid Carlsson, Paul Greengard, Eric R. Kandel
1999 Günter Blobel
1998 Robert F. Furchgott, Louis J. Ignarro, Ferid Murad
1997 Stanley B. Prusiner
1996 Peter C. Doherty, Rolf M. Zinkernagel
One thought worth thinking about is that while the world is becoming more filled with people, the percentage of innovators is decreasing, suggesting that we may be coming up with more problems and less people to fix them.
Since modern economic advancement is built on the back of innovation, this also suggests that global and utopianistic capitalism, where growth is maintained for everyone, is not just unrealistic, but quite naive. In fact, protecting the wealth we create from others may be a more pertinent priority.
This also may give some perspective into why most non-Western people tend away from Capitalism, believing instead in a zero-sum game of economics: because for them, it is. Cultures which lack innovation are cultures where the net wealth per person is essentially static, all else being equal. These people will not support capitalism over the long run because it is not in their interest to do so, and it is perhaps ethnocentric to believe otherwise.