Technology: The wealth of nations
Robert U. Ayres1988, Technological Forecasting and Social Change
Sign up for access to the world's latest research
checkGet notified about relevant papers
checkSave papers to use in your research
checkJoin the discussion with peers
checkTrack your impact
Abstract
The paper addresses a rather important question: What is wealth and how is it created? Until relatively recently in history, wealth has been considered to be "a gift of nature," even by philosophers. It follows from this idea that, once all such gifts are known, the economic system must be a "zero-sum game." The interesting theoretical questions then concern the existence and nature of equilibrium, and the major sociopolitical issues must be distributional in nature. Indeed, mainstream economics has continued to build theories based on static equilibria until past the middle of the twentieth century. The startling economic growih that took place over the two-plus centuries from 1750 to the present time really cannot be explained by "classical" economics. Since the 1950s it has been realized that economic growth can only be explained by introducing the notion of technological progress. This idea has attracted increasing attention since then. Nevertheless, mainstream theory has been extremely slow to incorporate-still less explain-this important phenomenon. The paper concludes that most wealth in existence today originates in technological innovation. Labor and capital play a role, but while wealth has material aspects, it is essentially a form of "condensed" useful information, or knowledge. Its ultimate origin is the human mind. In other words, wealth is not a gift of nature, nor is it derived from "labor" in traditional Marxian terms. Nor is it a simple consequence of the law of compound interest as applied to money in the bank. Money is a convenient measure of relative wealth, at least for some purposes, but money by itself does not create new wealth. The theoretical and philosophical implications of this proposition are interesting and nontrivial, but they are not pursued further in the paper. The major point made is the obvious one: If the major source of societal wealth today is technology, it is of vital importance to learn more about the underlying processes. The U.S. became rich by being good at technological innovation, but other countries that were once good innovators have slipped, and our own technological lead is slipping now. We do not know nearly enough about the determinants of invention, innovation, investment, adoption or, diffusion of technology. Address reprint requests to Prof. Robert U. Ayrcs,
Key takeaways
- Nevertheless, most academic economists since Marx have been uneasy with his labor theory of value, and perhaps with the underlying ethical theory of natural rights to the products of labor.
- Output was supposed to be determined by the availability of the factors of production: land, natural resources, labor, and capital.
- The contribution of capital to productivity ranges from 18% [ 1.5, 161 to 42% [4], while the contribution of labor quality ranges from 10% [ 15, 161 to 18% [6, 71.
- It follows that the value added by labor in any activity or process is related to the useful information transferred.
- The major conclusion of this paper is the most straightforward implication of the fact that wealth is (mainly) derived from technological innovation.
Related papers
The concept of technology in the history of economic thought. (2017)
Libre Empresa, 2017
All schools of economic thought prior to Schumpeter did not pay attention to the processes of technological innovation which was assumed to be included in the capital-machine variable. The different approaches used from Schumpeter to the present are described, including neoclassical and evolutionary schools, which are oriented to demonstrate that there can be neither growth nor development unless there are public policies that enhance the capacity of technological innovation from the educational and business. The study of technological innovation has gone from being an exclusive subject of macroeconomic policy to an issue of entrepreneurial and multidisciplinary dominance
19 Creativit ¡ innovation , and the production of wealth
2018
Creativit¡ innovation, and the production of wealth Knut Sogner* "Adam Smith did not see the Inclustrial Revolution coming"-so saicl rny undergraduate teacher in econonric history in 1 985. In his serninal book The weitttt of Nation, itll ø7 , S'dth lays so're of the crucial g'oundwork for the modern science of e.onomics, but he does not ryrr.nr.ri.¡Ç adclress innovation. Yec parallel to his writing this treatise, the British procluction ,yrt.,r' b.grn to usher forth profouncl changes in the organization of production anå in the goods p.oauåa. 'while Smith cliscussed efûciency, the Industrial Revolution involved innovative change thar radically shifted what was achievabre in rerms of the production of wealth. During the latter half of the eighteenth century the Industrial Revoiution was in embryonic form, so it is understanclabie that Srnith rnight not have discerned the potential of his very ow' conception, the natural system of liberry. Yet he did write profoundly abour the possibilities of economic change (in particular specialization ancl how specialization night lead to innovation) ancl growth' compared with many modern economists his is a broacl .id hisror.ical approach. Yet economics-with its account of the mechanisms that create balance between what is produced and what is consurned (or, more correctly, berween supply and demand)-is hardly able to grasp the rnany ancl tlessy unclertakings that alter th. r,tppty ,yrtellr, that part of the e conolny that creates and procluces the goods and services under the demand ofconsurners. creativity and innovatio_n heip to increase productivity, thereby changing the way in which people ear' their livelihoocls as well as the goåds and services th.i .njoyl To uncierstand creativiry ancl innovation one tnust move beyond standard models .ápr"y.a by econo'rists. one must consider, for example, the transformative possibilities .ngender.iby ,.i".r.. as weil as the ways in which politics ancl law function to allow, encourage, or incentivize creative acts and beneûcial inreracrions (Fagerberg et al. 2005). over the last quarter century new fields of research have emerged that seek to understand positive change in the economy (Fagerberg et at. 2012). The coñ¡ron agenda is to ûnd out how and why innovation, in the broadest serrse, happens. The scholars who pursue this agencla range from those interestecl in corporate success to those who want to understand why nations ancl societies grow rich. This is, therefore, a vast and heterogenous arena, but this chapter wiil concentrate on what may be termed Schumpeterian i,rnovation, afte¡ the Austrian-American economistJoseph Schumpeter. The chapter will, therefore, focus on processes of creativity and entrepreneurship that have, either through intended purpose or as actual ."rult, .ff".t.á ,.rl the alth iogner* ate teacher L lays some :ematically cem began produced. range that :mbryonic very own ;ibilities of rnovation) approach. iat is prorardly able economy 'in which tand creanists. One ¡¡ell as the e acts and nderstand > ûnc1 out ris agenda ry nations Lapter will American .tiviry and ècted real Creativity, innovation, and the production of wealth changes in the production of goods and services-innovation. These sorts of innovations may arrive in a cluster, accumulating during a cliscrete slice of time, and lead to such radical changes of the economy that we may speak of an "industrial revolution." Schumpeter contributed at least three concepts that guide much research on innovation: the "entrepreneur" as agent of innovation (Schumpeter 7934, but see Hébert and Link 2009 for predecessors); a distinction benveen aclaptive and creative economic behavior (Schumpeter 1947); and the idea that innovations be institutionalized within large corporations (Schumpeter 1943 / 197 6). Schumpeter places these concepts in larger economic landscapes, revealing thereby how processes ofcreativiry and change prove reievant to the whole society. A very irnportant distinction in Schumpeter's definition of innovation is that inveÍrtion and innovation are not the same. A new chemical entity, a new way to produce energy, or a novel food recipe, are inventions until the required processes of commerciaiization turn them into innovations. Indeed, the deûnition of an innovation is the introduction of something new in the economy (even ifthe new entity is but a novel reconfiguration ofold entities). .While Schurnpeter was active in the ûrst part of the twentieth century, his rise to the center stage ofa scholarly enterprise devoted to the study ofinnovation and change is a consequence of the shiÍÌ from postwar growth to crises and volatiliry that occurred from the 1970s onwards (Van der Wee 1986). Innovation has been seen as more than a necessary tool to iolve issues of economic stagnation or to redo old economic structures that contribute to climate change and pollution. In fact, innovation may be regarded as a new tool to achieve economic equaliry. W'hile revolution and redistribution were leftist political goals for centuries, innovation is a new tool to change the society for the better (Phelps 2073; Mazzucato 2074). This chapter offers an historic introduction to the broad field of innovation studies with an eye towards ethical matters. Four fundamental issues are highlighted. In the ûrst section, I delineate how the concept of innovation has little place within the framework of standard economic rnodels, yet innovation is crucial to the total economy. In the second section, I take up some theoretical approaches, ernerging in the 1980s, that construe the phenomena of innovation as occurring within speciûc circumstances. This is the "inte¡active" approach. In rhe subsequent section, I focus on how innovation has been seen, by some, to be institutionalized within the large coqporation or, in other cases, within clusters of small companies or even the nation state,
Technological Change and the Wealth of Nations
SSRN Electronic Journal, 2000
We discuss a uni…ed theory of directed technological change and technology adoption that can shed light on the causes of persistent productivity di¤erences across countries. In our model, new technologies are designed in advanced countries and di¤use endogenously to less developed countries. Our framework is rich enough to highlight three broad reasons for productivity di¤erences: inappropriate technologies, policy-induced barriers to technology adoption, and within-country misallocations across sectors due to policy distortions. We also discuss the e¤ects of two aspects of globalization, trade in goods and migration, on the wealth of nations through their impact on the direction of technical progress. By doing so, we illustrate some of the equalizing and unequalizing forces of globalization.
Technology Creates 21St Century Wealth — Processes, Problems, and Prognosis
Marketing of Scientific and Research Organisations, 2016
Science and technology are the driving forces increasing the global standards of living. The technologywealth relationship is complex and not well understood presently but recent macro data tends to support Robert Solow's 1957 observation that societal, company, and individual wealth and increased standards of living is created by application of science and technology to socioeconomic challenges. In 1987, Robert Solow received the Nobel Prize in Economics, for his insight that "seven-eighths" of the world's increase in world wealth is due to advances in science and technology. The challenges and costs of of wealth creation are identified. This paper explores wealth as defined by GDP/capita, and the current correlations between world/GDP per capita and R&D spending, the number of scientific and technical articles,
Technology and the Economy
2005
The paper, as such a draft of a chapter for the second edition of the +DQGERRN RI (FRQRPLF 6RFLHORJ\, Edited by Neil J. Smelser and Richard Swedberg), is meant to offer some sort of roadmap across a few fields of investigation concerning the relationships between technological learning and economic dynamics. Within this broad critical endeavour, one discusses some of the interpretative achievements stemming from e.g. the economics of innovation, industrial economics, epistemology of knowledge, economic sociology and history of technology among others. In particular, one tries to identify the drivers of technological change, possible invariances in the processes of change themselves, their social and institutional roots and some properties of the dynamic coupling between technological learning, forms of corporate organization and economic evolution.
Technology, Wealth and Modern Management of Technology
The text talks about basic concepts of technology which has a great impact on our live, since it gives us great benefits and wealth, on the other hand could be harmful if not known exploit.
The Genesis & The Engine of Riches of Nations
Banka ve Ekonomik Yorumlar, 1999
The relations between the riches of Nations and the riches of PRODUCTIVE KNOWLEDGE (Technology) gains acknowledgment among economists at an increasing rate. Classical economists had assumed that the key to progress was the accumulation of homogenous capital goods. But, as P. Romer, among others, claims we cannot grow rich by accumulating more of the same capital goods. So, the Classical growth theory falls short of expectations. Capitalism's inherent feature is "destructive creation", said Marx. Decades later, in a similar fashion, Schumpeter stated that "Capitalist system incessantly revolutionizes the economic structure FROM WITHIN". What are those dynamic forces causing the incessant changes in an economy ? According to P. Drucker, A. Toffler, Baumol-McLennan and many others it is the productivity increases in general. P. Romer provides a more specific reply: technological change or the growth of new ideas. In this paper, H. Gürak goes deeper to the core and claims that all technological changes are produced by the human mind. In other words, knowledge on production, i.e., technology, gives occasion to a dynamic and uninterrupted growth process, but technology itself is the product of mental labor. This paper will show that the main source of wealth of nations in the long run is the knowledge necessary for production, that is, technology and technological innovations.
Historical Perspective of the Role of Technology in Economic Development
The focus of this paper is to investigate technology changes and influence on economies since the First Industrial Revolution. The First Industrial Revolution was the first point in time when both increase of GDP per capita and population occurred at the same time (avoiding the Malthusian trap). Thus the selected point in time. Furthermore, developments of the late 18th and 19th centuries have some common properties with development of new technologies today. Even though the process of technological change changed during this time, there are still some lessons to be learned from distant and near history on how to gauge policies for fostering successful technological advances. Changes that occurred are relevant for respective economies, industries, companies and individuals. On all these levels changes occurred that were unprecedented in history before the First Industrial Revolution. It is not suggested that technological progress of centuries before the First Industrial Revolution ...
Technology, Institutions and Economic Growth. By Richard R. Nelson
R & D Management, 2008
Knowledge and Technological Change in Different Schools of Economic Thought
Economic Alternatives, 2019
A thorough analysis of current capitalism requires a proper understanding of the dynamics of technological changes and its effects on the economy. Innovation is fundamental for less developed capitalist economies to reducing the gap between them and the core capitalist countries. In this paper, a brief review of the different analytical perspectives used by economic schools throughout history to analyse the topic of technology is made. The relevance of technological changes had different levels of importance at different historical moments. The ideas of the classical economists (Smith, Ricardo, etc.), the socialists and Marx, Schumpeter’s ideas, the neo-classical school, the Keynesian view and some ideas from Latin America, are considered in this paper.
Innovation , Information , Growth and Wealth
2016
In my last article on artificial intelligence, I made the statement that ". . . innovation is the source of wealth creation." I made that unquestioned statement as part of my reflexive world view. But, when I reread the article after its posting, I asked myself: What are the actual arguments and evidence for this innovation-to-wealth assertion? Surprisingly, there is not nearly the evidential basis for this assertion that I would have assumed.
The past and the future of innovation: Some lessons from economic history
Explorations in Economic History, 2018
In recent years, economists have revived the specter of slow growth and secular stagnation. From the point of view of economic history, what should we make of such doomster prophecies? As economic historians all know, for 97 percent or so of recorded history, the stationary state welldescribes the long-run dynamics of the world economy. Growth was slow, intermittent, and reversible. The Industrial Revolution rang in a period of sustained economic growth. Is that growth sustainable? One way to come to grips with that question is to analyze the brakes on economic growth before the Industrial Revolution and examine how they were released. Once these mechanisms are identified, we can look at the economic history of the past few decades and make an assessment of how likely growth is to continue. The answer I give is simple: there is no technological reason for growth in economic welfare to slow down, although institutions may become in some area a serious concern on the sustainability of growth.
Innovation – How Technology Can Reconcile Progress and Economic Justice
New Voices in Economics, Henry George School, 2019
In this paper the nature of innovation will be defined and explored especially as it relates to Economic outcomes such as wealth and income distribution. The nature of innovation, its lifecycle, and its methods are presented and discussed. Key concepts such as the S-curve of innovation, the "Innovator's Dilemma", and Scientific Revolutions are also presented. Following this an exploration of how Economics views Innovation especially by Henry George who saw innovation as key to our survival and Joseph Schumpeter who saw it as required by capitalism. This discussion will show the connection between innovation cycles on a product or technology level and on the long-range economic scale. Examples of expanding and declining technologies demonstrate these cycles. Finally, data is shared around innovation, wealth, and income distribution across societies. Conclusions of the talk include the relationship between policy and innovation, the linkage between R&D and wealth creation, and the correlation between innovation and reduced wealth disparity.
Innovation and growth: Schumpeterian perspectives : Frederic M. Scherer, (MIT Press, Cambridge, MA, 1984) pp. vii + 297, $35.00
Journal of Economic Behavior Organization, 1986
The Contribution of Economic History to the Study of Innovation and Technical Change: 1750–1914
Handbook of The Economics of Innovation, Vol. 1, 2010
on receiving credit and recognition for the contribution as part of a signaling game in which the goal is to establish a reputation. Much innovation in the past functioned very similarly. The dichotomy according to which science operated according to open-source systems whereas technology was subject to private property constraints is seriously exaggerated. Equally important in making innovation a unique topic in economic history is the fact that technology is produced under the kind of uncertainty that can be characterized as a combination of unintended consequences and unknown outcomes. In large part this is the case because technology is normally developed when the exact modus operandi of the physical, biological, or chemical processes utilized are at best understood very partially. Many inventions have unforeseeable spillover effects on the environment, human health, or the social fabric. Moreover, many innovations are often combined with other techniques in ways not originally foreseen, to produce wholly novel hybrid techniques that do far more than the simple sum of the components. As a consequence, inventors are often surprised by the eventual outcomes of what seems successful innovation. Such surprises can be, of course, positive or negative. The progress of technology has been explained by both internalist and externalist theories. Internalists see an autonomous logic, an evolutionary process in which one advance leads to another, in which contingency plays a major role, in which the past largely determines the future. Externalists think of technological change as determined by economic needs, by necessity stimulating invention, by induced innovation being guided by factor prices and resource endowments. In the same camp, but with a different emphasis are social constructionists who regard technology as the result of political processes and cultural transformations, in which certain ideas triumph in the marketplace because they serve certain special class or group interests and powerful lobbies. The history of technology since the Industrial Revolution provides support as well as problems for all of those approaches. A more inclusive approach would separate the process into interactive components. For instance, there is no question that economic needs serve as a "focusing device" in Rosenberg's (1976) famous simile, but the popular notion that "necessity is the mother of invention" manages to be simultaneously a platitude and a falsehood. Societies tend to be innovative and creative for reasons that have little to do with pressing economic need; our own society is a case in point. Modern western society is by and large wealthy enough to not feel any pressing "need," yet it is innovative and creative beyond the wildest dreams of the innovators of the eighteenth century. There was no "necessity" involved in the invention of ipods or botox. The social agenda of technology is often set by market forces or national needs, but there is nothing ever to guarantee that this agenda will be successful and to make sure what it will lead to. Technology moves at a certain speed, and in certain directions, and the study of innovation helps us understand these laws of motion. Moreover, to come to grips with why technology changes the way it does, we need to be clearer about the way in which prescriptive knowledge (technology) and propositional knowledge (science and general knowledge about nature) affect one another. Knowledge about the physical environment creates an epistemic base for techniques in use. Technology, in turn, sets the agenda for scientists, creating a feedback mechanism. Why, for instance, 7 steam engines and develop the iron-processing improvements that Britain did on its own. Not all artisans were friendly and conducive to technological progress, as Hilaire-Pérez points out. The armourers' resistance to Honoré Blanc and interchangeable parts in musket making helped derail a potentially promising advance. The Lyon weavers' resistance to the Jacquard loom failed, but only after the innovators were given military protection. The First Industrial Revolution: a New Approach The absence of long-term growth in most societies is thus clearly overdetermined. The real miracle is not that these Malthusian societies grew so slowly, but that they were, in the end, replaced by a society in which rapid growth became the norm. What I have called the Industrial Enlightenment (Mokyr, 2002) was an attempt to recognize this problem and rectify it. The Industrial Enlightenment was an attempt to carry out Bacon's dream that useful knowledge would become "a rich storehouse, for the Glory of the Creator and relief of Man's estate" (Bacon, ed. Vickers, 1996, p. 143). In the New Organon Bacon explained what became almost axiomatic to his followers in the eighteenth century: "If Man endeavor to establish and extend the power and dominion of the human race itself over the universe, his ambition…is without doubt a wholesome thing and …noble… Now the empire of man over things depends wholly on the arts and sciences. For we cannot command Nature except by obeying her" (aphorism 129, cited in Bacon, ed. Sargent, 1999, p. 147). The influence of Bacon on subsequent generations was enormous. Clearly, he had expressed a sentiment that was already in the air at his time, but by expressing it with precision and impeccable logical reasoning, he became, with
Innovation and Economic Thought
The paper outlines the impact of technology and innovation on economic thought and theories, starting from Malthus and ending with contemporary theoreticians.
Technological Change and Economic Theory
Scottish Journal of Political Economy, 1989
The Role of Technology in the Creation of Rich and Poor Nations
Rich Nations - Poor Nations. The long run perspective, 1996
2 Von Hornick's important work appeared in sixteen editions between 1684 and 1784, all in German. This was considerably more than the most famous English economists at the time. Mun's England's Treasure from 1664 reached eight editions in English and six in translations, Child's Brief Observations of 1690 reached ten editions in English and two translations. For a study of economic policy making under the 'proto-historical' school after Hornick, see .
Innovation and growth: Schumpeterian perspectives
Journal of Economic Behavior & Organization, 1986
Related topics
Cited by
Transferência internacional de tecnologia
Revista de Administração de Empresas, 1991
Planning the priority of high tech industries based on SWARA-WASPAS methodology: The case of the nanotechnology industry in Iran
Economic Research-Ekonomska Istraživanja, 2015
Decision-making and planning at the top level is highly complicated. One important duty of each government and of policy makers is planning at different levels for future problems. This research addresses such a concern. Planning for the future is the aim of this research. Moreover, the importance of the topic is discussed. The case study focused on is the nanotechnology industry and its development in Iran. Nanotechnology is one of the main and strategic industries in Iran. The important criteria for such a development are determined based on a literature review and the experiences from other countries. The different alternatives are selected based on the different applications of nanotechnology in other industries. The alternatives are: agriculture, transportation, construction, oil and gas, textile products, food industry, defence industry, health and medicine, nano electronics, nano energy and environment and water. The methodology employed is Multiple Criteria Decision Making (MCDM). In addition, SWARA-WASPAS is the hybrid MADM model employed in which SWARA is applied to evaluate the criteria and WASPAS is utilised to evaluate and rank the alternatives.
Loading Preview
Sorry, preview is currently unavailable. You can download the paper by clicking the button above.