Technological change

From the technical progress refers to the technical progress of the starting position of an economy or the totality of all the technical innovations of a culture. Due to technical progress can either an equal production quantity (output ) with a lower input of labor or means of production (inputs) to be created or a higher amount with the same use of means of production and labor. In addition to the quantitative improvement of the input-output relationship, there are also qualitative improvements such as new products ( art history ). In addition to the economic, technological progress also has cultural and social impact and leads to structural change.

• 5.1 Policy measures to avoid negative consequences of technical progress
• 5.2 Policy measures to promote the technical progress

• 6.1 Harrod - Domar model
• 6.2 Production Function

History

In the early period of human history, the rate of technical progress was relatively slow, even if it also came at longer intervals to great upheavals, such as the Neolithic Revolution. To major social upheavals led in recent history, the Industrial Revolution and, since the mid-1970s the digital revolution.

Historically, it has effectively given next times with technological progress also times with a technical step backwards. A classic example is the demise of the ancient culture with the subsequent Middle Ages. However, the historians argue on this issue, to what extent, for example, in certain areas (dissemination of the water mill), technological progress also continued during the Middle Ages.

It is debatable whether it is always a step forward with an innovation of technology because of the sometimes negative impact on people, nature and society. Therefore, it is spoken in the literature of technological change.

Manifestations

Technical progress can be called evolutionary or revolutionary.

The three main forms of technical progress are:

• Automation
• Rationalization and
• Synergies / economies of scale

It goes on technological progress not only to the increase of labor productivity - such that a certain number of people can produce more and more cars - but also to qualitative changes to innovations, innovations in products produced for the consumption of the people.

Joseph Schumpeter distinguishes between five different innovations that make the technical progress:

Dosi meant by the technical progress: "the search and discovery, imitation and adoption of new products, new production processes and organizational renewal. "

Geigant assumes that the technical progress allows for the production of new or improved products or the introduction of new production processes to produce an unchanged product to the same cost in larger quantity or in a constant quantity at a lower cost.

Thus, the technical progress leads to productivity growth in that

• The input can be reduced with a constant output (Fig. 1) or
• The output can be increased with a constant input. (Fig. 2)

Technical progress and economic growth

According to Schumpeter, there is a creative process of destruction to markets. Creative destruction means that innovations come to market, drive out the other products from the market. Due to competition, this process is fueled, as companies strive for innovation to gain a competitive advantage. The innovations represent a technical advance which leads to an increase in productivity. This allows for a reduction in prices and thus improved chances in the competition. The Technical progress is dynamically efficient, as a result of the increase in productivity more incentives are given to innovation.

Together with the learning curve effect (ie, reduction in unit costs while increasing production based on experience of the labor force ) and the accumulation of human capital (for example, increase of literacy through training of employees), technical progress is thus an important source of productivity increase and economic growth.

However, the growth due to the learning curve effect, or human capital accumulation is due to the declining marginal utility ( under the neoclassical assumptions ) as opposed to technical progress always at its limit. But the technical progress allows a long-term economic growth ( see also endogenous growth theory).

The importance of economic growth also show empirical studies of 1994, after which the contribution of technical progress to economic growth, depending on the calculation of between 40 % and 60 %.

Calculates this technical progress by Schumpeter as the difference between output growth and the pure change in factor inputs (total factor productivity). This difference is referred to as " residual " or residual.

Technical progress and unemployment

Is often discussed the question of whether technological progress creates jobs or on the contrary is the cause for unemployment. This question came in 1817 with David Ricardo, and later in the discussion of automation and streamlining back on.

Release theory

The technical progress achieved by further developments and innovations to increase productivity and modification of previously respected as efficient input-output ratios. ( See Figures 1 and 2)

Based on this knowledge, David Ricardo has established in the third edition of his " Principles of Political Economy and Taxation " of 1821, the thesis that unemployment is rising due to the technical progress, when demand temporarily remains constant. This theory is called liberation theory. Karl Marx also subscribed to this thesis.

Technological progress increases productivity rises ⇒ ⇒ demand for this good increases not necessarily ⇒ Fewer workers will be needed ⇒ unemployment rises

After the release of the theory of technical progress would result that unemployment arises. A well-known example which illustrates this thesis is the following: in the pin industry 10 people are employed. After the introduction of a machine in operation this 10 employees are replaced by the machine. Only one employee is still busy to operate the machine. The new machine can produce a multiple of the amount of pins, which could make the 10 workers. As the demand for pins not necessarily increases by more than a multiple because of the higher bid, there will be layoffs in the pin industry.

Theory of compensation

The following objection to the release theory is applicable in the compensation theory: Due to technical progress not only the amount of producible goods is increased, the price drops for the goods produced. This has the consequence that the real income rises. Due to the higher real income of the consumer of the considered material and other goods rises. The higher consumption leads to adjustments in other sectors. Following on from the above example, the price of pins would fall due to the higher range. The cutter can use the money for consumption of other goods.

Technical progress can therefore be employment neutral, if a technological change in higher demand for other goods triggers and thus resulting in a reinstatement of the vacated due to the rationalization workers.

Critics counter the theory of compensation that rise despite technological advances, the prices for more than 50 years in line with inflation. However, the counter-argument is that wages in the long term rise much more than the prices. ( See Figure 3). The real income to have increased partly because of the technical progress.

Concept of Karl Popper

The philosopher Karl Popper in his work " The Open Society and its Enemies", Volume 2 " Hegel and Marx " a systematic compilation of how a society can respond to an increase in labor productivity resulting from technological progress.

The available higher productive power can be used for:

• Case A: capital goods. Then invested to produce more capital goods which increase productivity even more. The problem is shifted into the future. Popper therefore considers this not a permanent solution.
• Case B: Consumer Goods for the entire population
• For a portion of the population

• Daily working
• The number of " unproductive" workers increases. Popper thinks so those outside of the manufacturing sector, particularly scientists, doctors, artists, business people, etc.

Here Popper draws a boundary. Previously, it was gratifying for the population effects of an increase in labor productivity. However, there are also unpleasant effects possible:

• The number of unemployed is rising.

• Consumer goods are destroyed
• Capital goods are not used, that is, farms lie fallow
• It produces goods that are no investment or consumer goods, such as weapons ( see also Rüstungskeynesianismus, permanent armaments industry )
• Work is used to destroy capital goods and thus reduce productivity again.

Economic policies

The following measures to control the impact of technical progress on the environment, the labor market and society can be derived inter alia from the previous article. However, the success and the implementation is to show each measure in a second step.

Policy measures to avoid negative consequences of technical progress

In order to prevent a structural unemployment should be a measure of politics to desegregate the labor market within the meaning of the theory of compensation. Aim is to convey the vacated due to technological progress labor in other industries whose goods are in demand more due to the increase in real income, in order to lead them as quickly as possible into a new employment relationship.

To accelerate the transition to a new employment relationship, the policy can also selectively promote retraining and further training measures.

Furthermore, the induced due to the technical progress, negative or positive external effects must be included in the legislation.

Example of negative externalities as a result of the technical progress: development of the internal combustion engine which has environmental damage and thus economic damage resulted due to the ejection of exhaust gases. Instruments to avoid negative externalities are here, for example, the fuel tax or emissions trading.

Example of positive externalities as a result of the technical progress: A company carries out research, the results of which are freely available to the public. A tool to prevent this positive external effect is the introduction of patents. ( But while creative people think, even without copyright and invent, the financial incentives of the patent are important for implementation, particularly in the institutional research - unless the cost can be covered differently. )

Policy measures to promote the technical progress

As the technical progress as already mentioned is dynamically efficient, and therefore the companies are looking even without government action to bring innovations to the market, government action is to promote individual enterprises not necessary or even harmful. Public support is harmful if it leads to a distortion of competition and then to a welfare loss.

Possibilities of policy the technical progress and thus promote economic growth without favoring one individual, for example, are freely accessible basic research and training professionals.

Technical progress in the theory of growth

The growth theory attempts to tap mathematically possible effects of technological progress. The technical progress plays an important role in the neoclassical growth theory. Under neoclassical assumptions of technical progress is an important requirement for long- term economic growth. Explain this can be in the following example:

A farmer produces cereals. He has a limited amount of workers and capital in the form of seeds and area of arable land available. Taking into account the neoclassical assumptions, the output will grow with each additional use of labor and capital. The marginal return of the additional factor input is as long decline until the output no longer increases with increasing factor input. Only an increase in the inputs of labor and capital can make the output only rise in the short term.

But the technical progress could allow that the farmer over the long term can increase output or marginal as in this example. Examples of technical progress are here: The introduction of fertilizer, which makes it possible that the field can be ordered in several times or the invention of the plow, which makes the soil more fertile.

The importance of technical progress was little noted in the first half of the 20th century as a source of growth of an economy in growth models (except Schumpeter ). Traditional growth models saw the labor supply and the capital available as sources of economic growth. Robert Solow (1957 ) was with his neoclassical growth model ( Solow model ) one of the first, the integrated technical progress in addition to supply of labor and capital as a source in a growth model.

In the Solow model (1957 ), Uzawa -Lucas model ( 1965) and AK model of Rebelo (1991 ), it is assumed that technological progress is an externally given factor. This implied that technical progress can not be changed through political action.

It was not until the early 90s of the 20th century in the models of Grossman - Helpman ( by Gene M. Grossman and Elhanan Helpman ), Romer ( Romer model of Paul Romer ) and Jones ( Jones model by Charles I. Jones ) of which assumed that technical progress is an endogenous variable influenced. The basic idea is that research and development affect economic growth. By promoting research and development could be influenced by targeted economic policy economic growth.

Harrod - Domar model

In order to investigate the conditions under which technological progress creates jobs or makes unnecessary, one can draw simple growth models in economics to rate. A well-known growth model is the Harrod - Domar model, which derives the conditions for the balancing growth and can also take account of technical progress. The model starts from the dual nature of the investment, which is the one part of the aggregate demand (the other part is the consumption expenditure), and for the stock of capital and thus increase the potential offer. In steady-state growth demand should be the same deal. It results in the following equilibrium condition:

• : Balanced growth rate, the offer makes the same demand.
• : Savings rate, percentage of savings on income, as demand is the economic supply of goods in equilibrium equal. Under the model assumption that all savings are invested, s is also the investment rate, ie the share of investment in total output.
• : Capital-output ratio, it indicates how much stock of capital is needed to produce a certain amount of production can.

The formula states that the more a higher growth can be achieved, the greater the investment ratio ( equal to the savings rate s is ), so the larger the share of production that is used for the construction of the capital stock. Growth is lower, the greater the capital coefficient, is the more capital needed to produce a unit of output.

If there is no technical progress, then the balanced growth should correspond to the "natural", the demographically given growth of the labor supply, otherwise either extends the labor supply is insufficient, or it creates ever increasing unemployment.

• : Population growth

The technical progress is introduced into the model so that it is assumed that the capital cost per worker (or per job ), capital intensity, at a certain rate (m) grows and that this labor productivity is also growing at this rate. It is also assumed that the wage per worker also grows at this rate.

This growth rate m of labor productivity and capital intensity is seen as a growth rate of technical progress. If the production constant, then (-m) jobs could be rationalized in each year according to this rate, employment shrank so. If, therefore, no unemployment arise, the balanced growth must be now:

• : Growth rate of technical progress, defined as the growth rate of labor productivity and capital intensity.
• : Demographically, ie exogenously given population growth, which is equal to the growth in labor supply.

Such growth can - be achieved by the savings and investment rate is s, if necessary, increased - according to this model. Since investment and profit not funded primarily from the from the wage income, calls for the economic policy has been widely used in continuing unemployment gemäßg the GIB formula moderate wage policy and higher profit income to trigger the more investment, growth and employment. Of course, such a policy also lead to distributional conflicts, since the profit income to be expanded at the expense of wage income.

Technical progress leads to the fact that compared to the total production more capital goods are needed, as without technical progress, full employment is to be achieved. However, there is a unique offering, the savings rate s is large enough, then from then on, the wage per worker according to the growth rate of technical progress, ie how the labor productivity growth.

Production function

Technical progress can be installed in different ways in a production function, for example:

A production function specifies how much can be produced when a certain amount of labor and capital ( capital stock ) or means of production is used:

From labor-saving, arbeitsvermehrendem or Harrod - neutral technical progress occurs when the following applies:

• Is a time factor becomes larger, which reflects the gradually increasing due to technical progress, labor productivity.

Less common is the Hicks - neutral technical progress

And the Solow - neutral, kapitalvermehrende or capital- saving technical progress

An early attempt to explain technological progress endogenously is the technical progress function by Nicholas Kaldor. Meanwhile, there are the Endogenous Growth Theory.

Reservation

As part of the criticism of globalization is discussed, that a strong and rigid to cross-linking globalization of techniques may well be associated with hazards. Especially created new, possibly sustainable ( " systemic " ) catastrophe risks (see Charles Perrow, Normal accidents ).