Technological change: how technology relates to economic change

New inventions, better production techniques than produce more efficiently, better organization and management of firms, better training, better transport and communications all come under the banner of technical progress.

All these things allow a country to increase output.  Progress and investments often go together when old machines are replaced by new, more sophisticated machines that can work faster.

However, is the technological change able to explain the economical change? is it the more importante factor?

Joel Mokyr (1946) states that the technological change is a very important factor but not the decisive one.  The institutional framework is the fundamental factor of technological change through the incentives.

The technological change, according to this author, is any change in the use of the information, regarding to the production, with the end to increase the efficacy.  The consequence of this process is to produce more with less resources or the production of new and better goods (innovation; concept that Mokyr links up with diffusion).

When the institutional framework allows the flow of information, the diffusion is posible.  According to Mokyr the invention is an exogenous factor; if the diffusion exists, the innovation is posible because the invention has been diffused.

Lynn White (1907 - 1987) treats to explain how the stirrup invention is caused by the feudalism.  In many occasions the invention already exists, however there is no application for it, as consequence there is no technological change because there is no diffusion.

http://licn.typepad.com/my_weblog/2012/09/technical-progress-john-dunn-consultant-ambertec-pe-pc.html

During the feudalism because of costs maintenance of the defence, the feudal lords decided to use the stirrup because the cost of horse rider maintenance is lower than a soldier; this is mainly because of the quantity of them to defence the lands, it is needed less horse riders than soldiers.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Population: cause or consequence of economic change?

There are some theories to explain how the population is related to the economic change. We are going to expose two theories: the pessimist, from Malthus, and the optimist, from Boserup.

Thomas Malthus (1766 - 1834): the main ideas about their theory are included on "an essay on the principle of population" where the malthusian trap is the base of his principles:

"Population, when unchecked, increases in a geometrical ratio. Subsistence increases only in an arithmetical ratio. A slight acquaintance with numbers will shew the immensity of the first power in comparison of the second."

The population grows steadily whenever there are resources, however the productivity could be increased whenever the law of diminishing returns allows it.

To explain this, the author uses two factors: land and work.

The main critique to this theory is that the author does not take into consideration neither the technology nor the demographic changes that could have any kind of consequence on technology or production.

Ester Boserup (1910 - 1999): The production could be increased as an answer to a demographic growing.  In a following step, the jump from a small society to another big one will be determined by resources increase, at consequence, the population could increase more.

Her arguments are defended through the scale economics that appears when the population grows. The scale economics allows to develop the specialization and the trade.

However with this growth, it appears a unequal distribution of incomes.  There is more habitants by area.  As consequence the value of the land will be increased, and the propietaries of land will have more incomes.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.

Theories of economic change: environment.

Regarding to theories of economic change the problems of the environment can be focused on: differences among the regions and how the environment changes affects to the development of a country.



Different authors have written about the environment and the economical change.  Let us see three opinions.

Karl August Wittfogel (1896 - 1988): he analyzed the ancient and modern era. His conclusions are related to the development of different cultures around rivers and deltas needed to make it work the irrigation systems.  These kind of systems brought about a centralization where the autor based his ideas about the oriental despotism. The one who has the control of the irrigation systems has the control of the economy.

The environment factors determine the kind of economic organization. This organization affects to the results of an economy.

The main critique to this theory is that the factors are independent each others, that is to say, for the develop of the despotism, it does not suggest the existence of irrigation systems and vice versa. Besides, at the old chinese empire, the peasants organized their own irrigation systems, without any control of the goverment.

     

Eric Jones (1936): he analyzes and explains the origin of the industrial revolution in Europe.  The differences in the XIV century between Europe and Asia were not very big, however, different environmental factors make this differences started to be relevant:

Europe has the luck of to own fertile and separated areas by natural barriers, that it did not allow contact among them. This fact means to develop a decentralized power (unlike that Asia where the population was concentrated around the deltas).  The european natural disasters kept untouched the physical capital.  It had the consequence to develop an increase of productivity and per capita income.  

The demographic european model is different from the asiatic (It easiest to recover than the asiatic).

The climate is much more varied in Europe than in Asia.  The consequence for Europe is more oportunnities regarding natural resources.

Finally, the physical european situation allow to this continent, to be isolated from invasions (mongols and turks). 

Jones considers countries as enterprises. These countries competed among them with the end to achieve the richness of each others.

Besides the countries started to developed a kind of organization where the goverments supplied defense and justice in exchange for a tax.  This situation allows to develop scale economics (the largest the population, the lower the cost associated to this population).  However there is a point where the increase of this population is negative.  This point is negative proportional to technology (how much more is invested in technology later this point appear.

There is another theories that try to explain the economic change regarding the environment by the climates change. However this theories are not adequate because of the lack of predictive.

Bibliography:

Cameron R. (1992).  Historia Económica Mundial.  Alianza.  Capítulo 1.

North, D.C.,  y Tomas, R.P. (1989).  El nacimiento del mundo occidental.  Una nueva historia económica (900-1700).  Capítulos 1 y 2.