Some brief thoughts on technical change

Engelbart's mouse

I have discussed some of these issues before (here, for example, or here). But it is the last week of my intermediate macro class, and I often end up with some discussion of growth. Mostly the Solow model, and some alternative demand-led growth model. I do only the simple models, Joan Robinson's banana model and Thirlwall's balance of payments constraint, to contrast with neoclassical supply constrained stories of growth.

But in the middle of that discussion, supply constraint versus demand led growth, a conversation about the nature of technological change is always inevitable. No, I'm not going to talk about Kaldor-Verdoorn now. There are two interesting aspects of technology that are often misrepresented in mainstream models.

First, in the Solow model technology is akin to a public good, meaning is non-excludable and non-rivalrous. So technology is relatively easy to acquire, difficult to preclude others from obtaining it, and the access to it by one group does not limit its availability to others. That, by the way, is the reason patents and copyright are supposedly needed, to preclude technology to spread too easily and to provide the incentive for innovators.

However, technology seems to be considerably more difficult to acquire than what the canonical neoclassical model presumes. I always tell students that technology acquisition resembles building IKEA chairs. You have the blueprint, but even then it is hard to interpret it, and the first one is always a bit wobbly, while the process of building new chairs implies that by the time you are done with the last (perhaps the third or fourth one) the process is completely mastered.

The second element of technology that is often misrepresented, and this also true of some neo-Schumpeterians, is the role of the entrepreneur, the innovator. There is overpraise of their role in the process of technological change. The flash of genius which allows the innovator to transform the whole world is glorified. In reality, technological change is a slow process, in which several flashes are necessary to eventually produce any significant change.

For example, I asked my students what made Bill Gates the wealthiest man on the planet. Only one, by the way, said Windows, the operating system that followed DOS, and that was in every PC, after his contract with IBM (yes that contract, and the fact that he could pile his other software with the operating system, is the real source of the wealth). The operating systems were bought from another company, and essentially copied from Apple. And yes, Steve Jobs got most of his ideas from a visit to Xerox Parc. So the names of the several people that were central for the development of the graphical interface with multiple windows on a screen are hardly household names.

Walter Isaacson's The Innovators, which does overall a good job of showing that technological progress is a team sport, even if he does also idealize the role of innovators (yeah, it's in the title) tells the story of one of the them, Douglas Engelbart. About him he says (and yes there is a bit of hero worship in this):

"Over the next six years, culminating in 1968, Engelbart went on to devise a full-fledged augmentation system that he called 'oNLine System,' or NLS. In addition to the mouse, it included many other advances that led to the personal computer revolution: on-screen graphics, multiple windows on a screen, digital publishing, blog-like journals, wiki-like collaborations, document sharing, email, instant messaging, hypertext linking, Skype-like videoconferencing, and the formatting of documents. One of his technocharged protégés, Alan Kay, who would later advance each of these ideas at Xerox PARC, said of Engelbart, 'I don’t know what Silicon Valley will do when it runs out of Doug’s ideas.'"

Most of the time the several innovators needed to produce significant change are forgotten, and do not reap the financial benefits of their own innovations. In particular, because many times is difficult to sort out who had the original idea, where one innovation finishes and when the other starts. Technology more often than not develops as a result of a series of small steps, rather than by big leaps. Histories of technology should emphasize the role of institutions, like Bell Labs, and in particular for modern capitalist societies the role of the state.