Technical Progress refers to the improvement in knowledge about techniques for production. Such progress may allow more output to be obtained from unchanged inputs, the same output to be obtained from fewer inputs, or new forms of output to be produced which were not previously possible. Technical progress may be embodied or disembodied.
Historical Context
The concept of technical progress has been a cornerstone in the study of economic growth and development. Throughout history, advancements in technology—from the invention of the wheel to the digital revolution—have played a crucial role in increasing productivity and enhancing living standards.
Types/Categories of Technical Progress
1. Embodied Technical Progress
In embodied technical progress, the new techniques for production are embedded in new capital equipment or new intermediate products. This means that to exploit these advancements, there is a need for investment in new machinery, tools, or technologies.
2. Disembodied Technical Progress
In disembodied technical progress, improvements in productivity occur due to new knowledge or improved skills, without requiring investment in new equipment. This could involve better organizational methods, improved processes, or enhanced worker skills.
Key Events and Models
1. Harrod-neutral Technical Progress
This form of technical progress increases the efficiency of labor, meaning it is labor-augmenting. It’s named after economist Roy Harrod.
2. Hicks-neutral Technical Progress
Named after John Hicks, this type of technical progress improves the efficiency of both labor and capital proportionately.
Mathematical Formulas/Models
Technical progress can be represented mathematically in growth models. For instance, in the Solow Growth Model:
Y = A * F(K, L)
Where:
- \( Y \) = Total output
- \( A \) = Technological progress (Total Factor Productivity)
- \( K \) = Capital
- \( L \) = Labor
Mermaid diagram of the relationship:
graph TD;
A[Technological Progress (A)] -->|Enhances| K[Capital (K)];
A -->|Enhances| L[Labor (L)];
K -->|Combined with| F[Production Function (F)];
L -->|Combined with| F;
F --> Y[Total Output (Y)];
Importance and Applicability
Technical progress is vital as it drives economic growth, enhances productivity, and increases living standards. It can lead to cost reductions, quality improvements, and the creation of entirely new industries.
Examples
- Industrial Revolution: Introduction of steam engines.
- Digital Age: Advancement in computing technology.
Considerations
- Investment: Embodied progress requires capital investment.
- Skills and Training: Disembodied progress may require significant retraining and education efforts.
Related Terms
- Disembodied Technical Progress: Improvements due to new knowledge/skills without new equipment.
- Embodied Technical Progress: Requires investment in new equipment to exploit new techniques.
- Harrod-neutral Progress: Labor-augmenting progress.
- Hicks-neutral Progress: Proportional enhancement of both labor and capital.
Comparisons
| Feature | Embodied Technical Progress | Disembodied Technical Progress |
|---|---|---|
| Requires New Equipment | Yes | No |
| Investment Level | High | Lower |
| Focus | New capital/technology | Skills/Knowledge |
Interesting Facts
- The concept of technical progress extends beyond economics to any area where innovation improves outcomes, such as medicine or education.
Inspirational Stories
- The invention of the printing press by Johannes Gutenberg revolutionized the way knowledge was disseminated, marking a major advancement in technical progress during the Renaissance.
Famous Quotes
- “The advance of technology is based on making it fit in so that you don’t really even notice it, so it’s part of everyday life.” — Bill Gates
Proverbs and Clichés
- “Necessity is the mother of invention.”
- “Innovation distinguishes between a leader and a follower.”
Expressions, Jargon, and Slang
- Tech Boom: A period of rapid technological advancements and investments.
- Game Changer: A new technology or innovation that dramatically changes an industry.
FAQs
Q1: What is technical progress? A1: It is the improvement in knowledge about techniques for production, allowing more output from the same inputs, the same output from fewer inputs, or the production of new outputs.
Q2: What is the difference between embodied and disembodied technical progress? A2: Embodied progress requires new equipment for implementation, while disembodied progress is based on new knowledge or skills without needing new equipment.
References
- Solow, Robert M. (1957). “Technical Change and the Aggregate Production Function.” The Review of Economics and Statistics.
- Romer, Paul M. (1990). “Endogenous Technological Change.” Journal of Political Economy.
Summary
Technical progress plays a pivotal role in the advancement of economies and societies by improving production techniques. Understanding the distinction between embodied and disembodied progress is crucial for effective investment and policy-making. By fostering an environment conducive to both types of progress, economies can continue to grow and evolve, benefiting from enhanced productivity and new innovations.
