A new framework for analyzing technological change
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A new framework for analyzing technological change Yoshinori Shiozawa 1 Received: 2 November 2018 / Revised: 4 September 2020 / Accepted: 6 September 2020 # Springer-Verlag GmbH Germany, part of Springer Nature 2020
Abstract Technological evolution is widely thought to be the primary process that brings about economic growth. It is one of the main targets of evolutionary economics, but how technological change induces economic growth has remained unexplained. Based on the new theory of value, this paper explains how technological change leads to long-run improvement in real wage rates and income per capita. Section 2 gives a brief overview of the new theory and presents two theorems (minimal price and the convergence theorem) that afford the basis of analyses in Sections 4 and 5. Before these, Section 3 compares two price systems, traditional and new, and compares efficiency from two points of view. Traditionally economics with equilibrium has been concerned with those conditions that provide allocative efficiency. However, technological evolution comprises a series of half-blind selections of ‘better’ production techniques and exhibits another kind of efficiency that can be named dynamic efficiency. The latter is more important than the former. Allocative efficiency is self-destructive, while dynamic efficiency is cumulative in its effects. Section 4 shows how technological change works cumulatively and how it leads to real wage increases and income per capita. Section 5 shows that the new theory can explain the emergence and growth of global value supply chains as a part of technology choice arising through international trade. This paper is mainly focused on supply-side theory, while problems concerning the demand side are considered in Section 6. Section 7 concludes. Keywords Technological change . Evolutionary process . Economic growth . Dynamic
efficiency . Global value chains JEL codes D21 . D24 . D51 . D81 . E14 . F12 . O33 . O40
* Yoshinori Shiozawa [email protected]
1
Osaka City University, Osaka, Japan
Y. Shiozawa
1 Introduction1* Technological evolution is normally thought to be the primary force that brings about economic growth (Freeman 1988). After a detailed survey of three major growth theories (classical, new or endogenous, and evolutionary growth theory), Sredojević et al. (2016) show that all three theories assert this as fact. But growth theories exhibit a strange phenomenon. None give a detailed mechanism showing how technological change induces economic growth. The fact that it does is assumed as self-evident or trivial. Evolutionary economics is no exception in this regard. Technological change is one of the main foci of evolutionary economics, as is confirmed by Nelson and Winter (2002), the originators of evolutionary theorizing. Their 40 page survey covers 120 sources. In the section on technology and economic growth, the authors identify an important strand in evolutionary economics that “has been concerned with understanding technological advance and economic growth largely driven
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