Economics Dictionary of ArgumentsHome
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| Technical progress: Technical progress in economics refers to improvements in production processes and efficiency, leading to increased output with the same or fewer inputs. It drives economic growth by enhancing productivity, and reducing costs. Technical progress can be embodied in new machinery or disembodied as better methods and organizational improvements. See also Technology, Technocracy, Progress, Economic growth._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Geoffrey C. Harcourt on Technical Progress - Dictionary of Arguments
Harcourt I 63 Technical Progress/capital-labour ratio/Harcourt: With the embodied view of technical progress, whereby gross investment is the medium for transmitting both technical change and capital-labour substitution to the capital stock, so bringing about productivity growth, the capital stock consists at any moment of time of layers of fossils, or vintages. For “embodied view” see >Terminology/Harcourt. >Capital structure, >Production, >Production function. Harcourt I 64 Technology/investments: Each layer represents the amount of gross investment in the technique that was chosen under the pull of expected relative factor prices, technical advances and demand conditions at the time when the investments were made. Ex ante/ex post: There are, on this view, ex ante substitution possibilities - when making investment decisions businessmen have to decide where on the f(i) function they wish to be - but not necessarily ex post possibilities. Even if the initial substitution possibilities remain open ex post, one variant of the vintage approach assumes that nevertheless these possibilities are unaffected by later technical advances. For “vintage approach” see >Terminology/Harcourt. Investments: The amount of new investment which is done and the total amount and number of vintages that are in use, at any moment of time, are determined, at the industry level, by demand and supply conditions, and by the condition that only vintages with positive to zero quasi-rents are to be kept working. Harcourt I 65 Output expands until the price of the product is such that only the normal rate of profits is expected to be earned on new vintages. Labour: Labour requirements per unit of output rise as the age of the vintage increases. The real-wage level (which is rising over time) therefore determines the scrapping margin in each industry and in the economy as a whole: see Salter [1960(1), 1965(2)], Sargent [1968](3). In this way, technical progress, productivity changes and distributive shares may be analysed as historical processes without there being any need to measure capital stocks as such: see, for example, Salter [1965](2). Historical processes/Marshall/Harcourt: This procedure is an extremely neat solution of the conundrum associated with the application of Marshallian long-period analysis to actual historical processes. >Alfred Marshall. Clearly, it is impossible to suppose that other things will be equal, i.e. stand still long enough to allow the economy (or even an industry) to establish, overall, the optimum capital-labour and capital-output ratios implied by expectations concerning prices, costs and levels of sales at any moment of time, i.e. we cannot expect ex ante and ex post production functions ever fully to coincide one with another. >Economic models, >Idealization. Price/output: Therefore the notion that both actual prices and outputs could be at levels which offer only the normal rate of profits on the entire capital stock seems to be a non-starter; indeed, it is difficult, if not impossible to conceive of any uniform or stable link between conceptual normal values and the values of the movements of actual economic series over time, with the exception of prices and provided that we take the not implausible view that expectations almost always turn out to be falsified, often by large margins. However, if we assume that 'other things' have to stand still only long enough to allow suitable adjustments to be made at the margins of the capital stocks, while the bulk of production is done by existing vintages which must take whatever quasi-rents they can get (even if they are disappointing in relation to the high hopes that were held when the machines concerned were first installed), we may salvage Marshall's insight and add a new dimension of realism - and relevance - to his brand of period analysis. The time-period involved has shrunk greatly and provided that innovations do not roll over us in great waves, crowding in on one another, we may generate values of key theoretical variables -gross investment, output, productivity, wages, profits, as well as priceswhich reasonably may be said to have as their empirical counterparts the trend values of the statistics available on them. >Expectations/Harcourt. Harcourt I 66 Terminology/Harcourt: (…) [we distinguish between] the malleable capital world in which technical progress is disembodied and the vintage world where it is embodied (…). >Economic models. 1. Salter, W. E. G. [1960] Productivity and Technical Change (Cambridge: Cambridge University Press). 2. Salter, W. E. G. [1965] 'Productivity Growth and Accumulation as Historical Processes', Problems in Economic Development, ed. by E. A. G. Robinson (London: Macmillan), pp. 266-91. 3. Sargent, J. R. [1968] 'Recent Growth Experience in the Economy of the United Kingdom', Economic Journal, Lxxvin, pp. 19-42._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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