FINAL ECON 339 OUTLINES

1. What is Mokyrs theory about the process of technological change? Compare and
contrast his views with that of other scholars studied in the course.
INTRO:
In his article Technology and the Problem of Human Knowledge Mokyr puts forward his
theory regarding technological change. He begins by explaining the two different types of
knowledge that society experiences, which are propositional and instructional. For him
technological change is evolutionary and knowledge forms a sort of chain. Considering the type
of knowledge one has and how tight it is in other words how much does society accept it, one
will guard such knowledge differently. For instance in many cases a creative society may invent
some sort of new knowledge which will eventually get diffused at no cost therefore becoming a
free lunch for everyone else. However, in some cases governmental institutions and even
individuals may acquire very valuable knowledge and guard it accordingly. That is, society may
be limited from it and may be only available at a certain cost.
When referring to technological change specifically it can be argued that knowledge can both
limit abilities and broad and productivity. For instance, if we think of distribution of Labor,
Braverman argues how do to capitalism and rapid increase in technology labor no longer needs
to be intense rather people are allocated specific tasks (specialization) And only asked to know
how to perform such a task.
Although knowledge is public good in the sense that the consumption of one does not reduce that
of others, the private costs of acquiring it are not negligible in terms of time, efforts and often
other real resources as well (remember Egypt). Mokyr theory about process of technological
change is evolutionary. Technologically creative societies in the past, as well as in the present,
can be defined as those that generated innovations whose benefits dwarfed the costs of invention
and development and thus created a free lunch.
-

MOKYR

1.
What is Mokyrs central question?
How does knowledge affect technology and thus growth? 2 types of useful knowledge
2.
What distinguishes useful knowledge from other kinds of knowledge? What
examples are provided?
A useful knowledge knowledge that is NOT singleton;
Geography is very much part of it: knowing where things are is logically prior to the set of
instructions of how to go from here to there.
Claims that useful knowledge is the source of economic growth.
Useful knowledge is natural phenomena that lends itself to manipulation such as artifacts,
materials, energy and human beings

3.
What distinguishes pre and post 1800 period in terms of the epistemic base
according to Mokyr? What are the implications of this distinction?
The epistemic base of techniques can be narrow or wide. Although new
techniques appeared before the Industrial Revolution, they had narrow epistemic bases
and thus rarely if ever led to continued and sustained improvements.
Specialization allowed for the widening of the epistemic base
Tightness of knowledge--social acceptability of knowledge. The more tight
knowledge is the more it is accepted by people.
If knowledge is controlled by an imperial bureaucracy much of it can be lost or
made inaccessible. Ex) China, old imperial civilizations.
Access to knowledge also depends on the culture of knowledge--if those who
posses it regard it as a source of world power or privilege, they will tend to guard it more
jealously..
Technologically creative societies in the past, as well as in the present, can be
defined as those that generated innovations whose benefits dwarfed the costs of invention
and development and thus created a free lunch.
What makes some societies more inventive or innovative than others?

1. Argument, issue, debate:

Mokyrs argument: How does knowledge affect technology and therefore [economic] growth?
Useful knowledge is a main cause of an increase in technology growth.
Useful knowledge improves and allows the manipulation of natural
phenomena such as artifacts, materials, energy and human beings
manipulation = technology.
2. Theoretical framework/economic model (economic relationships relevant to the
authors argument. Cause & effect relationships):
The way he demonstrates the relationship between knowledge and technology within the concept
of economic growth. How do they contribute to it?
Mokyr works under the assumption that technological change drives economic growth. Human
knowledge is a source of such growth because it fosters the creation of technology and its
improvement, however, because he refers to technology as the manipulation of the natural
phenomena, not all types of knowledge serve to this purpose. As scientific knowledge is the one
concerned to the natural world, for Mokyr it is the type that matters and he refers to it as useful
knowledge. Other kinds of knowledge like social sciences must be disregarded because they are
concerned with human behavior.
Useful knowledge is classified into two categories: propositional and prescriptive knowledge.
Propositional knowledge is the epistemic base, the catalog of natural phenomena, basically the
what of things. Prescriptive knowledge, on the other hand involves the techniques of the
epistemic base, the instructions that reside in storage devices, its applications, or more
specifically how we do things. Because propositional knowledge contents all science and

subsets a lot more, its development allows to build a further understanding of the techniques
that we need to apply it, hence the importance of expanding the epistemic base. The wider the
base is, the more likely it is to produce new inventions and the easier it is to develop new
applications to such discoveries (or innovations in the case that they are built on preexistent
knowledge). Mokyr represents this theoretical framework in the following way, where a
corresponds to the epistemic base and b to the instructional one:

The wider a is, the bigger b will be. The more we know about the natural world, the better we
will be at describing it and adapting our knowledge to new and existing circumstances. Even
then, we are adding more information to our previous knowledge, which allows us to discover
and explore other epistemic bases, a1, and their applications (research in higher education is an
example of that).
3. Empirical evidence and/or methodology:
He demonstrates this relationship through verbal reasoning, making use of quantitative data and
through a historical perspective:
- He builds his theoretical framework upon a comparison with the evolutionary
theory.
- Industrial Revolution in the West: a process that encouraged the creation of new
propositional knowledge, fostering technological inventions on manufacturing industries
and spreading them to the rest of the world.
- These changes were implemented during the 19th century and continued their
development during the 20th century, this time to improve the productivity of already
existing machinery and modes of production.
4. Findings/conclusion:
- A change of attitude regarding the contribution of knowledge to technological
change: Europe experienced a revolution in terms of the way useful knowledge was
accumulated and utilized.
- Importance was given to material innovations, and material progress was
dependant on increasing knowledge.

- To enhance the creation of knowledge in the 18th century not only a change of
attitude was needed, but also an institutional change.
- Knowledge, in order to contribute to economic growth, must be social. Useful
knowledge shall not remain on single individuals, but instead spread to society to spark
the creative process that technological change requires.
- The diffusion of knowledge depends on the priorities defined by culture and
institutions, hence the importance of the social, economic and political structures.
- Such structures have to facilitate the access, distribution and tightness
(acceptance) of collective knowledge for it to actually make an impact on society.
5. How does this fit into a larger body of literature?
- Spillovers effects of knowledge on the creation of technology.
- Grand perspective questions: Mokyrs theory is one useful approach to explain the
pace and nature of technological change, and the extent to which institutions can
determine it.
- Importance of education and science.
SOLOW:
1. Argument, issue, debate:
The amount of output produced by a given capital stock, K(t), and labour force, L(t), increases
overtime due to technological progress, A(t).
2. Theoretical framework/economic model (economic relationships relevant to the
authors argument. Cause & effect relationships):
- Exogenous growth model with constant returns to scale.
- Growth accounting framework taken from the Cobb-Douglas production function.
(Y = A Ka Lb). Demonstrates that economic growth can be given by two factors: capital
accumulation and an increase in productivity (technological change).
- Growth, however, is more effective when there is innovation since capital
accumulation is subject to diminishing returns. Technological change, on the other side, is
permanent and sets the production output to a new, higher level.
- In the long run, when growth is only extensive, the overall economy tends to
move towards a steady state, in which there is an equilibrium on K and Y and growth
stops increasing.
- Solow also uses income per capita as an alternative approach, where savings and
depreciation are taken in account in the Solow Model. Without technological change,
savings only suffice to cover population growth (capital to labour ratio) and depreciation,
which are constant.
- Because every factor of production in the Cobb-Douglas function is divided then
by labour, output becomes a function of only capital and technology (sY = sA Ka), where
savings from Y and a given set of output are directly dependant on innovation to increase
(capital is subject to diminishing returns).
3. Empirical evidence and/or methodology:
- Case study of the US economy from 1909-1949.
- of the economic growth from that period were attributed to technological
change.

- Mathematical model where there is a disaggregation of the Cobb-Douglas

production function to evaluate the contribution of each component to the growth of the
American economy.
- After all components were accounted, there was leftover on growth. Solow
concludes then that this must belong to technology, hence the so-called Solow
Residual.
4. Findings/conclusion:
- Capital accumulation is not enough for long-term economic growth, technological
change must happen in order to drive output levels up given a fixed amount of K and L.
- Solow Residual: increases in productivity, innovation.
- As it output per worker rises, income increases as well.
- Without technological change, savings in an overall economy can only keep up
with the expenses of depreciation and population growth.
5. How does this fit into a larger body of literature?
-

Distribution of income.
The role of institutions: who determines saving and investment rates?
Leontieff: labour augmenting.

DIFFERENCES IN BOTH THEORETICAL APPROACHES:

- Basically all noted above.
- More specifically: Mokyr examines knowledge as the main component that
encourages technological change, whereas Solow addresses such technological change as
the reason for economic growth.
SIMILARITIES IN BOTH THEORETICAL APPROACHES:
- Both assume that technology is efficiently diffused to society.
- From an income per capita perspective, they also assume that, as output per
worker increaser, more capital is required and therefore labour. Such proportions are
fixed, and therefore technological change is defined to be labour augmenting.
- Both views address (Solow implicitly) the importance of the role of institutions to
determine the diffusion of innovations and the distribution of income among the
economy.

2. What is Bravermans argument about the nature of work in the twentieth century?
What is the basis of his claims? Discuss and evaluate in the context of the social and
economic implications of technological change.
http://www.faculty.rsu.edu/users/f/felwell/www/presentations/BraveWords.htm
INTRO:
Braverman claims that labour in the 20th century has become 'degraded', due to the
increase in technological change and the capitalist system. The combined effects of
mechanization, scientific management and other control techniques, in other words, the
consequences of technological change, have allowed managers and employers to gain more
power and more importantly to enforce specialization of tasks across all industries. Braverman
believes that capitalism is a big factor in this matter. He argues that the use of mass production
and management strategies devalues the working class, comparing humans and animals and how
the one and only distinction between the both has become blurred. This essay will recount Harry
Bravermans theory about how labour has become devalued with the introduction of new
technologies.
Explain how labor has become degraded:
Division of labour in order to:
Increase productivity
Efficiency
Specialization: task
Minimization of jobs specific
knowledge on the part of the worker. Each worker acquires
different skill for a certain job. Meaning that every worker will
have a different level of skills that may only be applicable to that
one specific task.
Leads to alienation of workers
petty tasks
need to only know one specific task from all
procedure
Exploitation
Today, various well-known brands (i.e. Nike) are
known to encourage such types of production lines.
Braverman believes that even though the degradation of labour is
evident. Employees continue to succumb to this dehumanization from mass
production.
Animals V humans Braverman argues
that the key difference between the two is that: humans
work is conscious and purposive. Humans are able to
visualize and plan out what they want to do, whereas an
animal would merely work on instinct.
Instinctive activities are inborn rather
than learned.

 Human work by contrast Is

the power of conceptual work
**THINKING
CAPABILITY
draws line b/w humans and animals
Relationship to Capitalism
Reducing labor cost through systematic degradation of human
labor
In his work , Braverman states how capitalism is usually
characterized by the constant drive to enlarge and perfect machinery on the one
hand and to diminish the worker on the other.
Robotic performance
The use of this new method of mass production increased profits
for the capitalists because it produced a more effective use of resources.
Argument:
Example: making cars; labour workers no longer need to know the
whole process of making a car but only their allocated task.
Workers have been reduced to a level of performance that any
machine or animal can perform, resulting in many sociological effects on the
human workers mind.
Braverman believes this is a result of capitalist greed
Braverman uses example of caterpillar: A caterpillar will continue
to construct the second half of a cocoon despite the fact that the first half that it
created was destroyed by an external and unforeseen source.
Capitalists use other humans as any other resource in order to
produce the highest profit possible.
worker does not have to think to
perform his task Rather continues to follow a
monotonous motion instructed by managers.
Conclusion:
Braverman concludes that subjecting workers to the mundane
atmosphere required by mass production in factory environments degrades
workers to a sub-human level. Capitalists locate the strength workers have and
utilize it as a repetitive action that will result in the fastest and most efficient
method of producing products that will eventually lead to maximization of profits.
1. Argument, issue, debate:
Labour in the manufacturing industry has degraded thanks to the increase of technology usage
and inventions in the capitalist system. He criticizes the management systems that exercise
control on the labour force through production.
2. Theoretical framework/economic model (economic relationships relevant to the authors
argument. Cause & effect relationships)
- Marxist theory of labour process. Examination of the detachment of the natural
skills and creativity of the productive man according to the needs of the capitalist system.

- He looks at how people work, who controls it, what skills are employed within
that work and how they are paid for it.
- In order to match with the increasing productivity of newly introduced machinery,
capitalists modified the labour process of the workforce by introducing specialization: the
division of labour within the production lines and reduced only to specific tasks per
worker.
- Thanks to specialization, there is a reduction of labour costs. Mass production is
not only capital saving, but also increases the profits of the capitalists.
3. Empirical evidence and/or methodology:
- Makes comparisons between the intuitive animals and the rational man. The
nature of an animal is to respond to their biological needs by intuition, whereas the nature
of a rational man is to be productive and aware of its skills.
- Uses specific animals as examples like the caterpillar.
- He criticizes the labour management and production techniques of Fordism, and
the scientific management of Taylorism, for their contributions to the dehumanization of
labour.
4. Findings/conclusions (4 and 5 are the social and economic implications of technological
change):
- Devaluation of the working class by the performance of repetitive processes to
maximize the profits of the capitalists.
- Human labour seen as a ramification of machinery, not as a complement of it.
- Workers are free of legal constraints.
- Price of labour, wages, are dependant on the output of production and limited to
be at the level of human subsistence.
5. How does this fit into a larger body of literature?
- Materialism: the division of labour led to to the division of society as well: class
struggle.
- Unequal distribution of income,
- Bias of technological change: labour augmenting on deplorable conditions,
unemployment when labour process is totally automatized, labour saving (McAfee).
- Unionization of workers due to the alienation effect.
- Grand economic perspective: another relationship between capital accumulation
and labour.
3. What are the implications of the bias of technological change in relation to the
distribution of income? What is Leontiefs view? Compare and contrast the relevant
readings and sources in relation to this question.
INTRO
The distribution of income has always been an issue when it comes to economics and
how it is studied. Some classical economists like Adam Smith believed that in order for growth
to occur, there had to be rising inequality. Additionally, Karl Marx also believed that labor

technological change would eventually lead to greater inequality, driven by exploitation of labor.
However, in his article Technological Advance, Economic Growth, and the Distribution of
Income, Wassily Leontief argued that a main factor driving todays unfair distribution of income
in regards to technological change, is the decreasing demand for labor and the complexity of the
machinery workers have to deal with today ( compared to the 19th century machinery).
Leontiefs Main Argument on 1st Industrial Revolution
Leontief argues that what characterized the first Industrial Revolution was the
necessity of labor to work the new machines. That is, with the introduction of new
machines there was a rapid increase in labor, since it became indispensable to have
people employing the machines. This lead to a steady increase in demand and thus to an
increase in the price paid for it.
It is important to notice that the effectiveness of the new introductions of
technology depended critically in the particular nature of the 19 century technology.
o Such technology allowed a significant increase in output and at the same time it
maintained an even and strong domination of human labor in most productive
procedures in factories.
o Meaning that instead of increasing unemployment, the demand for labor increased.
Additionally, this increased the share of total national income.
Great Industrial Revolution
However, during the Great Industrial Revolution, technologies became more
complex and difficult to employ. New machines could engage in mental-like functions
(i.e. computers)
This enabled machinery to perform production of goods and services without any
human labor-input. Diminishing the indispensable role of human labor as a factor of
production.
Leontief uses example of the horse and tractors. Essentially, the introduction of
tractors and other machinery first reduced and then completely eliminated horses and
other drafts animals in agriculture. Horses unable to compete with newer technologies
lost their jobs.
The main issue is that, unlike in the 19th century, when technology enabled an
increased necessity for labor. These new complex inventions may just diminish the
demand for labor in general and eventually eliminate its necessity at all.
Machines are now able to do tasks that humans were previously thought to be
superior at.
Some attempts at reducing unemployment and distribution of income
There have been attempts to introduce new mechanisms in the economies in order
to decrease the level of unemployment. For instance, labour-saving machinery, however
no state is likely to adopt such policies since this would affect their position in
international trade and thus weaken it.
There is also the example of Egypt, which attempts to tackle both unemployment
and the distribution of income. Leontief describes an aluminum factory in Egypt and how
even though the equipment and technical procedures as well as the level of output, were

basically identical to those employed in a similar factory in the U.S. However, the
number of workers employed was about four times bigger with lower wages.
Even though from a purely economic point of view, having a large number of
employees may seem inefficient. In this particular case it makes good sense, since wages
are reduced accordingly.
This is seen as an unemployment relief, since without such policy in place many
would be unemployed and without any type of income available.
Bias of Technological Change and Distribution of Income
For a given level of output, technical change is seen to affect the factors of
production
Need to consider labour saving and labour augmenting
Labour saving: technologies that replace workers
Limitations:
Marx
this
creates
unemployment
This means that, the distribution of income will
benefit more those in charge of the market forces (i.e. managers)
capitalism
Labour augmenting: no unemployment, but instead technologies
may make workforce more efficient.
This means that the distribution of income will be
more equal across labour forces.
Conclusion
Technological change affects primarily the demand for labour which then affects
the distribution of income.
New technologies tend to diminish the role of labor be it skilled or unskilled, as
income distribution, the new technology diminishes the role of human labor in production
to such an extent that it is bound to bring about not only long-run technology
unemployment, but if permitted to operate within the framework of the automatic
competitive price mechanismalso a shift toward a more skewed and, because of that,
socially unacceptable distribution of income.
1. Argument, issue, debate:
According to the bias of technology, technological change can be labour augmenting or labour
saving. In either case they lead to an increase in income, but the fairness of its distribution is still
a matter of debate.
2. Theoretical framework/economic model (economic relationships relevant to the
authors argument. Cause & effect relationships):
(To take in consideration Leontief, McAfee and Marx)
- Sustainable progress relies on a combination of technology, political and social
organizations, proper allocation of resources (distribution of income mainly) and
economic institutions.

- Technological change increases income through a competitive price mechanism

but the distribution of it is given by the nature of innovations themselves.
- When technological change is labour augmenting, workers are willing to be
displaced from their previous job in order to be allocated in a new one because the
increasing demand allows it. This is socially acceptable and healthy, necessary for a
sustainable economy.
- When technological change is labour saving it benefits firms because they now
have a bigger share of the profits. For the working class this is not desirable because there
is structural unemployment, it frees labour.
- There is willingness to accept lower wages, which benefits labour intensive
industries and, in the case of developing countries, it yields them comparative advantage
(abundance of cheap labour).
- Pressure on wage rates produces unequal distribution of income.
3. Empirical evidence and/or methodology:
- Analysis of developed and less developed countries throughout history, especially
in Western Europe from the 19th century onwards.
- Comparison between the first Industrial Revolution and the Great Industrial
Revolution: Leontief examines the indispensability of human skills in the production of
goods and services.
- In the first Industrial Revolution the more machines that were introduced, the
more workers that were needed to manage them. Human labour force became
indispensable, even with the availability of new machinery.
- With the development of technology from the 20th century onwards, industries
are less dependant on human labour. Machines are more capable to perform the same
physical and mental skills than men.
- Analogy of the horse and the tractor.
- Aluminum plant in Egypt as an example.
4. Findings, conclusions:
- Technological change affects the demand of labour, but also its supply.
- On one hand increasing productivity allows more people to enter in the workforce
(labour augmenting), on the other side, depending on the nature of the technology
introduced in the market, it can be labour saving and produce unemployment.
- A strong system of transfers of income is needed to face automatization.
- Countries should not avoid implementing new technologies because it weakens
their international comparative advantage when exporting their goods and services.
5. How does this fit into a larger body of literature?
- In the case of labour saving technology, the automatization of production lines for
goods and the provision of services in the 21st century plays a central role in
technological unemployment.
- McAfee and Brynjolfsson address the tradeoff between automatization and
unemployment that we face nowadays, however they argue that it is not possible to
replace labour with physical capital completely because humans still surpass machines in
complex reasoning (intuition, problem solving skills, etc).

4. In what ways do firm size and market structure influence the pace and contribution of
technological change to the economy?
1. Argument, issue, debate:
Technological innovations stimulate competition among firms by creating comparative (or
absolute) advantages where industries are profitable. Depending on the nature of the
technologies employed, it can lead to a change (or enforcement) of firms sizes like monopolies.
2. Theoretical framework/economic model (economic relationship relevant to the
authors argument. Cause-effect relationships):
(Griliches, Mokyr and Allen)
- The rates of innovation are determined by the costs and economic compensations
from the returns, and the present value that firms need in order to yield a given amount of
income in the future.
- One firm assumes the costs of R&D, and then other firms follow with lesser costs
of implementation.
- The spillover effect: when new techniques arise from R&D and they're profit
augmenting, the rest of firms in the industry will look for imitating or develop the same
line of innovations in order to increase their competitiveness and create an advantage.
- Tradeoff between private and social benefits: when technological change takes
place, the firm that develop the new techniques can choose to whether or not make it
public (patents). If they choose to not publicize it, there is a greater share of the profits
from the market destined to the firms, but consumers are affected (possible creation of
monopolies). If they do, there is a benefit for the society but the firm is no longer able to
gather all the possible profits from such innovations. It loses the returns of its investment.
3. Empirical evidence and/or methodology:
- Gradual development of blast furnace heights in English industries.
- Introduction of the seeds of hybrid corn in the U.S., which was dependant on the
geographical and market differences. It was introduced first in areas where it was
predicted to be more profitable (comparison between good and poor areas) and
accepted by farmers (related to Mokyrs concept of tightness) because of the faster
economic returns.
4. Findings, conclusions:
- Competitive industry structures lead to innovations in order to gain advantage
among firms.
- Investment costs and risk taking made in decentralized markets can lead to
widespread adoption of new technologies if rewards (economic returns) exist for them.
- If industries are sufficiently profitable, rates of capital investment and innovation
are highly correlated: the risks of pursuing and adopting new technologies are justified.
- Dissemination of knowledge is key to the development process.
- Political and social institutions play a role in developing appropriate channels of
information to spread and fuel collective innovation.
5. How does this fit into a larger body of literature?

- There is a tendency for technological change to accentuate the economic

disparities in the levels of income and rates of growth.
- Negative externalities caused by the nature of the inventions/innovations
themselves and the lack of regulations of political and economic institutions.
- Property rights, trade secrets and patents.

5. What are the factors determining the demand for education and/or skills and their
economic benefits? Discuss in the context of the readings and content in this course.
INTRO

It is evident, that lately the demand for education and skills has increased significantly. There are
various factors determining the shifts in both demand and supply of education. In most cases,
such demand is related to the desired levels of increases and benefits of a given economy. This
essay will discuss some of the most important aspects which determine how education
demanded, and by extension the skills acquired from education, are positively correlated to
economic growth. Theories brought up by Mokyr and Engerman will be provided in order to
support the argument.
MOKYR ON KNOWLEDGE
Mokyr describes two types of knowledge
Instructional: techniques
Propositional: what we know
Knowledge is valuable due to the fact that it enables the creation
of new processes of production spillover
usually more efficient
self-interest people are unwilling to give things (in this case knowledge) for free
no free-lunch, like in old societies.
Current education system reflects Mokyr idea that people are
generally averse to giving knowledge freely, since individuals in pursuit for
knowledge pay for education. (exchange).
This means that knowledge is a critical factor when it comes to economic
benefits.
Education is demanded in order to employ new innovations
ENGERMAN ON EDUCATION (SOLOW RESIDUAL)
Engermans case study on the U.S. demonstrates how there is an increasing
demand for education and thus for a high-level of skills
Investment on education expecting a high level of skills
The more educated can be more easily and cheaply trained to a
new position when there are changes in the industry/occupation structure.
Engerman argues that people demand education due to tech change (skilled
education). This reflects the idea that people have an increased demand in attaining
instructional knowledge embodied in current education systems.
The demand for education being dependant on the expected return
of investments on education.
Engerman demonstrates how we would expect that
the private rate of returns ROR to those receiving education > social ROR,
at lower levels of education since no costs of income forgone and the
direct cost paid out of taxpayer money. But keep in mind the social
benefits of the educated individuals.
Example: college educated vs high school educated: a college
educated worker is likely to contributes four times higher (as an economic input)
than a high school educated.
ARGUMENT: POSSIBLE FACTORS

 Considering the Solow Residual and how Engerman attributed part of A to Human
Capital (education). It can be argued that the increase in demand for education is directly
related to Mokyrs theory of knowledge. That is, peoples knowledge is significant in
determining how valuable their skills are. For that reason, there is a demand in education
more importantly in post-secondary education. People are expected to have a high level
of instructional knowledge which directly benefits human capital formation and thus
productivity and value of the economic markets.
This means that a big factor driving the demand for education is the desire to
accelerate economic growth and thus profits.
Also with the rapid increase in technology, innovations and more complex
procedures require higher level skills.
We know that skills are directly correlated to education
More education more economic inputs (Engerman)

- economic growth
- profit
- productivity
- human capital formation (part of solow residual)
- Technological progress
- Y= A ( K, L) Take A, for instance. Solow argues that A
accounts for the factors that lead to economic growth
exclusive of K and L. Therefore part of A can be accounted for
by Human Capital. We saw that Mokyr argues knowledge to be
instructional, and we know that much of the education in
pursuit nowadays takes the form of instructional knowledge
(techniques). (increased demand in education due to tech
change). Engerman, exploring the effect of human capital (in
the form of education) on productivity argues that education is
not uniform in nature but that different levels of education
produce HC that differ in productivity and value.
Solow, Engerman, and Mokyr
Engerman Looking at HC formation through education.
Tech change increases the demand for educated workers (how?)
B/c we want skills compatible with current tech
profitability in relation to education (or marginal product of
education)
Relationship between education and
income indicates that the educated are viewed as being
more productive Basic source of data used to measure these benefits of
education has been the income by education completed that data collected by the Bureau
of the census since 1940. Be sure that there's a positive correlation of each age between
the income earned by an individual and the quantity of education he has previously
received.

Human Capital (HC) as being part of the solow residual, and

Engerman exploring the effect of HC (in the form of education) on productivity.

 The demand for education being dependant on the expected return

of investments on education.
Engerman demonstrates how we would expect that
the private rate of returns ROR to those receiving education > social ROR,
at lower levels of education since no costs of income forgone and the
direct cost paid out of taxpayer money. But keep in mind the social
benefits of the educated individuals.
Talk about how pursuing an education means a reduction of
present consumption in exchange for future income. Engerman states that costs of
education can take the form of expenditures related to tuition and school supplies,
for instance, as well as the opportunity cost of income forgone.
Idea that much of the anticipated benefits from education are from
generalized skill levels (education systems as moving away from providing super
specific education). This would then produce a more flexible and adjustable labor
force. Therefore what education provides in the ability to avoid economic
obsolescence. The more educated are considered not only more able to respond to
changing geographic and occupational opportunities, but are also more alert to the
possibilities of introducing profitable economic changes.
Solow Y= A (L, K) HC as part of A Knowledge ( instructional/
propositional) embodied in formal education.
Mokyr Social proofing of education. In context of Mokyr the idea
that pursuing educational degrees is desirable is a tight belief
socially. This kinda adds pres
Technical Change and Deskilling (as a counter argument)
Braverman

Although knowledge is public good in the sense that the consumption of one does not reduce that
of others, the private costs of acquiring it are not negligible in terms of time, efforts and often
other real resources as well (remember Egypt). Mokyrs theory about process of technological
change is evolutionary. Technologically creative societies in the past, as well as in the present,
can be defined as those that generated innovations whose benefits dwarfed the costs of invention
and development and thus created a free lunch.
- By taking a historical perspective and making use of quantitative evidence Mokyr argues that
useful knowledge comes from institutional structures and its not always about markets
(considering the biggest example of market failure: negative externalities)
- Social aspect of his theory: information can be transferred through relationships, power
structures, economic differences
- Solow residual: left over piece that is not explained, not accounted by factors of production.
Thus the most significant aspect is: technology
- Mokyr also explores link between human knowledge; accumulation of knowledge over time
and why it happened differently in different parts of the world.

1. Argument, issue, debate:

Technological change has increased the demand of more skilled and better educated workers,
education is thought to accelerate economic growth and thus profit.
2. Theoretical framework/economic model (economic relationships relevant to the authors
argument. Cause & effect relationships):
- Mokyr: technological change drives economic growth, but such change is
dependant on the technological creativity fostered by knowledge.
- Useful knowledge has to be social in order to encourage the creation of new
technologies: education produces that spillover effect if we have the appropriate
institutions, priorities and structures.
- Engerman: Today innovations are more complex and they require better skilled
people to employ them, education is then seen as an investment on human capital because
it increases productivity and brings higher economic returns.
- At lower levels of education, private rate of returns ROR to those receiving
education is greater to social ROR since no costs of income are forgone and the direct
costs are paid out of taxpayer money.

3. Empirical evidence and/or methodology:

- Mokyr: uses a historical perspective (industrial revolution) and an evolutionary
approach to the way we collect and spread useful knowledge.
- Engerman: uses the US Census Bureau to measure the benefits (meaning by this
the economic returns) of education since 1940 and its relationship with economic growth
(the educated are more productive, hence they receive more income).
- Solow residual. Human capital (in the form of education) is part of the leftover
accounted for technology (A) in the aggregate economy.
4. Findings, conclusions:
- Technologically creative societies in the past, as well as in the present, can be
defined as those that generated innovations whose benefits dwarfed the costs of invention
and development and thus created a free lunch.
- The demand of education is set by the expected returns of the investments on it.
- Engerman states that pursuing an education is translated into a reduction of
present consumption in exchange for future income. Such costs of education can take the
form of expenditures related to tuition and school supplies, for instance, as well as the
opportunity cost of income forgone.
- Information can be transferred through social relationships, power structures,
economic differences.
- There is a positive correlation between age (also linked to the schooling levels)
and income: the older and more educated we are, the more income we are likely to gain.
- According to Engerman, the general curricula of education today is what makes it
so attractive to the economy and feasible for the application of new technologies.

Individuals gain adaptability, which translates into lesser incurred costs when adopting
innovations.
5. How does this fit into a larger body of literature?
- Mokyr and Engerman use the assumptions of the neoclassical model of economic
growth. Technological change is shown as being labour augmenting, therefore increasing
the demand of labour when it takes places.
- However they are not taking in consideration the structural unemployment that
would result if the technology applied is capital saving. (Lewis and Bravermans
implications for the distribution of income -marginal wages- and deskilled workers)

6.How does the history of the salmon canning industry illustrate the economic causes and
consequences of technological change. How does the Gulf of Georgia Cannery compare
and/or contrast with the argument presented in Diane Newells paper?
Newell considers the halting and incomplete diffusion of mechanization and
continuous process technology in the salmon-canning industry of the Pacific Northwest.
She shows that the fragile and cyclical character of the natural resource, the labour
system employed, and the remote and isolated locations of individual production units all
affected cannery operators decisions about tech adoption, and the persistence of manual
labour reflected rational, not reactionary, business choices.
The industry was cyclical, so it made more sense to hire piece rate workers. The
non homogenous nature of the fish made it so that you would need to modify the machine
a lot. Workers are more able to adapt to changing situations than machines are.
BC mechanized slower because there were workers that were down to do piece
rate. Less chinese immigration and exclusion acts reduced the supply of cheap and skilled
labour. The industry was also growing and the supply of workers was not meeting the
demand of the industry. Labour got expensive as well, as demand grew, supply dropped,
and labour became more specialized.
Mechanization seems like a great idea except the industry was geographically
isolated, heterogenous products and a cyclical industry. Geographic dispersion reduced
the ability to share machinery.
Machinery that made it into the process were the ones that sped up the line.
PART B:
7. How do the forces represented by the Solow Residual contribute to economic growth?
Is there a role for the state? Discuss in light of the content of this course.
INTRO:
The Solow Residual is a number describing empirical productivity growth in an economy
from year to year and decade to decade. Robert Solow was one of the first economists to look
at the relationship between technological growth and economic growth. Solow defined rising
productivity as rising output with constant capital and labor input. It is called a residual
because it is the part of the growth that cannot be explained through capital accommodation
or increased labor. Various studies have been done attempting to explain the residual in the
production function. This essay will discuss some of the theories put forward in class.
SOLOW RESIDUAL
Usually there is a given level of input expected to supply a given level of output.
However, the introduction of technology affects the factors of production in various
ways.
This way the level of inputs is affected in a way in which is usually
made more efficient, but still contributes to the same level of outputs (or in better
cases increased output).

 Some economists have argued that such residual is technological changes in a

given economy.
The growth accounting framework is developed from Solows growth model
Growth accounting is a procedure used to measure the contribution
of different factors to economic growth and indirectly compute the rate of
technological progress which is the Solow Residual
Thus, the unexplained part of economic growth is due to
innovations and more efficient methods of production.
Most convenient way to illustrate the growth accounting
framework is to use a Cobb-Douglas production function Y=AK^a L^B
Usually there is no data for technical progress
STANLEY ENGERMAN ON RESIDUAL
In his article Human Capital, Education, and Economic Growth Engerman
examines possible factors that account for the residual A in the Solow neoclassical
growth model.
Using the U.S. as a case study, Engerman demonstrates how the demand for
educated workers has increased over time due to the increases in technological change.
Which in return, helps the development of human capital formation.
He states how due to the fact that the market does not consider all workers equally
productive, one cannot consider labor input as equivalent across all areas.
For instance, a person with college education is considered to give
twice as much economic input as those with only a high-school education
Thus he focuses on the quantity of education received by members of the work
force.
More education more economic input
The education-income profiles indicate that people with more education are
valued more highly in the market than people with less education.
Engermans research concludes by suggesting a positive contribution from
education to economic growth.
EXAMPLES OF POSSIBLE SOLOW RESIDUALS
(1) In Agriculture during the Industrial Revolution by Robert Allen, he discusses how
productivity grew from 1700 to 1850. Total factor productivity increased by 50%. Allen
states how some changes during these period cannot be all attributed to changes in capital
and/or labour.
(2) Also Harley in Sail to Steam argues how a portion of the change in sail to steam
boats can be attributed to technological change. Although there was considered tech progress
resulting in lower labour requirements in both steam and sailing ships, the principal tech
improvements causing the shift from sail to steam are credited to marine engines. (Harley is
theorizing in what s could be in this case change in engine technology).
COUNTER-ARGUMENTS:

When technological change occurs, further investment in capital is required to implement change

Technical change tends to be labor augmenting (makes each worker more productive)
ROLE OF THE STATE?
Generally developing countries are better suited for new technologies. Since there
are more areas where such innovations can be tested for efficiency.
Also states need to be open-minded, that is, to learn from other already
developed states in order to fasten their economic growth and development.
Also consider: knowledge spillovers exchange of ideas across
individuals

Additionally, like Engerman discusses education is a big contributor to the

development of a country.

o Thus, states need to invest in higher levels of education in order to have a well
prepared workforce.
o This highly influences the role of both political and economic institutions
Thus, the role of the state is definitely an important factor that helps determine the
phase at which an economy will grow.
CONCLUSION

8. To what extent do problems associated with climate change, plastics, and hybrid corn
reflect cases of market and/or policy failure? What factors determine the role of
technological change in creating such problems and their potential solutions?
INTRO

It is evident that the issue of climate change has brought up multiple debates amongst both
developed and developing countries. Many of the issues associated with climate change, plastics
or hybrid corn can be directly related to both market and policy failures. This essay will attempt
to clarify the similar matters that help further worsen this situation. For instance the role of
technological change and the role of states.
TECHNOLOGICAL CHANGE
Rapid increase in machinery has enabled more efficient ways to exploit land and
other significant factors of production
This benefits the economy since it makes it more efficient and it
usually helps produce more output than before Positive
externality, since more output not only benefits producers but
also consumers.
However, the increase in technological change also leads to
environmental damage.
Climate change
Green-house gases
Plastics
EX 1: Message in the Waves plastic in the ocean
This video analyses the repercussions in Kamilo beach in Hawaii because of the
excess waste of plastics.
A noteworthy point is that most of the plastic-waste accumulated in the Kamilo
beach is not due to littering in Hawaii but from the pacific rim surrounding Hawaii.
Some plastics are even believed to have accumulated since the 1950s.
EX 2: Hybrid corn and economics of innovation ZVI GRILICHES
Interesting implication is that hybrid corn was an innovation which was more
profitable in the good areas than in the poor areas. This is also a characteristic of many
other innovations. Moreover, this tendency is reinforced by the economics of the
innovation process which results in the new techniques being supplied to the good areas
before they are supplied to the poor areas and also in the more rapid acceptance of these
techniques in the good areas.
The kinds of inventions we get and the process by which they are distributed may
lead to aggravation of the already serious problem of regional differentials in levels of
income and growth.

MARKET / POLICY FAILURES : ROLE OF STATE

The already mentioned studies demonstrate the lack of policies by both
governmental and economic institutions needed to protect the environment as well as
those most likely to suffer the consequences from the negative externalities (i.e.
developing countries).

 Usually, environmental degradation tends to have greater

repercussions on developing countries.

As a market failure, governmental institutions are letting market forces take over
and determine the ultimate outcome which in return greatly affects the environment.
For those reasons, one of the biggest issue is the level of regulation governments
should put in place.
Environmental regulations
Tax: taxing use of machinery that has high levels of
pollution; taxing units of emission
Subsidies: incentives for firms to use more efficient
ways of productions ( in terms of environmental benefits)
This in return is likely to benefit the environment
An example of policy failure is the case of hybrid corn. Giriliches points out the
fact that it is the poorer states in the U.S. that did not get access to new technologies. This
then increases the disparity between the wealthier states and the less wealthy states.
It is evident that the situations mentioned above (climate change, plastic debris,
hybrid corn seed problem) can be directly associated with failures in market policies and
governmental policies.

Negative externalities.
Market Failure
What factors determine the role of tech change in creating such problems and
their potential solutions? humans. humans determine the role of tech change. Institutions/
innovators/ firms/ capitalism (market structure).
1. Main argument, issue, debate:
Zvi Griliches (Hybrid Corn/ Economics of Innovation):
Adoption of new technology depends on economic factors, mainly by the
expected value (EV) of switching to the new technology. Richer areas have a better
ability to adopt new technology because their expected value (EV) is higher and they
have less risk of innovation. Poorer areas have slower adoption rates due to lower
expected value (EV) and higher risk of innovation, and thus lag behind richer economies
who experience faster growth.
The kinds of inventions we get and the process by which they are
distributed may lead to aggravation of the already serious problem of regional
differentials in levels of income and growth.
2. Theoretical framework/economic model (economic relationships relevant to the authors
argument. Cause & effect relationships):

3. Empirical evidence and/or methodology (does the author use quantitative evidence, statistical
analysis, verbal reasoning, illustrations, audio sources, graphs, etc):
Griliches makes regional comparisons of when technology was adopted, and the cause and effect
of that.
Southeastern corn production adopting technology a lot slower due to their less
developed market (corn was more volatile) thus leading to less support from institutions.
4. Findings/conclusion:
Rates of acceptance: difference in rates of acceptance [of hybrid corn] are demand
based and not a result of supply conditions. Rate of which farms accept new techniques
depend on the magnitude of profit to be realised from the changeover.
Rates of shifting [to hybrid corn]: depends on absolute superiority of hybrids vs.
corn. E.g. bushels/acre, average number of acres per farm.
Equilibrium level: explained by differences in the average profit from shifting
from corn to hybrid.
5. How does this work for into the larger picture (Grand Perspective Questions):
1. What is the role of technological change in economic growth and development?
2. How does the market structure determine the nature of technological change?

9. What are some of the factors that facilitate and motivate invention? Explain the
difference between the social and private returns to invention. Does market structure
matter? Discuss the role of institutions in spurring technological creativity and economic
growth.
You can bring in Engerman in this one. Role of education as an institution
You can bring in the corn reading in this one specifically the fact
(from the reading) that explained why the Southern US states were
later in introducing hybrid corn seeds as a result of the unavailability of
supporting institutions relative to northern states (or states along the
Corn Belt)
What facilitates invention profits as a main motivator. But
institutions as a major determinant (facilitator) of ability to invent and
innovate. What about market structures?
Adams/Dirlam (Open hearth 2 Basic Oxygen)+ Allan (Collective
Invention --furnace) invention
Griliches (corn) Diffusion
2. Main argument, issue, debate:
Investment in education and thus human capital today = lesser consumption of
other goods today in return for a higher/existing future income.
Role of investment, humans, and free societies have been overlooked because
such expenditures are ignored or treated as consumption within conventional national
income accounting.
(Definition- National Income Accounting: used in economics to
refer to a bookkeeping system that a national government uses to measure the
level of the countrys economic activity in a given time period. Two methods: the
expenditure approach sums what has been purchased during the year, the income
approach sums what has been earned during the year).
Traditional national income accounting restricts the concept of
investment.
Problems in the estimation of cost-benefit of education.
Cost-benefit should be measure the cost of education in relation to
opportunity cost. Costs = paying tuition, school supplies, foregone income due to
attending school vs. getting a job.

 Private/social costs of education: ROR (rate of return) of education

different for different individuals and different societies.
At lower levels of education: Private ROR of
education > Social ROR because lower/no costs of foregone income and
direct cost is covered by taxpayers money (i.e. elementary school,
secondary school).
Distinction between private and social benefits more subtle.
2. Theoretical framework/economic model (economic relationships relevant to the authors
argument. Cause & effect relationships):
Economic model used:
Cobb Douglas Model Y = A (K,L) which is used to calculate economic
growth has problems:
Residual A Solow residual breaking down residual
is one step towards redefining labour input. Measures previously
used labour in physical units therefore imply each unit is
equivalent in value = not the case since the labour market
values different labour differently and sees difference in
productivity.
Engerman suggests: calculating index of labour quality with
changes over time with changes in number of people in each educational category.
i.e. college graduate earning $10,00 vs. high school graduate earning $5,000
-completing college is considered to have a higher economic importance.)
AVG quality of education explains ~23% of growth
of total ouput, and 42% of growth of output per person employed.
3. Empirical evidence and/or methodology (does the author use quantitative evidence, statistical
analysis, verbal reasoning, illustrations, audio sources, graphs, etc):
The author dissects the Cobb Douglas Model, the Solow Residual, and uses statistics to present
evidence of his findings.
4. Findings/conclusion:
Technological change = increase in demand for educated
workers therefore technological change & education go hand-in-hand
known as an optimistic view compared to critics of capitalism.
Private & Public returns to education are different. Cost & benefits of education
need to change to make proper decision of investing/not investing in education. Costs =
tuition fees, foregone income (if applicable), opportunity cost.
5. How does this work for into the larger picture (Grand Perspective Questions):
3. What is the role of technological change in economic growth and development?
Technology change = increase in demand for higher skilled
workers. We must change ...
4. How does the market structure determine the nature of technological change?

10. What is the argument presented in the book by Brynjolfsson and McAfee? Discuss in
light of the other material presented in this course. What is your view about the future of
work, education and the distribution of income? Are you optimistic? Explain.
1. Main argument, issue, debate [in the book]:
Advancing technology makes working more efficient.
Digital technology = forceful economic driver that will cause workers to become
more replaceable.
Automation has made some human work skills more valuable
than ever Leading to the Great Restructuring not a Great
Depression.
Government must develop effective programs to incentivize workers to upgrade
their skills, in order to counter the worker displacement automation has brought/will be
bringing.
Overall, regardless of employment disruptions, improvement in technology
improves lives of everyone in the world.
2. Theoretical framework/economic model (economic relationships relevant to the authors
argument. Cause & effect relationships):
Why jobs vanished:
1. Cyclicality: due to economic demand remains sluggish to rehire
people out of work.
2. Stagnation: due to decline and failure to innovate and extend
productivity. We have been living off low-hanging fruit for at least 300 years
yet during the past 40 years, all the low-hanging fruit have started to disappear.
Role of humans as the most important factor of production is bound to diminish
in the same way that the role of horses in agricultural production was first
diminished and then eliminated by the introduction of tractors.
3. end of work: due to staggering increase in technological
achievement ==> which means fewer and fewer workers will be needed to
manufacture products and provide services for the worlds population. Workers
will become superfluous.
3. Empirical evidence and/or methodology (does the author use quantitative evidence, statistical
analysis, verbal reasoning, illustrations, audio sources, graphs, etc):
Brynjolfsson and McAfee use historical evidence of comparing technological advancement with
agricultural advancement.
Role of humans as the most important factor of production is bound to diminish in the
same way that the role of horses in agricultural production was first diminished and then
eliminated by the introduction of tractors.
They also use quantitative evidence? Using graphs?
4. Findings/conclusion:

The growth in the US median income (income point demarking where half the people earn
less/half earn more) is indifferent, yet the super-rich have benefited from the machine-driven
increase in productivity. While their wealth is skyrocketing, the average worker is losing the
race against the machine. Digital technologies change rapidly, but organizations and skills
arent keeping pace. The message the labour market is clearly sending is that its much easier
to create value with highly educated workers thus if society and government implements
solutions to the machine-labour problem, it will help expand innovation inside organizations and
create more human capital nation wide. Policy makers in four areas (education, entrepreneurship,
investment, and laws, regulations and taxes -i.e. institutions, organizations, banks, and
governments) should create policies that enforce education to help workers step out in front of
machines instead of racing against them. Overall the digital frontier age will improve
peoples lives worldwide, even though some difficult periods of transitions.
5. How does this work for into the larger picture (Grand Perspective Questions):
Grand perspective question:
5. What is the role of technological change in economic growth and development?
Technological change more automation lower
skilled workers replaced with machinery increase in
unemployment skills displacement need for policy by
government to bring workers up to pace with the machine
Digital revolution Great restructuring of the workplace new
value/need for highly skilled workers.
6. How does the market structure determine the nature of technological change?