Production Factors and Technology

Abstract

The description of production processes in the previous chapter assumes that something can be made from something else and that there are tools for making things. Now we are going to look at the production process from another side, considering efforts of humans and work of production equipment. We are introducing two sets of quantities, which, in the macroeconomic approach, reflect the level of technology in the economy: (1) the technological coefficients $\lambda$ and $\varepsilon$ that show how much labour and substitutive work are needed to introduce a unit of investment in the production system, and (2) the potential rates of growth of production factors $\tilde{\nu }$ and $\tilde{\eta }$. The first set of quantities includes inherent characteristics of production equipment, whereas the second set, in this chapter, will be considered as a set of exogenous factors. The technological coefficients appear to be appropriate and convenient characteristics of technology used in an economy and can be easily estimated considering the performance of production equipment.