technical change

Abstract

The successive transformations of economic society since the 14th century from agricultural to industrial form and beyond to the service economy have consolidated a process of economic change with its own inner logic of tremendous power, a logic which harnessed continual technical and organizational innovation to the pursuit of profit. At the core of the new logic is the intertwining of emergent knowledge and economic adaptation to its hidden possibilities that has been the basis for the sustained increase of aggregate output per person employed — the chief proximate source of increased standards of living in the Western world — the progressive mechanization and automation of production methods, and the continuous development of the economic structure (Kuznets, 1977; Mokyr, 1990; 2002). The gains in material welfare, in length of human life, in life experience and functioning have been beyond anything achieved before the 18th century, yet knowledge-driven progress comes at a price. It is necessarily uneven in its incidence across space and time, and the ensuing disparities of performance can and do impose heavy human adjustment costs as old ways give ground to the new. Skills are devalued, capital assets lose the capacity to generate income, while there is little prospect of the losers receiving compensation. If the balance sheet speaks to progress, it does so in a tangled way. This is the ethic of competition, and nowhere is this unevenness more apparent than in the seemingly unavoidable differences in economic performance between advanced and developing countries.