Finance:General purpose technology

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General purpose technologies (GPTs) are technologies that can affect an entire economy (usually at a national or global level)[1][2][3]. GPTs have the potential to drastically alter societies through their impact on pre-existing economic and social structures. Examples include the steam engine, railroad, interchangeable parts, electricity, electronics, material handling, mechanization, control theory (automation), the automobile, the computer, the Internet, medicine, and artificial intelligence.

Effect

Initially adopting a new GPT within an economy may, before improving productivity, actually decrease it, due to:

Impending timeframe to utilize the latent benefits of the new technology is deemed a trade-off.

History of General Purpose Technologies

Economist Richard Lipsey and Kenneth Carlaw suggests that there have only been 24 technologies in history that can be classified as true GPTs.[4] He defines a transforming GPT according to the four criteria listed below:

  • It is a single, recognisable generic technology
  • Initially has much scope for improvement but comes to be widely used across the economy
  • Has many different uses
  • Creates many spillover effects

Since their book, more GPTs have been added for the 21st century. A GPT can be a product, a process or an organisational system.

The earliest technologies mentioned by Lipsey and Carlaw occur before the neolithic period and have not been cast as GPTs, however, they are innovations that the other 24 rely upon.

Classification Date
Spoken Language Process Pre-10,000BC
Clothing Product Pre-10,000BC
Mastery of Fire Process Pre-10,000BC
Coil Pottery Product Pre-10,000BC
Weapons (sharp edged tools) Product Pre-10,000BC
GPT Spillover Effects Date Classification
Domestication of plants Neolithic Agricultural Revolution 9000-8000 BC Process
Domestication of animals Neolithic Agricultural Revolution, Working animals 8500-7500 BC Process
Smelting of ore Early metal tools 8000-7000 BC Process
Wheel Mechanization, Potter's wheel 4000–3000 BC Product
Writing Trade, Record keeping 3400-3200 BC Process
Bronze Tools & Weapons 2800 BC Product
Iron Tools & Weapons 1200 BC Product
Water wheel Inanimate power, Mechanical systems Early Middle Ages Product
Three-Masted Sailing Ship Discovery of the New World, Maritime trade, Colonialism 15th Century Product
Printing Knowledge economy, Science education, Financial credit 16th Century Process
Factory system Industrial Revolution, Interchangeable parts Late 18th Century Organisation
Steam Engine Industrial Revolution, Machine tools Late 18th Century Product
Railways Suburbs, Commuting, Flexible location of factories Mid 19th Century Product
Iron Steamship Global agricultural trade, International tourism, Dreadnought Battleship Mid 19th Century Product
Internal Combustion Engine Automobile, Airplane, Oil industry, Mobile warfare Late 19th Century Product
Electricity Centralized power generation, Factory electrification, Telegraphic communication Late 19th Century Product
Automobile Suburbs, Commuting, Shopping centres, Long-distance domestic tourism 20th Century Product
Airplane International tourism, International sports leagues, Mobile warfare 20th Century Product
Mass Production Consumerism, Growth of US economy, Industrial warfare 20th Century Organisation
Computer Digital Revolution, Internet 20th Century Product
Lean Production Growth of Japanese economy, Agile software development 20th Century Organisation
Internet Electronic business, Crowdsourcing, Social networking, Information warfare 20th Century Product
Biotechnology Genetically modified food, Bioengineering, Gene therapy 20th Century Process
Business Virtualization Paperless office, Telecommuting, Software agents 21st Century Process
Nanotechnology Nanomaterials, Nanomedicine, Quantum dot solar cell, Targeted cancer therapy 21st Century Product
Artificial Intelligence Autonomous car, Inventory robot, Industrial robot 21st Century Process

Steam engine increased labor productivity annually by 0.34%, IT – 0.6% (in 1995-2005), robotics – 0.36% (in 1993-2007).[5]

General purpose technologies and military and defense-related procurement

In his book, Is War Necessary for Economic Growth?: Military Procurement and Technology Development, Vernon W. Ruttan, Regents Professor Emeritus in the Department of Applied Economics at the University of Minnesota, examines the impact of military and defense-related procurement on U.S. technology development.[6] Ruttan identifies the development of six general purpose technologies:

  • Interchangeable parts and mass production
  • Military and commercial aircraft
  • Nuclear energy
  • Computers and semi-conductors
  • The Internet
  • The space industries

Based on his reading of the histories of these technologies, Ruttan finds that military and defense-related procurement has been a major source of technology development. He believes that the current technological landscape would look very different in the absence of military and defense-related contributions to commercial technology development. However, from his research, Ruttan determines that commercial technology development would have occurred in the absence of military procurement but more slowly, e.g., the aircraft, computer, and Internet industries. He cites nuclear power as an example of a general purpose technology that would not have developed in the absence of military and defense-related procurement.

New general purpose technologies in energy systems transformation

In the book Global Energy Transformation, author Mats Larsson refers to the work of Professor Ruttan and argues that large scale government programs for energy systems transformation will become necessary to drive the development of new energy technologies. Energy efficient technologies and infrastructures will become necessary to drive economic growth in a future situation after peak oil. The task of developing and implementing these technologies on a large scale will be too complex and demanding in terms of resources, for the market to drive this on its own.

Larsson refers to earlier large scale development programs and projects, to support his argument. One is the transformation of US industry to war production during World War II, the second is the Marshall Plan and the third is the Apollo program. A similar government funded program will become necessary to transform global energy systems on a large scale.References

  1. ↑ Landes, David S. (1976) (in en). The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from .... At the University Press. https://books.google.com/?id=7Z77ngEACAAJ&dq=editions:k1KIY0NfxM0C. 
  2. ↑ Rosenberg, Nathan (1982) (in en). Inside the Black Box: Technology and Economics. Cambridge University Press. ISBN 9780521273671. https://archive.org/details/insideblackboxte00rose. "editions:rcZYDd5BgC0C." 
  3. ↑ Bresnahan, Timothy F.; Trajtenberg, M. (1995-01-01). "General purpose technologies 'Engines of growth'?". Journal of Econometrics 65 (1): 83–108. doi:10.1016/0304-4076(94)01598-T. http://www.nber.org/papers/w4148.pdf. 
  4. ↑ Lipsey, Richard; Kenneth I. Carlaw; Clifford T. Bekhar (2005). Economic Transformations: General Purpose Technologies and Long Term Economic Growth. Oxford University Press. pp. 131–218. ISBN 978-0-19-928564-8. https://archive.org/details/economictransfor00lips. 
  5. ↑ https://hbr.org/2015/06/robots-seem-to-be-improving-productivity-not-costing-jobs
  6. ↑ Ruttan, Vernon (2006). Is War Necessary for Economic Growth?: Military Procurement and Technology Development. New York: Oxford University Press. ISBN 978-0-19-518804-2. 

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