Technology: Schumpeter or Marshall’s trajectory?

Technology: Schumpeter or Marshall’s trajectory?

An analysis of the advancements in technology over a period of time shows some startling facts. Advancements in the older mathematical technologies like the abacus and the slide rule took decades to develop. The calculator came out in the 1960s and considerable advances were made in its technology over the next few decades. The computer developed in the 1940s. Developments in computer technology are proceeding at a bewildering speed; the technology is sometimes outdated even before it has reached the market. 

The older technologies developed over years and then reached a stage of stability. These technologies then remained static and did not change very much after the stable state was reached; a steady, predictable, reliable state, a condition which is known as ‘lock-in.’

The newer technologies differ from the technologies that preceded them in a fundamental way. They are self-accelerating. The development of these new processes results in the development of another yet another discovery; the new processes developed may be related to the original product or entirely different from it. For example, the development of the computer led to changes in automobile technology.

This form of a rapidly developing technology that leads to the development of another technology which then translates into another technological leap and continues into perpetuity is called ‘autocatalysis’. These technologies, with this property of perpetual self-accelerated development, create conditions that are unstable, unpredictable and unreliable. 

This leads us back to the concept of lock-in. The term ‘lock-in period’ is not derived from science. It is derived from business administration and it refers to a period during which a loan cannot be paid-off earlier than scheduled without incurring penalties. The aim of a lock -in period is to ensure that there is a minimum return on the loan that has been given. The concept of ‘technological lock-in’ is different. If a technology has been utilised for a certain amount of time and it has been determined that the technology is viable and cost-effective, it can be stated that the technology has reached a state of lock-in. 

An example of an invention which has gone through a technological lock-in is the motor car. The motor car was developed as a means of increasing mobility. It then changed its status from being a luxury to being a necessity. Then, the increasing pollution generated by the motor car caused a further change in its image; to that of a necessary evil. 

As time passed, the motor car went through several technical innovations. Some of these were the development of catalytic converters, lead-free petrol and electronic engine monitoring systems to control polluting emissions. Consumer organisations and the media are also responsible for ensuring that car manufacturers incorporate improved safety features. The technology associated with the motor car has reached a stage of relative stability. There is a complex unchangeable network of supporting interests which have developed around automobiles and now the motor car is well into the period of a technological lock-in. 

Technological discontinuities

Joseph Schumpeter, an Austrian-born American economist, was the first person to lay stress on the importance of technological discontinuities in economic history. According to Schumpeter, “evolution is lopsided, discontinuous, disharmonious by nature... studded with violent outbursts and catastrophes... more like a series of explosions than a gentle, though incessant, transformation”.

Schumpeter said that there are long periods of gradual development that are marked by the incremental development of dominant technologies. However, he stressed that such periods are punctuated by short bursts in which new technological products, processes and associated knowledge replace the existing regimes. It is these bursts of ‘creative destruction’ that truly drive the system in a new direction. Such a shift “so displaces its equilibrium point that the new one cannot be reached from the old one by infinitesimal steps”.

In sharp contrast to the Schumpeter doctrine, Alfred Marshall stated, “natura non facit saltum (nature does not leap)” in the preface of his classical work, ‘Principles of Economics’. Marshall felt that nature moves in predictable directions and development occurs in small steps and not in large leaps.

Giovanni Dosi, an economics professor in Italy has given a concept which reassembles Marshall’s theory. He states that “there is a tendency for technological change to proceed ‘incrementally’ along more or less fixed trajectories”. He stated quite categorically that technology moves along fixed trajectories rather than “radically” in discontinuous leaps.

If one goes by Schumpeter’s hypothesis, this rapid technological advancement is acceptable, perhaps even what should be expected. Perhaps the new level of equilibrium achieved will stabilise until the next period of technological slow-down. However, if the converse theories of Marshall and Dosi are accepted, this rapid technological lock-in would have adverse consequences. There are three possible scenarios which could follow this rapid advancement. 

The first scenario is that in the future, technological advancements will plateau or grow at a slow pace. This would mean that newer technologies would take a longer time to reach a stage of an acceptable technological lock-in. This is an extension of Schumpeter’s theory. 

In the second and third scenarios, technology will advance at the same rate. The difference is that in the second scenario, humanity will adapt to the change. In the third scenario, humanity will not be able to adapt because the interval between the bursts of development will get shorter and shorter as revolutionary new technologies will develop at an increasingly rapid pace. 

In the last case, the future is uncertain. How will technology influence humankind? Only time will tell. 

(The writer is a Senior Consultant, Surgical Pathology and Molecular Diagnostics, Neuberg Anand Reference Laboratory)

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