A new book leads to ponderings on our technology strategy. 

Technology is an ambiguous notion. Its most common use in economics arises in the following way.

The laws of thermodynamics mean that there exist production functions which relate inputs to outputs. The most familiar ones have a single output generated by inputs of labour and capital, although there can be other inputs such as land, energy, intermediate goods and imports.

When economists measured production functions they found that they shifted so that, over time, more output was produced by the same inputs. This shift was attributed to ‘technology’ but here it is but a term with no independent existence to explain the phenomenon – there are many similar instances in physics. When economists and others use ‘technology’ in an economic context they are usually referring to this vague notion; so vague that a couple of economists described the measure of technological progress as the ‘coefficient of ignorance’. (That leads to the thought that those who want to increase its rate are trying to increase the coefficient of ignorance; many of the advocates are well qualified to do so.)

I like to think of technology as plans of how to produce things. The plans are stored in a huge warehouse, only parts of which are accessible. Over time, and often using resources, we can hunt around and find new plans, some of which tell us how to produce more for the given inputs. We can implement the plans; economists call more output for the same inputs an increase in ‘productivity’.

(If I had room I would say more about the outputs, observing that there may seem to be new ones, although they are simply better ways of doing past things; when cars replaced horses; the fundamental outputs would be travel times, distances, comfort and convenience. Another output issue is changing consumer preferences.)

Some flesh to the bones of this story will be found in Alan Wylde’s Technological Innovation and Economic Growth in New Zealand: 1918 to ‘Think Big’. The warehouse of plans is so enormous that no book could cover the entire the topic. This book gives concise summaries of technical change in railways, the meat industry, grasslands, aerial fertiliser, dairying, wool, flaxmilling, hydroelectricity, geothermal power, the Cook Strait cable, the steel industry, and the hydrocarbon-based major products.

I shall not review the book but instead share the ponderings which it precipitated.

Most importantly, the vast majority of the technologies we use are generated overseas – 100 percent to the nearest percentage point. Sometimes we import the plans, or experts knowledgeable about them, but often they come embodied in a product – like the computer this is being written on.

However, there is very often a challenge to adapt the foreign technologies to local conditions. The first example in Wylde’s book is that because our terrain is very different from England’s, we had to adapt their railway technology to local conditions. Tasman found the Scandinavian pulp and paper plant they installed was not designed for radiata pine and spent a lot of time fine tuning it.

The list could go on, each item illustrating that while we often get the technologies from overseas we had to rummage around in the plans warehouse to tweak them.

The rummaging may be done by our engineers and scientists, but sometimes the key adapters are others. For instance, monolithic cladding can be a very effective means of shielding a house. Applied badly it can result in a leaky building. I would never trust the cladding unless the building workers were trained in its application.

We can be very sloppy, more like the Brits than the Germans, whose secondary schooling and technical training makes more effort to ensure their workers are properly skilled.

The sloppiness happens at all levels. A union organiser told me of management calling in their process workers and demanding to know why the downtime of a new expensive machine was far higher than the German manufacturer’s specification. The answer was that the workers had never been trained to use the machine.

The perspective I am offering is pretty obvious – Wylde’s book is rich with examples illustrating it. But it is not the way that public policy thinks. In particular we are pouring resources into an ‘innovation strategy’ which aims to generate technological plans which can earn royalties by being sold overseas. Undoubtedly this will sometimes happen, but Wylde’s book has very few such examples; when it happens the earnings are often the consulting fees our technologists earn.

I doubt total external sales will earn an acceptable return on the public outlays. Does the balance in our innovation strategy make sense? To what extent should we placing more effort on improving the importing, adaptation and implementation of world technologies?

This does not mean spending any less. Our chance of making a major breakthrough in cancer treatment, say, is very small. The effort, surely, should be to ensure that what is available internationally is applied quickly and effectively to those who suffer cancer. Probably a key element in this transfer process is high quality scientific teams who are involved in research near the world frontier so they understand what is going on and can pass it on. But let us not pretend their purpose is to make the country a fortune by an international breakthrough (we could be lucky).

At the aggregate level of the production function, technology may be mysterious. At the micro-level of the descriptions in Wylde’s book, it is far less so. Whether New Zealand can accelerate the world’s rate of technological change is doubtful. But thinking practically at the micro-level could lead to better economic performance and, I would hope, to our environmental and social performance too.

Comments (19)

by Rich on November 28, 2016
Rich

3, 2, 1...

by Murray Grimwood on November 29, 2016
Murray Grimwood

You waiting for me to pull it to pieces, Rich? Hard not to.

"The laws of thermodynamics mean that there exist production functions which relate inputs to outputs. The most familiar ones have a single output generated by inputs of labour and capital, although there can be other inputs such as land, energy, intermediate goods and imports".

As written, it's hard to see whether this is bad linguistics or clever fudging.

https://en.wikipedia.org/wiki/Laws_of_thermodynamics

The variable - the ONLY variable - is 'efficiencies', which can indeed be attained by improving technology. Technology alone, however, is nothing - merely a means to attain said efficiencies. And efficiency-gaining follows a law of diminishing returns. En route it gets ever-more complex, and the more complex you make something, the more maintenance it requires and the more chances it has the fail.

You also end up with experts in small parts of things - utterly useless if demand for that specialisation ceases. As someone said, they get to know more and more about less and less until they know everything about stuff-all.

At the point we are at now, simplicity and resilience are the more logical goals. Our major strong-points are our lack of population and our high percentage of renewably-generated electricity.

 

by Murray Grimwood on November 29, 2016
Murray Grimwood

For those genuinely interested:

http://sterndavidi.com/Publications/Growth.pdf

2.3.1.1. is though-provoking - but the ending is a little lame.

 

by Antoine on November 30, 2016
Antoine

Do we not already do technology transfer? I thought we did.

A.

by James Green on November 30, 2016
James Green
  • Economics =
  • Land (natural resources) +
  • Labour (quantity and quality) +
  • Money (or abstracted resource surplus if you prefer) +
  • Technology (knowledge of techniques)

Did I miss anything important?

NZs major trade advantage is its Land, primarily bountiful water and grass. Although this is dependant on there being a low population.

In a large complex system diversity is better. I think NZ would do well in the long run to raise its population and thus increase technology, labour and money, at the cost of land.

by Murray Grimwood on November 30, 2016
Murray Grimwood

'James Green' - Yes, you missed the most important of all, without which nothing happens.

Energy.

Money is not a replacement for energy, and no guarantee whatsoever that there will be adequate available in the future.

Sigh. How is it that folk can understand that they need to keep re-filling their cars with fuel, but somehow they cannot grasp what will happen when the planet goes past '1/2 empty'.

More population only depletes your resource-base quicker. Land will indeed be in contention, but that isn't the problem. Increasing technology - as applied to energy - only makes your use of same a bit more efficient. Doesn't help, just delays the inevitable.

Oh, and what is grass without fertiliser?

https://en.wikipedia.org/wiki/Fertilizer

grass is fossil-fuelled too. See the problem?

We already have diversity - you can see extreme specialisations here - but our debate clearly suffers from lack of meshing.

Then I ask a final question - what will your 'money' buy once you've depleted your resource-base (which you erroneously call 'land')?

by James Green on December 01, 2016
James Green

I consider energy to just be another resource, albeit an important sub-category, that fits into the land category.

Land in this case is everything that exists in a place without the intervention of humans being required, e.g. sunny weather for solar power would be part of the land category.

Fertiliser is actually an interesting question: https://en.wikipedia.org/wiki/Peak_phosphorus

But given that peak oil turned out to not be a problem after all I'm being cautious.

by Murray Grimwood on December 02, 2016
Murray Grimwood

That just has to be wrong. No energy, no work. No work, nothing happens.

That's a big more significant than 'the land category'.

Peak oil got fudged. There is less and less available every day, of less and less quality. What we have to remember is two things: One is that future energy underwrites future debt-repayment, so 'price' won't be a guaranteed indicator. The other is that the poor got hit first - it's a relativity thing - and the malaise is now up as far as the social strata that pumped for Trump. The front of the First World will be the last to feel it - although they may feel it indirectly first when more and more below them can't 'afford' their products.

 

by Brian Easton on December 05, 2016
Brian Easton

 

We transfer international technologies to New Zealand all the time, Antoine. When you upgrade your computer you are doing such a transfer. However, as far as I know, we have no international transfer policy; it happens by accident.

There are a number of defintions of what economics is about James. The one I like is that economics is about ‘What, How, Where, When and for Whom?’It is open ended and raises questions rather than gives answers. So some items economists have to refer to are the things you listed, sometimes to other things as well (like property rights) and sometimes some of the things you listed are not relevant (pre-market Maori did not have any money/medium of exchange).

by James Green on December 06, 2016
James Green

Ah, I just didn't want to write the word capital in my list, but what I really meant is a resource surplus which frequently takes the form of money today, but Maori tribes might have used a surplus of kumara to allocate towards increasing job specialisation, or putting more warriors in the field, etc. Your definition is so open ended I could apply it to writing an English essay in school (I think I actually did once).

Property rights is an interesting one, I don't think they would necessarily be necessary (did Maori have property rights, did the USSR?), they are certainly useful though.

I had another look into that peak phosphorous thing by the way, yeah it's pretty much bullshit.

by Murray Grimwood on December 06, 2016
Murray Grimwood

Money is not a guarantee of physical resources being available.

Maori actually suffered from a lack of available energy - often ate each other to gain more.

by Antoine on December 06, 2016
Antoine

Brian - were you not aware of this, for instance?

https://www.beehive.govt.nz/release/first-new-research-vouchers-awarded

 

by Murray Grimwood on December 06, 2016
Murray Grimwood

Using what energy source, 'Antoine'?

Seems we have a few in-house spin doctors hereabouts.....

 


 

by Murray Grimwood on December 06, 2016
Murray Grimwood

Brian - you have yet to clarify the mish-mash para re thermodynamics (which are real) and mentioning a few other things which are not comparable. For instance, 'labour' is a very minor source of energy (200 watts for a short time per person - compare that to a cupful of petrol) which can be traced to fossil fuels via the paddock. Capital is nothing but numbers.

Apples with apples is always a good start.

by Antoine on December 07, 2016
Antoine

@Murray I wasn't asking you!

A.

by Murray Grimwood on December 07, 2016
Murray Grimwood

That's good, I wasn't replying to you.

But chosen ignorance doesn't remove a fact.

Nor does sustained silence

 

by Brian Easton on December 07, 2016
Brian Easton

Thankyou Antoine, no, I was not aware of this development. Trumpeting spending $190,000 on technology transfer suggests it has not been a priority, but this is a start. Probably the key element in public technology transfer is tertiary education; but we don’t think of it that way. (Part of the failure of leaky buildings was about that time the apprenticeship system was wrecked.)

Property rights, James, need not be private property rights. In some cases in Maori society they were communally held. One way of thinking about the Taranaki wars is that the settlers did not understand this in regard to land and tried to impose English land rights on the locals.

Just how the economic surplus was used in traditional Maoridom is hard to detail because we do not have quantitative records. My (eccentric?) hypothesis is one of the uses were building pa but, as a book I am writing explains, there were many others.

Money is not strictly a resource. It is an obligation, a kind of property right (although this is not quite so true if the money is fully backed – that is the medium of exchange is worth its face value; rare today.)

To elaborate one feature of the Maori economy. Like most pre-industrial societies the main source of energy was labour power and, ultimately, food. Wood and animals came distantly behind. Cannibalism is irrelevant; it was for ritual rather than a food source (and not that widespread, except in the fantasies of the uninformed). We can tell it was not, since women did not participate in it.

by Murray Grimwood on December 08, 2016
Murray Grimwood

I beg to differ. Wood did the job of digestion and gave those who'd discovered fire, more surplus energy than eaing raw food.

But wherever hunter-gatherers went, big meat quickly vanished - woolly mammoths and moa and suchlike. Then scarcity drove fighting over what was available. Maori tribal scraps will always be able to be traced to resource-scarcity. So, somewhat energy-depleted after a life-and-death scrap, they cooked up the most immediate replenishment. Call it ritualistic if you need to, but always ask of a ritual 'why?' And which sex did the energy-depleting fighting?

by James Green on December 08, 2016
James Green

Ha! Had a look at those Technology Transfer Vouchers, the website linked is dead and has been for some time. The program finished a while ago: http://sciblogs.co.nz/stick/2013/06/13/technology-transfer-vouchers-go-t...

Also despite the name they appear to have had nothing to do with transferring technology from overseas, but rather were just general R&D grants.

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