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.