PART I - TECHNOLOGY AND INDUSTRIAL ORGANISATION

Summary

The idea that ‘where you start from determines where you end up’ has had considerable currency in theories of technological change. An economy with resources concentrated in one particular industry will gain experience which will allow further improvements in the technology of that industry. In terms of figure 1.1 ray OA might be the technology for chemicals and ray OB the technology for industrial engines. As drawn chemicals are more capital intensive than industrial engines. For a given state of technical knowledge, points on the rays closer to the origin O, using fewer inputs of capital and labour, produce lower outputs. Technical progress shifts towards O at least one point on the constant output curve joining CD. A technological trajectory (chapter 2) implies that movements down one ray will be easier or faster than movements down another. An interpretation of the problem of measuring the impact of railways is a shift outwards along one ray or even the elimination of one ray (chapter 3). Railways might be ray OA and competing transport modes, OB. At point E railways produce more transport with less need for both labour (F) and capital (G) than the other modes. Abolishing railways would move the economy to D with greater demands for labour (H) and capital (J) to supply the same volume of transport.