U.S. economic growth from 1976 to 1986

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U.S. economic growth from 1976 to 1986
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Table of Contents
    Front Cover
        Page i
        Page ii
    Letters of transmittal
        Page iii
        Page iv
        Page v
        Page vi
    Table of Contents
        Page vii
        Page viii
    Thinking about technology policy for the coming decade
        Page 1
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
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        Page 31
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    Technological change and future growth: Issues and opportunities
        Page 33
        Page 34
        Page 35
        Page 36
        Page 37
        Page 38
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    Back Cover
        Page 63
        Page 64
Full Text
/+021.Q+. /42


Congress
Session


JOINT COMMITTEE PRINT'.
2" .


^ Cfc : ." ,
sNLi-c...


*,.* -


U.S. ECONOMIC GROWTH FROMM WeyLOt1.

PROSPECTS, PROBLEMS, AND IPAT!ERNS


Volume 9-Technological Change





STUDIES

YPREPAREMD FOR T(IE ISE OU F T'HI E

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

*-;


JANI'ARY ". 1977


Printed for the use of the Joint Ecoinic i Committee


U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1976


For sale by the Superintendent of Documents. UTT.S. Government Printiiin Otlice
Wlii iit on. D.C. 20402 Price 85 (cints
'Iii:re is: a nliniilln charge of $1.1ii for eaelh mail order


94th
2d


________________________________________. * I - -



























JOINT ECONOMIC COMMITTEE


(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)
HUBERT M HUMPHREY, Minnesota, Chairman
RICHARD BOLLING, Missouri, Vice Chairman


SENATE
JOHN SPARKMAN, Alabama
WILLIAM PROXMIRE, Wisconsin
ABRAHAM RIBICOFF, Connecticut
LLOYD M. BENTSEN, JR., Texas
EDWARD LM. KENNEDY, Massachusetts
JACOB K. JAVITS, New York
CHARLES H. PERCY, Illinois
ROBERT TAFT, JR., Ohio
WILLIAM V. ROTH, JR., Delaware


HOUSE OF REPRESENTATIVES
HENRY S. REUSS, Wisconsin
WILLIAM S. MOORHEAD, Pennsylvania
LEE H. HAMILTON, Indiana
GILLIS W. LONG, Lousiana
OTIS G. PIKE. New York
CLARENCE J. BROWN, Ohio
GARRY BROWN, Michigan
MARGARET M. HECKLER. Massachusetts
JOHN H. ROUSSELOT, California


JOHN R. STARK, Executive Director
RICHARD F. KAUFMAN, 'General Counsel

ECONOMISTS


WILLIAM R. BUECHNER
G. THOMAS CATOR
WILLIAM A. COX
Lucy A. FALCON


CHARLES H. BRADFORD


ROBERT D. HAMRIN
SARAH JACKSON
JOHN R. KARLIK
L. DOUGLAS LEE


MI NORITY
GEORGE D. KRUMBHAAR, Jr.
MARK R. PoLIcNsKs


PHILIP MCMARTIN
RALPH L. SCHLOUSTEIN
COURTENAY M.L SLATER
GEORGE R. TYLER


M. CATHERINE MILLER


(II)











LETTERS OF TRANSMITTAL


DECEMBER 28, 1976.
Fo the Members of the Joint Economic Committee:
Transmitted herewith is the ninth volume of the Joint Economic
Committee study series entitled "U.S. Economic Growth From 1976
to 1986: Prospects, Problems, and Patterns." This series of over 40
studies forms an important part of the Joint Economic Committee's
30th anniversary study series, which was undertaken to provide in-
sight to the Members of Congress and to the public at large on the
important subject of full employment and economic growth. The Em-
ployment Act of 1946, which established the Joint Economic Com-
mittee, requires that the committee make reports and recommendations
to the Congress on the subject of maximizing employment, production
and purchasing power.
Volume 9 comprises two studies which examine the ways in which
technological change will influence future economic growth rates and
patterns. The studies were done by Prof. Nathan Rosenberg and by
Dr. Joseph Coates. The committee is indebted to these authors for their
fine contributions which we hope will serve to stimulate interest and
discussion among economists, policymakers and the general public,
and thereby to improvement in public policy formulation.
The views expressed are those of the authors and do not neces-
sarily represent the views of the committee members or committee
staff.
Sincerely,
HUBER.nT I. HUMPHTREY.
Chairman, Joint Economic Cornmm ;ttee.

DECEMBER 23. 1976.
Hon. HUBERT H. HUMPHREY,
Chairman, Joint Economrc Comnmittee,
U.S. Congress, llashig.qton, D.C.
DEAR LfR. CHiAIRMAN: Transmitted herewith are two studies en-
titled "Thinking About Technology Policy for the Coming Decade"
by Professor Nathan Rosenberg and "Tehunological Clihangc and Fu-
ture Growth: Issues and Opportunities" by I)r. Joseph F. Coates.
These two studies comprise volume 9 of the Joint Economic Commit-
tee's study series "U.S. Economic Growth From 1976 to 1986: Pros-
pects, Problems, and Patterns." This series forms a substantial part
of the Joint Economic Committee's 30 anniversary study series.
While each paper addresses the same question-how will techno-
logical change influence future U.S. economic growth rates and
pattern?-very differingg 1)erspectives are presented.
Profes-r Rosenberg )presents a comprehensive examination of how
teclinological change has influenced U.S. economic growth in the past.
(III)







li m'itiral r | "'hl,, ,.-i-i is tl,.i. it is L.w:ro th in the prodliuctivity of re-
s-oiic,.-. aiil nout lmIe 'riowtli i-n 1olme. that Iade tech,'ioll oliiail
cJh:!ii,, central to our lpst grwtlh exlprien'e. lie nu;iintaiiis that. in
ti1n Ill'r nI. owin 01f 1lie Iliost sinificant conseqences of techilofrical
inno .iti i l,:s ,,- n to ili. e the .ie of twe r,,-(ije l e o .. i e itself b!
developi methodsl: to1' ihk xplit-il-tion of previmsly uniis;d>le ri-
:,,irct-. a hd lv t lie devel, iite'nt of totally new materials sith. as plas-
ti ic- anl syitvIetie filers. The 'npllicatio (f tlhi- for thl fltIe is t i tha
t ,e ,'ii,.--fIul f nel 'ti l.inir of tie A i ,erIc i Iolo mv will coiltilI .
to trn 1110 llI 1 our ..l,:',itv to levwlop tcliilipcs for tlie exploitat.;on of
ti nre ;iahiudanit of the 'materials which make uip our :itillral
cnril oii n'it. 1 "
Ie dI l' V o. o -id i'ablle discl:siol v to the is-iue of U \OV(,'l!!li.lt th.l-
oi, y poli,.y, S. L,_,.-,tin 0 t .at Ipublic lpolic. tow:-d tit( nolIo)L,,' 1 ,1v
ii)~~ ~ ,2 -O .S L!T~ n l~t111 1 f4pl e tow( i i11(e I Cr;1J
1,e<'ot min ni effective by ad(l1t .ssii" itself to mre modlest ^oats. lIe
:11s(y s' Itt t1ie desi ability of a LrOveIIi11t'ltf 1et !iIiolo volviyig the ldevelopl)i lt of a Lreater capacit V for slhiftinlr to alterna-
tive oul r.v( of material supplies so that we will retain a potentially for
Ihw i 111(r itia -. A iot lvc
,more flexible policy Nrep(oIse.s to chani .onditios. h\otli point
which lhe evilphasimes. i- tlIat technological cha ige anl t atteiidant pro
ductivity improvenmvenit' enter the eo.Iomy through iillv doors alnd
take a wide variety of forms, lie conluctde-. that ill spite of Ili tilie
(1eno0mo11s Co it ribiutions whlich. technological clhawane L'a' 1 'made to o'L"
economcln ( w ll1-being. it is extriintelvy impo-)rtant that we should not
think of it as a potential "fix" for all of our economIic 1)roA)lemIIs.
D)r. ('oates lpre.enits a highly optimistic as-es-Ient of tlhe future of
ItIlnlolori.al c('harli'e in the IUnited States. Ilis analysis revolves :ilboi it
tlhe movement of I'.S. society into a p-sl indlistil -oi"t V Wili 01iml*1a-
i onil knowledge-l;based industries thliat will stimiulate nilajor shifts in
the nature and location of work, land se., and information,. I1e .xpetts
mil.ajor tramsformnations in society, e.g., a substantial percentaire of all
work being( done at home wIich in turn (collTl provide e.,,p(cati v ta111
work for hu-sbanld and wife which lhas major possibilities for a world
Sit'isth tiallv different fr lom today's ,eltrifu gal fa ily life. Many
fiji iludaental organizational chan,.es in thie work pllae' anid in the, con-
ditions for work are possible because of the major structural ci an ge
in the labor force. ie estimates that rounhlyv 50 percent of the labor
force is 1ow in the busiI,,-s of generation. packain, distriltinr.
storing c, initerpretin,1g. or in soYei otlier way manipl)ulatiniz (d:ta and
information.
Ile ex('pect.? more new Opportunities in biological, psycholocrical, in-
tellectual. and social technologies which have 1ween rAiatively little
explored to date. This means that tec,.oloirie- will 1 I developing
which deal more directly with man as an organisim nmid wih tlhe social
relation,( among people. HIe po.stulates tliat tlhe next wave of techilo-
loici,'ll advalce will therefore deal with the questioi- of improving
the equal ity, diver-it N. and satisf;'t ion in various 'onsuei'I a'i.' *.: and1l
in m;,etini tlie col lective needs, such a s those of the handicapped. I hose
SI fferinf 1 from 1ni I'al l isea:ues'. and thle socially and (-ultually


,,',1ti'1ini ,1wnefits from teclIhnolo('y is (iuiding the sociallyy e Tffetive
interplay of the 1b-ic va\riable:-: Lamd, labor, capital, resource avail-






ability and knowledge. To )e socially iisa'fil, the iliterlplay l114st e,
future-orieiited, flexible, and in1formnatio0 drivee. As an exal ple, lie
urges a role for government now in the study of Ihe policy ilmpl)ic('a-
tions of thle potential changes inl tlhe st-ructuire of work i] socielv whtichl
hlie highlights in his paper.
The committee is deeply appreciative of tlie thmro-hl anml creative
way in which these authors addrIessed e tleopic of techliolo gical c(hang
andll( econoilic growth. Professor Rosellberg is on the ecoomlics facu ltv
at Stanford University and ID)r. (Coates is thlie Assista fit to tlie )Director,
Office of Technology Assessment, U.S. congress .
D)r. Robert I). IlIamrin of the committee stallf is re1)01onsib1le for. t0e
planning and compilation of this study series wit" s"uggestions and as-
sistance from other members of tle staff. The aIdministrative assist-
ance of Beverly Mitchell and Christal Blakely of the committee staff
is also appreciated.
The views expressed are those of the authors and do tot neces-
sarily represent the views of the members of the committee or the
committee staff.
Sincerely,
JOHN R. STARK,
I'xecutive D; r'etor, Joint Economic CommilttCee



















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in 2013













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CONTENTS

Page
Letters of transmittal----------------------------------------------- III

THINKING ABOUT TECHNOLOGY POLICY FOR THE COMING
DECADE
By Nathan Rosenberg
Summary ---------------------------------------------------------- 1
Introduction -------------------------------------------------------- 4
Some conceptual background------- ------------------- -------5------- 5
Historical perspectives---------------------------------------------- 8
Present concerns over technology------------------------------------- 13
The formulation of technology policies-------------------------------- 18
Conclusion -------------------------------------------------------31
TECHNOLOGICAL CHANGE AND FUTURE GROWTH: ISSUES
AND OPPORTUNITIES
By Joseph F. Coates
Summary --------------------------------------------------------- 33
I. Introduction ------------------------------------------------ 34
II. Some factors iiifltencing future technological development---------- 36
III. Basic propositions about technology------------------------------ 49
IV. Some implications for government------------------------------- 54
(vn)















THINKING ABOUT TECI HNOLOGY POLICY FOR THE
COMING DECADE
Bl/ NAv'rIAN IOSEXENBi&:;::;


SUMMARY
It is a widely-ac(cepted proposition that technological innovation
hlas played a critical role in generating American economic growth.
We now have reasonably reliable measures of the changing supplies
of the various inputs as well as the growth in output for the American
economy going as far back as 1840. A fact which emerges unmistake-
ably from these data is that the growth in total output and per capital
output are far greater than can possibly be accounted for by the asso-
ciated growth in input supplies-at least as these inputs are conven-
tionally measured. America's long-term growth experience has pro-
duced something like a six-fold increase in output per capital over the
period 1840-1960. For the last part of that period, 1920 to 1960,
Kendrick has estimated that one third of the total economic growth
was attributable to the growth in the suIpply of inputs and fully two
thirds to an increase in the productivity of factor inputs. It is this
growth in the productivity of resources, and not their mere growth
in volume, which calls our attention to the centrality of technological
change in our past growth experience.
Of course, a, variety of factors other than technological innovations
alone have contributed to the increase of resource productivity. At
the same time it needs to be recognized that technological innovation
has set into motion forces which cannot be adequately summarized
by stating that such innovation has increased the productivity of
(r,;.iting resources. For. in the long run. one of the most significant
consequences of techlinological innovation has been to increase the size
of the resource base itself. Although our natural environment is fixed
in a geological sense, it is not fixed in terms of its potential economic
significance. Although uranium has existed in the earth's crust for
a very long time. it has only become a resource in economic terms in
thle last couple decades. The c-lime might be said witlih i-pect to
offshore deposits of oil. Moreover, a major thrust of twentieth century
technology has been the development of te'.hni(ques for thi. exploita-
tion of low-"rade mineral ore deposits. Theze teclniqpues have im-
mensely expandeled oulr supl)lplies of ui:.il)le iron. copper, lead. zinc,
miolvbdenuni and wood pulp. to name just a few.
Thlus. a basic function of teJhnological chan Ire as been to widen
thle vresource laise of the economy. It has done tins not only by develop-
P-nfpssor ,if peonfmipe Stnnford University.
*I have had the lhrefit of -ii-o ld dii ;Mioi.Rons on a variety of relevant matters with
MoepS Abramovitz.. Rlebnrd N. rC-inprr. Stanley Enuorm-in. Victor '1,,i.h. Han's .irk.
David Mowery, Richard R. Nl.1on. and RP:ymind Vernon.
7(-1
79-9f09 7(6---I2







in, met llodls for the exploitation of previousul ilble lesour' but
al lIy the developimrent of totally new iiiaterial:-. sich as pldast ics .and
synthlwtic liler.. (Indeed. one of tihe most pervasive cllaracteristics
which I. ls 1,ee associated witli Aimericanll e o'oJi;ic growth has been
tlie emnergLIrence of new illd listris prolducingl new pllodilct-,. so that the
Lrrowtli in out1it hlas a]bwavs leen as-.ociated with sin ificant clhangres
in its- com lpllosition as well.) it is apparent that the ticcs.-1'ld fufiniction-
iny of the Americ'i econoliiy in the future will continue to turn upon
our caparit'ity to develop techniques for tlihe exploit tionl of the 1-ore
abumdlanit of the materials which iiiake up our in'1atiiral evlvironmelliilt.
The fiianci ial support of research which hold-, pro oi-e of widlening
,ur scientific and teclhnological t lcapacity to utilize aLundant j:1atural
materials should thus be accorded a very high priority.
h'le economic conditions which are likely to encourage innovative
activity need to be more strongly emphasized. In our recent preoccu-
pation with the contribution of technological progress to economic
growth, there has been a serious neglect ofthe reverse relationship-
tlhe contribution of economic growth to technological progress. There
seems little doubt that that contribution has been a powerful one in
the past-that expectations of high rates of future economic growth
have provided highly favorable environments to the willingness of
individuals to commit resources to those activities which generate
technological progress. Moreover, such favorable expectations have
not only influenced the decision to commit resources to inventive
activity; they have also positively influenced the adoption decision
concerning inventions, once such invent ions have been successfully
developed. New technologies exercise their impact upon the produc-
tivity growth of the economy, not as a function of the volume of re-
sources committed to the search process or even the actual achieve-
ment of new inventions. Rather, that impact is a function of the speed
with which the new technology is diffused throughout the economy.
New technologies generate productivity growth only to the extent that
they are actually incorporated into the economic life of the society. In
this sense it is the decision to adopt which is critical. Such decisions
are, in turn, highly sensitive to expectations concerning market condi-
tions and, in particular, to expectations concerning the adequacy of
the demand for the product. Innovative activity, therefore, is not
likely to flourish in a stagnating or slowly-growing economy with a
substantial unemployed or underemployed labor force and an under-
utilized capital stock. Under these conditions the incentive to under-
take inventive activity or to adopt new inventions will be weak and
the incentive of workers to oppose the introduction of inventions, es-
pecially labor-saving inventions, will be strong. Measures on the mac-
roeconomic level which will assure a sustained high level of economic
activity will therefore strengthen both the incentive of business to
introduce inventions as well as the willingness of workers to make the
necessary accommodations involved in their introduction.
In some respects public policy toward technology may be much more
effective if it addresses itself energetically to more modest goals and
issues in addition to the big ones. In our preoccupation with the big
questions we tend to neglect the fact that there are literally hundreds
of things which we can do now, with our present technology, to achieve
important coals. For example, while no one of the many ways in which
we can, with our present technology, reduce our utilization of fuel,







will be highly significant to our aggregate utilization, cumulatively
tliee measures would be enormously significant. Getting people to
respond to these present possibilities for fuel savings requires a com-
bination of forceful political leadership together with the willingn,.ss
to introduce incentives into our economic life to induce people to re-
duce fuel consumption-smaller cars with less "performance," more
extensive iuse of home insulation materials, substitution of glass bot-
tles for aluminum beer cans, etc. At the same time, recent experience
strongly suggests the desirability of a government technology policy
involving the development of a greater capacity for shifting to al-
ternative sources of material supplies in various areas, so that we will
retain a potential for more flexible policy responses to changing con-
ditions. Such flexibility is likely to be particularly important in ac-
tivities where long lead times are involved. This necessity is. obvi-
ously, likely to become greater in an international environment where
access to vital raw materials can be manipulated in response either to
political considerations or the prospect of exploiting a monopolistic or
oligopolistic advantage in world markets.
A point which requires great emphasis is that technological change
and its associated productivity improvements enter the economy
through many doors and take a wide variety of forms. Moreover, the
location of these doors to shift periodically, so that any rigid mapping
of the most significant relationships is bound to become outmoded
over time-and not very long periods of time at that. It is of basic
importance to the formulation of policy to recognize explicitly this
diversity of routes and forms by which technological changes lead to
improvements in productivity. Our failure to appreciate this diversity
is due to a variety of causes: to the small size of individual improve-
ments, to a frequent preoccupation with what is technologically spec-
tacular rather than economically significant, and to the inevitable,
related difficulty which an outsider has in attempting to appreciate
the significance of alterations within highly complex and elaborately
differentiated technologies. Finally, although we are becoming
increasingly aware of the dependence of technology upon science, we
are much less aware of the dependence of science upon technology.
It needs to be remembered that progress in the realm of science is
and always has been highly dependent upon technological improve-
ments which enhance our capacity to observe and to experiment. This
is particularly true in the realm of instrumentation. Our present
knowledge of the natural world, ranging from microbiology on the
one hand to cosmology on the other, would have been inconceivable
without the microscope and telescope and the improvements which
continue to be made in our observational capacities through further
modifications of these instruments.
In spite of the enormous contribution which technological change
has made to our economic well-being, it is extremely important that
we should not think of it as a potential "fix" for all of our economic
problems. The effective formulation of national policies can only be
jeopardized by such excessive expectations. This is so not only because
we will inevitably be disappointed and frustrated, but because, by
placing excessive faith in the prospect for purely technological solu-
tions, we will fail to explore other measures and alternatives which
may offer greater, or more immediate, prospects for success.







IN I'l;( Mil'it -'ii V\"
Pl~erlia lriist .,:o'.:,n ,,iI'rvationl which forei.,gner have made
(\ ,. tlie c';1:ir. ill c(ii i inltiil.." upml t lle( dlisliict iv'(, .-.S Of American
,.hvili/.,i ,l~tw v,;.s it?. prv(,('ciipn iw witlh matters tecli nological. De
T"1(,,i ,i*ille loni ;is_,n called atteniition to the ala'ritv \vitl v which men
il thie ujp)wAvirdlv mole dem ratic envirtonet of Almirica iih1 ied to
the adoptio of ,\new 1er imiie.o
.\A they are always- dissatisfied with the position which they occupy, and ore
alway- free to leave it, they think of nothing but the means of changing their
forttiie, or of increasing it. To minds thus predisposed, every new method which
t,..ds by a shorter road of wealth, every machine which spares labour, every
ins.trnument which diminishe, the cost of production, every discovery which
facilitates pleasure^ or augmuients them. seems to be the grandest effort of the
hinirin intellect.1
I think de Tocqueville ma.s f idamnentallv correct. It see.nis to me
thl:t ml. of thle (distilctivene:- of the American experience has
rsidled in the fact tliat th1 "NeN(w World" offered far fewer restric-
tion or inhlibl)itionsI uIpon thle intro, d 'tion and spread of new tech-
Ild,('i&.s thanI was the case in Eutrope. W'hateerm may lhanve l)(eel the
historical realitv under'lyin.. the nimich-vaiinted "Ya(kee ingenuitv,'
(a1141 I am personally skeptial of thle notion flthat Americans were in
po--(e-sion of '-omle ilnherenttly greaterr inventive .pf.r-7Iai;y than Euro-
1pean.s) tliere is little doiiit that American society offered fewer road-
blocks to the widespread adoption of inventions, onoe thliey were made.
Anmerica 's great past achieveIimelts were no doubt favored by a mini-
mum of political interference to protect those who had a vested
interest ill the old technology. This, combined with rapidly growing
populationn ,nd(1 manarkets, seenis to Ilave provided a powerful set of
stimuli to techlnoloicaial innovation in many sectors of the economy.
Numerous studies bv economists over the past twenty years have
abundantly confirmed what has long been obvious to intelligent lay-
men-namely, that technological innovation has played a decisive
role in generating the lono, sustained growth in American livylng
standards And vet. in addressing ourselves to technological questions.
and in parti.llar in asking ourselves what we may reasonably expect
of telchnolooyv over the decade ahead, it is deceptively easiv to get tilnes
out, of focus. I believe that it is extremely important that we should
learn not to expect of technolofrv more than technology, by itself. can
possibly deliver. The effective formulation of national policies can
fnlv be jeopardized by. such excesive expectations. Tlin is so not only
l)i,01;4ewe will be disappointed and(l frustrated, but 1lecaemz, by placing
ex(,1z ive faith in the prospect for a technological "fix." we will fail
to explore other measilure and alternative, which may offer 1renter, or
o1' riei' immediate prospects for success.2 In this respect I find the rrow-
if (.ritic.isin of technoloo'v in recent rears n salutary. development
in'nr ^a it serve' to disalbuse iz of the simplistic notion that tech-
nrloo'v ('.n provide a neatly parkagel solution for all of our problems.
i .,i do iT 0onwievillp. Denonr,-e in Anmerifra. Arlinaton Tou M New Rnehpll.P. Now
Y,.'." .L!. Tjf,(lTT,niry% R~ove. tran!,lntor). v,lmil T. T. 45.
2 t. r rnl Y',tor F'l, h' rr tlat rld. pprcnin. tvelY I t1tink. thst thre nrep
'.:1t .... pj pr im enl'ts in tbhe health nff the I- PriePn i ,nopil:ition to hp n-lli 'l--d through
'ho~inp n rei.,tl' thbln t h 'nni 1 filrth l 'p enrllitlirps unon new nnd luiihlv-P*.\tfn.i'V"
pnieC l tfhnnlnLi-. The lirp-Qtvle and taftp .lnns-pq wh;eh he hq In ininrd Inehrlo
ih tih*nL- nS r.liuinntlon ri' smoln.in-z. more bodily Pv erke. and -renter attention to
4IEot:1rV nlaltterR tO 'Cl o rx"i:ilt,h +r l oth r tnirmittpq which nr' lijnl:nd to rntt, 'r- of
fin ,.,ini f#vri. See o ietor Fn h ,it WI, .1l,,fl Liie?, T hasl Book.. New York.t 1974.
frn I ,.






Somne of the critical voices, on the other hand, are excessively shrill,
and seem to suggest that all technological innovations involve somn
sort of Faustian pact with the devil. Other critics link the bigness
and narrow specialization of much modern industrial technology with
the surest ion that such technology inevitably generates deep al(l
pervasive friitriation and alienation. At the same time it is a1-.-rted
or implied that there are no inevitable tradeoffs between the pursuit
of a more humane technology and a larger material output, that there
are readily available alternative technologies of a smaller scale, aud
richer human content which can be adopted without any substantial
loss of materialal output. Needhlvs to say, such important issues cannot
be settled by mere assertion.
It is not my intention in this paper to deal with all the bitr
questions-social, psychological and philo-ophical-which are po:-.J1
by the continued utilization of modern industrial technologies. Rather.
I intend to deal, on a more circumncribed level, with some questions
concerning appropriate economic policy with respect to technoloav.
I hope the outcome will be some illumination of the quivtion of how
we rmay 1vmore successfully guide technology toward the realiz;ltion
of certain widely-held national goals. However, I should perhaps
say at the outset that I am not at all certain what are the implications
for policy of all of the observations and comments which follow. In-
deed. as I will emphasize, the range and diversity of the technologies
employed today defy easy categorization. On the other hand. I am
quite 'ire that effective policies toward technology cannot be developed
without due attention to the kinds of considerations with which I will
be concerned. Perhaps this is simply another way of recognizing
that technological change is still not a very well understood pheno-
menon, that it continues to resist attempts to model it (much le. to
plan it) in a rigorous way. and that the further sudy of technological
phenomena should, itself, be a high priority of government policy.

SOME CONCEPTUAL BACKGROUND
Technology, for present purposes, may 1e most usefully thought
of a.s a form of knowledge. It is a very special form of knowledege-
that dealing with the transformation of the material environment into
a flow of useful goods and services. If we view the economic process
as those human activities which specifically involve the transformation
of the material environment into goods and services which satisfy
human needs, then we may think of technological change as incre-
ments to the stock of useful knowledge concerning the economic pro0-
ess. In the most elemental sense, these increments to human know
edge involve some improvement in the relationship between inputs
and outputs. It is therefore convenient to think of technological
change as advances in knowledge which make it pos'-ible to generate
more output from the same volume of inputs, or the same volume of
output from a smaller volume of inputs. Indeed, a larp'e portion of the
story of America's long-term economic 'rowtli can be told in precisely
these terms. That storv is one of perv-asive and sustained improve-
ments in resource (or factor) productivity. As a consequence, a unit
of input in 1976-say a man-year ofl'alor or an acre of land-tvpic-ilvy
produces a far greater output than did a con'e ponding input in
1776.







1u1, thle long-tenn overall growth of the American economy
involves two distinct processes. On the one hand, the volume of inputs
hlas been growing. The history of thle American economy is one of
growth in total population and the labor force, rapid increments to
tlhe stock of capital goods and, up till roughly the end of the 19th
century at least, vast new tracts of land brought into cultivation
along with the westward movement of population. We would normally
expect tIme total output of the economy to grow along with the growth
in inputs. Such aggregate growth, however, need not involve a growth
in resource productivity, but merely increments in output associated
with the growth in inputs.
Much more interesting, however, is the fact that the American
economiiV has grown over the years at rates far beyond what can be
acolinted for by tle growing supply of inputs. 'From about 1840
we have reasonably reliable measures of the changing supplies of
in)iputs- as well as thie volume of outputs. Leaving aside all the con-
ceptual and methodological problems which are inevitably involved
in such statistical exercises, a fact which emerges unmistakeably from
these data is that the growth in total output and per capital output
are far greater than can possibly be accounted for by the associated
growth in input supplies-at least as these inputs are conventionally
m1eas.,1red. John Kendrick, for example, estimates that between 1920
and 1961) some two-thirds of total economic growth in America was
attributable to an increase in total factor productivity and one-third
to the growth in the supply of factor inputs.3 It is this growth in the
productivity of resources, therefore, not their mere growth in volume.
which calls our attention to the centrality of technological change in
America's long-term growth experience. And, it should be noted, that
longr-term growth experience was one which produced something like a
six-fold increase in output per capital over the period 1840-1960, or
an annual rate of growth averaging slightly more than 1.5 percent.
This statement, so far, is not even a first approximation to the role
of technology in American economic growth, because it at once claims
too much and too little, if only implicitly. It would be grossly incor-
rect. first of all, to attribute all of the per capital growth of the Ameri-
can economy to technological change. The per capital output of an
economy may grow for a variety of reasons not directly connected to
technological phenomena. A larger proportion of the population may
become productively employed due to such factors as changes in the
aOe composition of thle population or the increasing participation of
females (both these factors have. in fact, played important roles in
the American economy in the twentieth century). People may work
harder. or more effectively, as a result of new payment schemes which
raise their incentives, as in the case of piece rates or productivity
bonuses. YNew personnel management techniques may raise produc-
tivity by achieving a. more effective selection and ass-ignment of
O'lriers'to1 particular jobs. Purely organizational changes at. the work
place. or minor alterations in layout. may speed the flow of materials
throua'h a sequence of steps. New techniques of inventory control or a
rr--,,ater d(eree of product ?-tandardi7ation may substantially reduce
-nv ntor', req(1irelients. Goveri'merlVt policies may encouraffe the mo-
bilitv of l:0bor and thereby speed up the response to altered market
*.TJi TKpnf rlc'k. T',-rtict- iiu Tredsi in tTIe U ited R.tafr..R. Prlneetin Tniv-r-ity Prezs,
19fil. rl.Optcr 3.







conditions and, in so doing, improve the overall allocation of labor.
Improvements in the operation of capital markets may increase the
effectiveness with which capital is made available to potential in-
novators. None of these things falls under the rubric of what the
economist ordinarily means by technological change, and it would
only be an exercise in obfuscation to widen our definition of tech-
nology to include any of them. The fact is that there have been
numerous forces contributing to American economic growth since
colonial days. Although there are compelling reasons for believing
that technological change has accounted for a large portion-per-
haps most-of that total growth, we are still a long way from being
able to separate out and to quantify that contribution with any pre-
tense of precision.
The description of technological change as generating greater out-
put per unit of input understates the impact of technology in two
highly significant ways, one on the input side and one on the output
side. The statement is, first of all, excessively static in nature. It fails
to take account of the fact that the very definition of the word "input"
in this context is not immutable. Our natural environment is fixed, at
least in a geological sense, but it is not fixed in terms of its economic
significance. Indeed, it is one of the most important features of tech-
nological change in American history that it has continually expanded
the resource base of the economy. This has taken several forms. Im-
provemnents in techniques of extraction have made it possible to re-
cover oil from depths of 20,000 feet or more, an accomplishment which
was physically impossible not very long ago. Numerous innovations
in exploration techniques (including the use of photographs from
orbiting satellites) have had to a more rapid rate of discovery of
mineral deposits. But, more generally, advances in technological
knowledge have led to the development of techniques for the exploita-
tion of materials which were formerly unexploited. Uranium was only
a resource in the geological sense and not the economic sense as
recently as 1940. The same was essentially true of even easily accessible
petroleum deposits in, say, 1800. The point is that natural resources
possess economic significance only as a function of technological
knowledge, and improvements in such knowledge have regularly led
to an expansion in the resource base in the economic sense. Another
dimension of this process has become particularly conspicuous in the
twentieth century as the supplies of high quality resources have been
gradually exhausted. A major thrust of twentieth century technology
has been the development of techniques for the exploitation of low-
grade resources. Thus, the gradual exhaustion of the high grade iron
ores of the Mesabi Range was followed by innovations such as methods
of concentration and beneficiation (a technique for enriching the ore
before it enters the blast furnace) which made possible the exploita-
tion of the immense deposits of hard, low-grade taconiteos.
The flotation process, originally applied to the exploitation of low
grade porphyry copper ores, has been applied to a wider range of
ores. both of lower mineral content and more complex chemical forms.
Teelnionues of selective flotation have played a major role in offsetting
the decline in the quality of available reourcem. not only for copper.
but for such important materials as lead, zinc and mnolv')(bdelenm as
well. In 1880. the lowest grade of copper ore which we could utilize
was 3 percent ore. Today it is 0.4 percent. Similar reductions have







taken place with r(spct ito iany other minerals. The great advances in
slIlpl)ate pulp)ing technolo,.y (luring tlie 1920s liberated the wool pulp
ind(lustry from its earlier lbodage to northern spruce and fir trees and
made possible the exploitation o()f the more rapidly-growing but pre-
violisly 1111usable southeirnl pile. D)olbtless a pr.1isten)t theme in the
future will be the search for technologies wliicli will make it possible
to) rely Il) upn highly abundant reso.(Jlr.es for the -ilpplyv of (essential
materials. Harbingers of such shifts were the nlitrogen fixation proc-
ess whiich fixes nitrolrel from thlie atilmspihere :aind tle ilcreasin" in-
terest in sea water--alrea(ldy a source of auianezitiin-as a source of
mineral inputs. There sekms little doubl)t that. at som(ue future date, the
rising cost of increasingly scarce fossil fuels will lead to a major
reliance upon111)011 the most aluindanit energy sou'.e of all, solar energy.
We are still a very lon way, hlowecver, from tlhe development of the
appropriate technology.
rThusi., a basic function of teclhnoloiical clian'-e lias been to widen
the resource base of the economy. It lias done tlins both by developing
methods for the exploitation of low qitialit- re'-oorc'ees-resources
whi,-h at ani earlier l)eriod' were rewarded as "u11necoomi0.'---(and also
by developing totally new materials-plastics, synthetic fibers, etc. It
seems apl)parent that the successful functioning of thei American
economy, with its immense resource requirements, will turn upon our
rapacity to develop techniques' for tle exploitation of the more
abundant of the materials" which nuakei- 0p our iatural evironment.
The financial support of research which holds plrolise of widening
our scientific and technological capacity to utilize abundant natural
materials should thns be accorded a very high federal priority. This
should include techniques directed toward reducing dependence upon
natural resolirce inputs by the recycling of. used materials or the
utilization of waste products.4 The ultimate goal of this exploratory
process is the situation which Harrison Brown has aptly characterized
as follows: "The basic raw materials for the industries of the future
will be seawater, air, ordinary rock, sedimentarydeposits of lime-
stone and phosphate rock. anid sunlight. All the ingredients essential
to a highly industrialized society are present .in the combination of
those substances."
HISTORICAL PERSPECTIVES
A brief historical ,'lance may lend some perspective to our present
concerns. The sensitive and significant linkaie between technological
innovation and a heterogeneous resource base can be readily observed
in the history of the iron and steel industry. From the 1850s on, a
series of innovations occurred which continually altered the economic
significance of natural resource deposits for the industry. Thle original
SIt Is worth noting here that many of our environmental problems are exacerbated by
the cteapnrs.ff of material Inputs as compared to the prices of labor and 'capital. Thus.
we may observe that two of the major concerns of environmentalists are really based
upon conflicting assumptions about relative resource prices. The pollution problem is often
bha.ed upon the ehpapnes. of raw material inputs, making recovery uneconomic. The
rr,,oiirce exhaustion problem, on the other hand, Is based upon the assumption of In-
exorably rising prices of resources. But, if materials prices 'were much higher, we could
lie saving our old newspapers, collecting dliscard(led beer cans. and hauling off to the
juinkyards the tens of thousands of automobiles which are abandoned on our rounds and
hlighways every year-or at least It would be worth someone's effort to provide these
services for us. An intprestina implication, therefore, is that a rise in raw material costs
may be pxpectpd to reducre the severity of some of our pollution problemm.
f lntrrison Brown, Tue Cliallengc of Man's Future, Viking Press, New York, 1954,
p. 218.








(acid) Be:-einer process could be used only to rdfine imtaterial- fulfill-
ing certain precise chemical conditions-the proc.- required iron free
from phosphorus content (the later basic B1-.-ener proc(-. by con-
trast, required ores of a high phosphorus content, but the Ulnited
States did not pos.esz large depo-its of such ore-, and the process never
1 -came a significant one in this country). The basic open hearth furnace
of the 1880s. however, was capable of exploiting: a very wide range of
inputs in steel(making (in addition to permitting a more precise degree
of quality control than was po-si:ble with the B:-inmer technique). In
particular, it could utilize ore of almost any proportion of phosphorus
content, and its availability made it pos-ible to exploit a much wider
band of the available spectrum of the gigantic Lake Superior iron ore
deposits. Moreover, the process could utilize a high proportion of scrap
as a material input, a consideration of great and increasing significance
in locations with ready access to such supplies. The growing abunlv ce
and cheapening of scrap in the twentieth century induced ro.-~arch
into methods of increasing the proportion of scrap used in oxygenll coln-
verters. With the recent development of the electric furnace we now
have a technique for producing steel entirely without iron ore since
such furnaces can operate with a 100 percent scrap charge. Thus the
potential supplies of inputs into the steelminaking proce-s have been
steadily widened, even to include the junkyards.6
The interaction between technological change and the natural re-
source base can be seen even more dramatically in Europe. The original
Bessemer process could be employed only when certain chemical condi-
tions were precisely fulfilled. The method required iron which was free
from pho-sphorus content. The fact that Bessemer's methods could only
refine materials which fell within certain narrow limits of chemical
analysis had major economic consequences, imparting a strong com-
parative advantage to those regions possessing the non-phosphoric
ores. Britain's (acid) Bessemer process grew rapidly upon the ex-
ploitation of her large deposits of non-phosphoric haematite ores. On
the other hand, Germany and France had only very limited deposits
appropriate for the Bessemer technique and Belgium had none. The
Bessemer te,,:hnique was useless for the exploitation of Europe's nias-
sive deposits of high-phosphorus ore in Lorraine and Sweden.
This British advantage, however, proved to be short-lived. The
Thomas-Gilchrist technique, introduced in 1879 after a long search
for methods which permitted the exploitation of phosphoric ores.
drastically altered comparative advantage in favor of Continental
steel producers. Their introduction of a "basic" lining for an "acid"
one vastly expanded the range of ores which could be utilized in mod-
ern steel-making technologies-making possible the intensive exploita-
tion of Europe's great phosphoric ore deposits.7 The Thomias-Gilchri-t
technique thus imiade possible a great expansion of steel product ion in
Germany, France and Belgium after 1880-an expanL-ion involving
both the basic Bessemer and basic open hearth methods. Thus, what
6 In this re,'pect the steel industry has already taken giant strides in the direction LIT'
recy0ling.
SWhereas the acid Bessemer process required low phosphorus content, the basic
Bessemer p)rocesS required a high pho.,pliorus content-m-ore than 1.5 percent li'i.,. horut.
Altlihigh this technique was well-suited to-German ,,res. it was not as well suited to
Britaii's phosphoric ores, which turned out now to have in-utlic-ient phosiliurus for the
basic process. See Peter Teimin. Iron and Steel in Nineteenth Century America, M.I.T.
Press.. 1964, chapter 6 for a good discussion of the Bessemer and post-Bessemer innova-
tions in steel ina ki n.
:-9)i,.l-76 ---3








appear, as a rather insignificant andl hbuimdrum teclhnological eveit-
tfl. 11e1ve -u1lbstitution of a new material for an old one in the lining of
tfie fulrnaee-was. ill fact. an event of imin.iise economic and geopoli-
ticil -inific.ance. Germany's swift and spectacular emergence as an
iln .I-trial power was based directly upon tlhe rapld(l growth of hler
steel industry in the ISSOs and 1890s-a growth which had, in turn,
l,'en made possible by the introduction of tlie basic lining and the
dr Itic redefinition of the natural resource base which flowed from it.8
Tie gradual exhaustion of the richest iron ore supplies in the U.S.
and elsewhere in the twentieth century shifted tihe economiic payoff
awav from tihe earlier concern over p1 iospioru, content and toward
tl]e development of methods which would make possible the exploita-
tion of low-grade iron ore. The result has been the growth of a highlly
sophisticated technology focusing upon tlhe use of poor-quality inputs.
Ores with a low iron content are now subjected to a process of beneficia-
tion-an upl)radinr of their iron content before they are introduced
into the blast furnace. Waste materials such as clay, gravel and sand
are removed and the ores are crushed and washed, so that the material
entering' tlie bhtwt futirnace is cleaner and more uniform in quality.
T'lie implications of such techniques have been very great because they
have made possible the utilization of huge resource supplies which
would formerly have been ignored.
One of the recent and significant beneficiation achievements has been the de-
velopment of a process to extract high grade iron ore from a rock called taconite,
,imf of the hardest in the world. There are billions of tons of it in the area around
Lake Superior. Taconite contains only about 22 percent iron, and until recently
the cost of extracting iron from it was prohibitive. But during the past couple of
decades improved methods of extracting iron from taconite ore have been de-
velolped. and now millions of tons of high grade iron ore, produced from taconite
in the form of pellets ready for the furnace, are shippiwd from the Lake Superior
region.
These developments in iron and steel are by no means unique. Al-
though discussions of the impact of new technologies usually concen-
trate upon resulting improvements in productivity, it is essential to
note that the main technological innovations in the iron and steel
industry over the past century also had the immensely important effect
of substantially widening tlhe range of usable natural resource in-
puts. New techniques elsewhere have, in effect, similarly augmented
our "dwindling" supply of other minerals in parallel ways.
The point here is of basic importance in understanding the signifi-
cance of technological change. Such changes alter the economic sig-
nificance of the physical environment so extensively that one cannot
really discuss the role of natural resources in economic activity with-
out first carefully specifying the level of technological knowledge and
sophistication. To put the point somewhat differently, the growth of
technological knowledge generates information which makes it econ-
nomically worth while to exploit resources which were formerly con-
sidered of such poor quality as not to be worth troubling with. For
this reason, discussions which ask how long it will take, at present
or extrapolated consumption rates, before we run out of a particular
natural resource are usually not very interesting. What the natural
s See J. C. Carr and W. Taplin. A History of the British Steel Industry, Harvard
University Press. 1962. charter XIX. appropriately titled "Lost Pre-eminence."
9 W. N. Peach and James A. Constantin, Zimmermann's World Resources and Industries,
IHarper and Row, New York, 1972, p. 448.







environment usually offers are limited deposits of resources of i1irh
quality and then a gradually declining slope toward lower grade re-
sources, which typically exist in abundance. It is a geological fact of
life that there is a mucil great er p)r()flusi(o)n in lthe earth's crust of low
grade than of high grade resource,. Even such terms as "high grade"
or "high quality" are often misleading silce they refer to cleical
composition and describe properties which nmay or may not have eco-
nomic significance. Thus. anthracite coal lias usually bl)een regarded as
higher quality than bituminous coal because it ])as little gas and other
impurities, such as sulphur. But, from thle point of view of its use ias
a blast furnace fuel, the low gas content was for many years a :-riolus
disadvantage because it made ignition very difficult. As a result thle rich
anthracite deposits in the eastern United States were unusable in the
blast furnace until the introduction of Neilson's hot blast during tlie
1830s. Even so, this "high quality" coal was soon displaced by large
"low quality" bituminous deposits when thle westward movement of
population made these deposits more readily accessible.
In all of these ways then, the expansion of technological knowledge
transforms the meaning and significance of what are rather colorlessly
described as "inputs". Equally drastic changes, however, have been
taking place on the "output" side. It is immensely convenient to be
able to characterize technological change as constituting an improve-
ment in some relationship between inputs and outputs. If all teclhno-
logical improvements were simply cost-reducing process innovations.
this would make it easier to deal with the economic consequences of
technology. The growth in the economy's output would involve altera-
tions in its composition-i.e., changes in the relative importance of
different categories of goods. But the changes would be purely cliange;
of quantity and not quality-there would be no entirely new products
or significant quality changes of existing products.
Although such a situation would simplify the life of the national
income statistician or anyone attempting to reduce technological
change to purely quantitative treatment, it is manisfestly not an ac-
curate characterization of the long-term impact of technological
change. Any treatment of the impact of technological change on
American society over the past, 200 years which took no cognizance of
the new products generated by that technology would be missingr what
has been, arguably, its most significant dimension.
American society and life in the 1970s is different from the world
of Franklin, Washington and Jefferson, not just because we have more
of the same bundle of goods consumed by these eminent gentlemen. It
is different also because we have available an immensely expanded
range of goods of a nature and quality literally undreamed of in the
18th Century. Medical technology and public health measures over the
past century, culminating in the development of antibiotics, have
brought with them the conquest of infectious diseases and a vast in-
crease in life expectancy. Aspirin, antihista mines, tranquilizers, novo-
caine and anesthesia have brought with them a remarkably enhanced
degree of control over pain, discomfort and nervous tension (the last
doubtless one of the less desi able concomitants of modern technology).
A sequence of contraceptive technologies, of which "tlie pill" is merely
the most recent, has provided increasingly effective control over human
reproduction. Furthermore, a host of technological changes have per-







emitted a greater evijoyNient of leisure tiine, longer life, and a wider
rFaI-'e of freedom concerning locational choice. The air conditioner, for
example. hlas IIade it possible for larger populations to maintain
.erimanent resi(lence in :-ucli "sunbelt" locations as Texas. Arizona, and
florida. as well as ,reatly improving Colditions of work for large
numbers of people. On the other hand, twentieth century technology
las also generated weapons of an awesome degree of destructiveness.
It would be difficult indeed to find any yard-tick with wlicill to provide
convincinZ-or even plausible-measures of the impla't of these new
technologies.
Tie inability to take qualitative changes adequately into account is
tlus onlle of tlie ino.-,t serious, limitations in our national income and
product accounts-a matter of iiclrea-ing concern in recent years. But
there is allotler highly imllportanit interaction betw ven technological
cbli-nge in the form of product innovation and economic growth. Muchl
technological innovation l]as been associated with the rise of new
ind.st.t'i.s pIrodlucing new products. This lias not been a randomly or
adlvent itious association. Rather, high1I aggreg-late growth rates in an
industrial econo.ly are a retlIecttion of a continuous shift in product
and industry mix. As Simon Kuznets has emphasized, all rapidly
.growing, industries eventually experience retardation in growth as
the. cost-reducing impact of technological innovation in each industry
eventually approaches exlia tistion. A; continuation of rapid growtli
therefore requires the development of new products. In view of the
typically low long-term income and price elasticity of demand for old
final consumer goods, further cost-reducing innovations in those in-
dustries will have a relatively small.ag"gregative impact. In Kuznets"
view: ". (A) sustained high rate o.f growth depends upon a con-
tinuous emergence of new inventions and innovations, providing the
bases for new industries whose high rates of growth compensate for
the inevitable slowing down in the rate of invention and innovation,
and upon the economic effects of both, which retard the rates of
growth of the older industries. A high rate of over-all growth in an
economy is thus necessarily accompanied by considerable shifting in
relative importance among industries, as the old decline and the new
increase in relative weight in the nation's output." 10
The preoccupation with product innovation is obviously not, a recent
development. As early as 1951 Gordon Bloom, reporting on his own
survey of industrial research laboratories, disclosed that ". . only
about -25 percent of regular industrial research budgets are devoted
to cost reduction projects, while in the neighlborliood of 75 percent
is allocated to product improvement and development of new prod-
,cts." 11 The general thrust of more recent surveys is similar. They
indicate that, if research and development expenditures may be taken
as, a reliable guide, American business firms are much more concerned
with product innovation than with process innovation. For example, a
McGraw-Hill survey indicated that, for the year 1975, industry ex-
0 -siimvn Kuznets, .'i.r Lectures on Economtnic Growth, The Free Press, Glencoe. 1959,
p. 2". For a more d!etai; d ]lprp.-ut-ition see Simon Kuznets, Secular Movements in Produc-
tion and Pri'cq. IHoughton Mifflin, Boston. 19.30.
G G. F. rlonin. "WVnge I'rpsure and Technological Discovery," American Fconomfc
Review, Sr..pimber 1951, p. 607. Bloom also added that ". . the percentage of industrial
research budgets devoted to product improvement is growing . ."








Iete that1. ') Nol b ,(ov t d t
pected that i7 percent of its IR&1) expel)ditln would 1e devoted to
the development of new products, 48 percent to thlie iiprovellelit of
existing products, and only 15 percent to the developliellnt of new
processes.12 On this basis it seems apparent that coltinuedl product
innovation is the primary justification undierlyving the expenditlrIe of
research and development funds by private industry.
Of course, whether an innovation is chlaisilied as a new product or a
new process will often depend upon the vantage point from which the
innovation is considered. This is particularly the case in a highly
specialized industrial economy where inter-ind(lu-t -Y transactions loomi
very large. A process innovation-say a numerically controlled ma-
chine tool-will represent a cost-reducing innovation to the firm using
the machine tool for the production of airplane components; but it
will represent. a product innovation to the firm whose business it was
previously to produce manually-operated machine tools but which now
produces numerically controlled machine tools. New fertilizers or
pesticides represent product innovations to one set of firms but con-
stitute cost-reducing process innovations to the agricultural sector of
the economy. Indeed, we are dealing here with a central feature ac-
counting for much of the technological dynamism of advanced capi-
talist societies. Producers of capital goods have a strong and pervasive
incentive, in terms of their own profit prospects, to develop new capital
goods products which will constitute cost-reducing proce.- innovations
to the industrial users of such intermediate products.13

Pl-SI:XNT CONCERNS OVER TECHNOLOGY

The growing concern over the adequacy o.f our technological per-
formance in recent years has been based primarily upon two a:-:ertions.
The first is the evidence of increasing succe:-.- of foreign producers in
displacing American "high-technology" products both at home and in
foreign markets. The second is that there has been a, slowing down in
the rate of productivity growth, beginning in the second half of the
1960s.
In the post WVorld War Two period up to the early 1960s, it was
almost universally believed that the United States enjoyed a decisive
and unassailable technological superiority over the otlier highly in-
dustrialized nations of the world. Although the notion of a "'technol-
12 20th Annual McGraw-Hill Surrey: Bufsiess' Plans for Research and Developmet
Expenditures, 1975-1978, McGraw-Hill Publications Company, New York. 1975. For
comparable evidence for the U.K., see Induf rial Research in Manutfacturing lnl stl
1959-60, Federation of British Industries, 1961.
13 "It is the producers of capital goods who have the financial incentive and th,'r,'ore
provide the pressures (marketing. demonstration) to persuade firmns to adopt the innova-
tion (which they produce). Creating a capital cioods industry is, In effect, a ma.ij'r way of
institutionalizing internal pressures for the adoption of new tecliln.log.y. In America the
producers of capital goods have alwvnys played a m.iinr role in persuadhiiig: anrl educa ichi
mniahinery users about the superiority and feasibility of new technitiics. This is an
extremely important activity in ovruimin the inevitable combination of inerti:a. ignor-
ance, and genuine uncertainty which surrounds an untried product. The introduction
of the diesel locomotive by General Motors is a classic case in point. In the United Slates
both the railroad companies and the locomotive producers were extremely -ki4tical ,f the
diesel engine and resistedI its introduction. It took great promotional effort on the part
of GM., which developed the diesel. to induce the railroads even to consider and experiment
with the innovation. This kindi sf promotional activity, on the part of capital :'"..d-
indiistries with a stron- personal motive to gain acept;ince for their product, seems to
have been a critical factor in the American experieinve." Nathan Rosenherg., "I,'onoiic
Develniinent and the Transfer of Technology: Soiie IIitorical Perspe,.live,.-." Teci, n,,,ir,
unid Culture, October 1970, pp. 56-5-66.








1,v .'p" W-s I'lever I)preisely defined.1'1 it \vas widely ai-cepted that the
41ni.hd states pos':-,d ;I iii juqv-tioned( tec'l1n)logical superiority
anid flhat Ibis silperiority wa.-, frauglit with Ilie most dangerous eco-
noIlic and political co,-,veii'n('es for ,other coii nlries, particularly
tho,:, of western EIuiro)e. At thle very least, the view was widely held
ill we-tern Europe tIhat (onlly a drastic "overlhuling" of political ma-
clhiller,' would miake it po:-iblle to face up to 'flte American (Chal-
leneo" as J. .T. Servai-Schreiber characterized it in his widely-dis-
cii'.-ed, book. published in l196s. Failing solme decisive action, western
Europe was de.,tilned to slip into thle status of an American colony,
totally dependent upon tlhe United States ,for both economic and
technological leadership.
'lihe speed with which these dominating views were displaced by
something approaching their polar opposite was breathtaking. Within
a couple of years the view of American technological hegemony gave
way to the view that. the United States was being overtaken throughout
a wide range of high technology exports-and even many low tech-
nology exports-by the burgeoning economies of western Europe and
Japan. By 1974 a distinguished American economist published an
article bearing the somewhat ominous title "An American Economic
Climacteric ?"15 and proceeded to suggest an affirmative answer to his
quest ion."l6
A more judicious view would r'o.rin with the recognition that tlhe
extraordinary circumstances of World War Two and its aftermath
made it possible for the United States to increase its technological lead
over Europe-a lead which unquestionably persisted from 1940 to
about 1960. After 1960 the gap began to narrow. Characteristically,
Europeans began to articulate their concern over American leader-
ship at precisely thle time when they were making significant inroads
into that leadership. But it should be apparent that American tech-
nological leadership could not possibly persist "across the board."
Indeed, it reflected extraordinary national conceit in the first place
to regard such Americ(an technological dominance as being, in any
sense, natural.
I would suggest that the increasing, effectiveness in recent years of
European and Japanese competition reflects not only tlhe resurgence
of their economies after the cataclysmic events of World War Two;
from a longer historical perspective of a century or more, America's
great success as an exporter of manufactured goods was solidly based

14 j'he term "technological gap" was frequently used rather Indiscriminately to describe
any situation where there was a substantial produrtivit gap between the United States
;in.l Europe. To describe such a anp as a technological gap is. of course, to beg the
question of the cause of the productivity gap. In fact. much of the discussion of the
"technolo-ical gap" was focu-ied upon superior American mnfinaqeril practices.
1Charleq Kindleberger, "An American Economic Climacteric?" Chiallenge, January-
February 1974.
For n useful discussion of the rapid transformation of perceptions, see Harvey
Brooks. "What's Happenina to the U.S. Lead In Technology?" Hlarvard Business Review,
May-June 1972. Brooks states: "What are we seeing. in fact. is the emergence of an In-
'cr.' iinily international science. technology, and economic system in which the very con-
(ctm of superiority and inferiority has less and less meaning. The Industrialized countries
as a zrolup are apnronliinr some sort of saturation relative to past growth, and the United
.lt.iot. as the most advanced nation in per-captia GNP, has entered the transition phase
a few years in advance' of its competitors.
"Other induitrialized nations most likely will continue to close the .1an. hut will
aptroaeh a common .symptntp with us-that is. reach the same approximate level-
rather tlian pass us on a steeply rising curve. Of the factors in the United States that
have 'lwoil the crowthli of science, gnorrated the reaction against terlrhnnlnv., and pro-
,li,.-l the disenchantment with prnoluIctlvity, viany are also visible In other advanced
count ri,:." Hid., p. 112.








upon an unsurpassed endowment of natural iv-ources. This endow-
ment was far superior to that of any other industrial nation. We aire
now observing the effects of a narrowing of factor price differeiitials
between the United States and Europe, especially the historical cheap-
ness, in America, of raw materials as compared to labor and capital.
A century ago American labor was very expensive relative to chip
raw materials, and America's technological direction needs to be un-
derstood as an exploitation of the comparative advantage which flowed
from this situation. More recently, rising labor costs in Europe and
the rising relative cost of raw materials in the United States have been
loading to a convergence in relative factor prices between the two con-
tinents. We are, in this sense, observing some of the consequences of
America's loss of its earlier great natural resource comparative ad-
vantage. The sudden Arab oil embargo only dramatized a longer and
more pervasive transformation. Ironically, therefore, whereas many
Europeans were only recently complaining of the "Americanization"'
of Europe, the reality of the situation could be more accurately de-
scribed as the "Europeanization" of America. To be sure, we continue
to retain some very important advantages, such as those provided by
our large endowment of high-quality agricultural land which still
provides the basis for the export of resource-intensive products, but
our position of orenhelm;nig natural resource superiority is largely
a thing of the past.17 Nevertheless, our preoccupation with high tech-
nology products should not blind us to the wide range of economic
opportunities which are still available to us in more traditional areas.
Our capacity to export large volumes of agricultural products, as the
Soviet and Chinese grain failures of 1972 served to remind us, is likely
to remain one of our most decisive assets in the international economic
arena in the years ahead.
The second cause for the increasing concern over the adequacy of our
technological performance is the allegation that the rate of produc-
tivity growth of the American economy experienced a significant
decline beginning in the second half of the 1960s.
It should be said, first of all, that a decline in the rate of growth
of output per worker need not necessarily and by itself be a matter
of public concern. For example, when sufficiently high levels of income
and affluence are attained, people may exercise a preference for greater
leisure or for working at a slower pace. Such a preference, if acted
upon, may lower the rate of growth of output per worker, but it is not
necessarily undesirable. Similarly, the introduction of child labor laws
or an increase in the proportion of our population going on to higher
17 Thp analysis of international trade flows which, in the context just described. seems
to me to make the most sense, is the product cycle literature eminerginir out of R.'v;'i,,,'1
Vernon's seminal article. "International Investment and International Trade in the
Product Cycle." Quarterly Journal of Economics, May 19fr. Vernon attempts to go beyond
the conventional comparative cost analysis which accounts for the composition of trade
fl,,ws amnnn countries in terms of differences in resource endowments and f:ictor prices.
The essential novelty of his approach is his attempt to incorporate the life cycle of a
product-new product, maturing product, standardized product-into the analysis ,f
observable shifts in international trade and investment. In iloinr so he ai',,rd a prominent
plae to the nature of domestic demand and the gradual maturing of the new p.<1,i1 r.
His hypothesis predicts that the United States will tend to be an evporter of h!';,1 iiiMflP
and labor saving products in the earl'i .Rtaqe.Q of the life cycle of such products and an
importer of them at the later states. Vernon's analryis serves to underline once :szin
the importance of stuidyina the implicationsrof product innovation as well as cost-rdicinz
process innovation to which economists have devoted most of their attention. See also
Raymond Vernon (ed.) The Techlnologr Farctor in International Trade, Universities-
National Bureau Conference Series No. 22, 1970.






16

edlliucation would botlli have the immediate effect of slo\inglr down entry
into the labor force and would unfavorably aftleet thle ecolionly's out-
put. Alternatively, certain kinds of economic activities mi)ay ,be dis-
contimned. or discontinued at specific locations. because of their
undlesiral)le environmental impact. We might decide, for example, to
dlisc(ontinue a strip mining operation because of its unsightly con-
sequences, even though it meant that we had to subst itute higher cost
energy sources. Or we might prohibit tlhe location of a paper mill or
a power generating plant on an attractive body of water because of
the destructive ecological impact resulting from a large quantity of
effluents. Similar observations might be made concerning measures
taken to ensure worker or consumer safety. Obviously the individuals
making up our society have many goals, some of which can be attained
only at the expense of measured national output. Consequently, a
slowing down in the rate of growth of GNP per worker should not be
regarded, ipso fact, as a cause for national concern or as evidence of
the need for some new government policy.
One need not search far for reasons for being skeptical of the view
that policies should 1e formed solely in terms of their impact upon
measured GNP.
It is by no means obvious, then, that a slowing down in the rate of
growth of productivity is necessarily a reflection of technological
failure. In fact, a variety of reasons have recently been advanced for
the apparent retardation in the rate of growth of labor productivity
seen in Table I.
TABLE I1
.4Annual growth
rate of output
per" man hour
(ririate dometic
econ.onmy)-percent
1099-1929 -------------------------------------------------------- 1. 7
1929-57 ----------------------------------------------------------2. 4
194-55---------------------------------------------------------- 3.11
1955-65 ----------------------------------------------------------2. 51
1965-71 ----------------------------------------------------------1. 88
1 First two rows, John Kendrick, Productivitit Trend.Q in the U7nited State., Princeton
1'nivr.rsitv Press, lil61, p. 72. Rows 3-5. William Nordihaus, "The Re.,tnt Productivity
Slowdown," Brooklin.,z Paplr-. on Economic Activiti, 3. 1972. p. 492. Edward Denison's
estimates for the whole economy show an even sharper decline in the growth rates of
national income per enmrlnyeved per-on. This fi.,uro fell from 2.51 percent for the period
15 ,,--;4 to 1.57 percent for 19G4-69. See Edward Denikon, Acrovuntihq for United States
Economic (Growu-th 192.9-1960, The Brookings Institution, 1974, p). 124.
And, of course, the effectiveness of any policies introduced for the
purpose of raisins thie r'te of productivity growth is likely to be
sensitive to our analysis of its cause(. Christene'-n. Cummings and
Jor::en.son, for example, have ar',ed that there wa; a slowing down
in the rate of growth of the capital-labor ratio during the 1960s.11
Such an analysis suggests the desirability of polities directed toward
raising the proportion of our resources devoted to capital formation.
perhaps a more favorable treatment of profit receipts, the raising of
surpluses through the government sector, etc. Kendrick has sug(aested
that a factor in the decline in productivity growth between 1966 and
1970 was the decline in the proportion of expenditures upon ihtanqibTe

1' Laurlts Christonsen. Dinnno Cummlngs. and Dale JnrPnsnon. "An IntOPrnationnl Corm-
parison of Growth In Prnduetivirtv. 1947-73." iinpublished paper prpi'rnd for preqpe.n-
tion at the Conferpncp on New Dpvelopments in Productivity Measurement. Willianmsburg.
Va., Nov. 13 and 14. 197'i.





17


capital, parti.-idaily upon l},),I which peaLked in tlie .. id-19; -.D
Others have argued that tire wai a deno(lralphic pli1noiuenon at
wNork, leading to aln altered co(-mposition of tle labor force.-' According
to this view tI e -i2'nificalil factor was a rise in tlie proportion of young
people (and women) inll tlhe labor force.
To the extent that the slowing down of the rate of growth of output
per worker was due to a rlSlng proportioll of le-- pro(iductive yomg
people enter'ii!g tlhe labor force- -a consequence of the "Baby Boom" of
the post.-war de(ale-it is obviouslyv self-'orrecting, and 1no new policy
meiasurl'es are (Ialled for. Nordhaus and others liav e argued that the
slowing down of productivity growth is a cOlslequlence of shifts in the
compositioll of output, it:.-li" the result of tle c'. 'ig composition
of demanlld l-:-ociated with rising' incomes. Norldhaus' .A i -.1 finds no
widespread evidence of a slowdown of productivity growth in in-
dividual industries. However. lie concludes that agr te rowthli has
slowed down becaulsbe of sectoral shifts inll output and employment out
of high productivity sectors and into low productivity sectors-e: ',.n-
tially the service industries. The analy-i; raises a host of troublesome
questions.-- not the lea t of which is the reliability of our established
procedures for measuring the output of the service industries. In
particular, h]ow do we measure output and productivity in the large '
and growing government sector? The present measurement conven-
tions of the Commerce ID)epartment undoubtedly impart a downward
bias to measures of productivity growth in the government and other
service sectors, and it seems therefore that our current measures may
not be a fully satisfactory guide to policy issues. How should we
measure the output of the educational sector? What exactly is its out-
pllt? 23 Are we prepared to regard an increase in the student/teacher
ratio as evidence of the increasing productivity of teachers? (For your
own children?)
It seems to be particularly true of many services that efforts to
increase their productivity are associated with distinctive, and often
objectionable, alterations in their nature and quality. Finally, the
slower rate of growth of output per worker may simply be a reflection
of short-term cyclical fluctuations and may not therefore portend any
serious decline from higher long-term growth trends.
Having said all this, technological change remains a major indis-
peji:able source to which we must turn in seeking to generate highly
rate." of productivity growth, as well as solutions to a wide r:uge of

John Kendrick. "The Productivity Slow-Down," Busines.i Economicis, September 1071.
pp. lO-11. It would he surrn!.-in.. however, if productivity --rowth in the economy a
a whliole could be so cl.i,.ly liki.kel to annu:i l variations in R&D. An,I. from a loi:-'.r 't1imO
perspective. Arrow has stated: "The enormous acceleration in R&D (even anunrt fr, n
gove-rnnioental supliiort) over the p',ist 30 years has been aceon '..i,'ed by only a 'ild
increase in the rate of increase of total factor productivity and by no incre'ae a.t nll in
inventions, at least as measured by patents." Kenneth Arrow. Science. 9 May I i; W. p. 7i.
20 Geor:"e Perry. "Labor Structure, Potential Output, and productivity. Brookik!;
Paperi oMI Economic Activity 1971.
2" William Nordlhaus. "The Recent Productivity Slowdown," Broolinq.s Paper. oo Eco-
nomic Activity ', 3. 1972: William Baumol, "The .M:t roeconomics if Unbalanced Growthli,"
A;o'erican Ecrnom ic Review, JI Ii', 19l17.
22 A skeptical view of the Norlhai s fin]diln. based upon a simulation analysis to ideter-
mine the quantitative silli.i-.ii .n, of the intersectoral kli'ft<. is presented by Michael
Gro-imnn and Victor Fu.'h-. "Inter'rectoral Shifts anqd i.-',_r,.ite Produrctivity (Cl.inze"
Annals of Economic and Socia7 Measurement, 2/2. 1973.
2 One of the peculiarities nr the service sector is that r',d,'irtivitv 1,I dterniin b
the behavior of the "conninumner" as well as that of the "-r',,dueer." Productivity in eluca-
tion depends not only upon the activity of-the teacher, hut u -'n that of the ind lividial
student as well. See Victor Fichs, "The First Service Economy." The Public Ifte'est'.
Winter 1066.


79-90.r-7f- 4







Spci fic prole,. inll the yc:alr ale;d. The desirability of productivity
growth i, ill mv view, i no way di111ilislied Iby tlhe increasing concern
over teinvirnillm1e'ntal p1rollesll.z. Implrovelnents in environmental quality
will require a ra IU, of programs fr dealing witl1 pollution in its various forms. The
prospects for aw ieving such diversions. I think it is fair to say, will
lbe greater where they do not involve substantial reduction in real per
capita incolnes. Tint will Prequire contimnious further productivity
r'nvtl. Perhaps evenl more important in the long run, resources will
need t) e commininitted to modifying our present technologies and per-
haps dleveloping wholly new ones. technologies which will not. be
:;'companied by so nuimnv of tle ol)bnoxiolus side effects which plague
tIlose presently at our disposal. The Iossilbility for achieving these
miore recently articulated goal, wAill therefore depend very much upon
our capacity for controlling and directing our technological capacities
ill specific direct ioi.s. I turn now to olnie considerations which are
relevant to the formulation of policies directed toward these ends.

THE FORM ULATION OF TECHNOLOGY POLICIES
The first thing that needs to be said is that the rate and direction of
technological activities are highly responsive to market forces. The
mnitations of market forces in generating an optimal allocation of
resources with respect to knowledge-producing and new-technology-
producing activities have been carefully scrutinized over the past 20
years, and need not be rehearsed here.24 The basic point is that even a
purely competitive economy will underinvest in knowledge-producing
activities when the outcome of these activities is highly uncertain, when
successful outcomes are likely to generate widespread and highly diffuse
payoffs, and when the market and the institutional context do not
facilitate the private appropriabilitv of those payoffs. American
history, going back to the establishment of our land-grant college svs-
tern and agricultural experiment stations, and even farther back to the
establishment of our patent laws nearly two hundred years ago, is full
of attempts to develop new institutional forms to accommodate various
categories of "market failure." In our proper concern with the imper-
fections of market, forces in providing a socially optimal system of
incentives, however, we should not forget that the market remains an
immensely powerful device for marshalling resources into productiv-
ity-increasing activities.
In order to be successful, policies should be devised with an aware-
ness of the sensitivity of inventive activity to the forces of both demand
and supply. At any time, demand and supply considerations interact
to provide, for the whole range of inventive possibilities, a configura-
tion of profit expectations which, in an economy such as ours, shape
the allocation of inventive resources. On the demand side, the need for
any given invention will be influenced by (a) any increase in revenue
flows or (b) any reduction in expenditure flows which are associated
with the employment of the invention. The expected returns to an in-
vention, then. will be affected by any of the forces which alter the
demand for the final product to which the invention may be related.
4 licb.hnrd Nelson. "The lSimple Economics of Basic Scientific Research." and Kenneth
Arrow. "Economei Welfare nnrl thlip Allocation of Reso.nrres for Invention." both reiirintr'd
in Nathan Rosenberg (ed.), Tlie Economic.Q of Tchlinological Change, Penguin Modlrn
E.r'nmics Readings, 1971.







Such forces might include changes in per capital incomes, .liaig.- in
family size and age composition of the population, urbanizatioln, etc.-5
On the supply side, the prospective cost of an invention will depend
upon the availability of all the factors involved in inventive activity.
Such costs, therefore, will reflect the scarcity or abundance of these
factors, and, in addition, any qualitative aspects which are relevant
for the productive process. The capacity to solve certain kinds of
problems, which is the e.seiice of inventive activity, will depend upon
the supply of labor possessing the requisite human skills, training an1d
talents, whether acquired through systems of apprenticesliip, on-tlie-
job training, or formal education; and upon the, state of organized
technological and scientific knowledge whicli can be made available
to potential inventors.-'
Government policies toward technology need to be formulated in
terms of the impact which they will be likely to exercise through the-e
two sets of forces. However, in an economy such as ours where the
capacity to generate a high level of inventive activity is demonit rably
strong, a primary goal should be simply to ensure that the appropriate
channels are kept open, that, for example, innovative activity is not
discouraged by legal or monopolistic barriers to entry into an industry,
by obsolete building codes, or by trade union impediments to the
utilization of new inventions. With respect to our present energy
concerns, at the very least government regulations which have the
effect of restricting the upward movement of natural gas or petroleum
product prices should no longer be tolerated. Artifically low prices
encourage rather than discourage consumption and they seriouslyv
weaken the incentive to explore for newv sources of fossil fuel deposits
or to invest in the developmentt of new technologies which offer a pros-
pect for increasing future energy suppll)ies.
In the past couple years we have been treated to the rather unedify-
ing spectacle of government by exhortation. The public has been
urged to alter its behavior in ways which will more directly accord
with a changed definition of the national interest. At the s:iiie time,
however, very little has been (lone to provide the ) public-indhi-t y
as well as households-with economic incentives to bring about the
desired modification of behavior. There is much talk of energy con-
servation but fuel prices remain artificallv low. largely as a result
of government regulation. Indeed, some of the goals, such as ener.vy
conservation, pollution control and safety, often involve minutiially-
conflicting policies. Automobile emission control devices reduce pollii-
tion but raise energy consumption, heavier cars are arvuablvy safer
to operate but also raise energy consumption. The goals bein laid
down by a growing number of government agencies are often incon-
sistent but, even more often, they fail to enlist tlhe self-intere-t of the
individuals concerned. The result, more often than not. is a growing"
sense of cynicism and frustration which contribute to an increasing
degree of hostility to. and alienation from. the federal government.
On the macroeconomic level it needs to be eml)hasizedl that innova-
tive activity is not likely to flourish in a sta..natina or slowly-g'rowini"
2 For an nithorittifvo tropitmnt of tbe rolp of ,nt"nd forces In slinpin'z inventive
activity, see Jacob Sehmookler, Inrenftion-,and Economic Croirti, Harvard University
Pross. 1966.
2For a dltcussi.,n of thp rolp of smr lv sidp vnr"fNl"M in the Inventivp proce.s. seo
Nathan RosPnhPr., "Sci,.n,.. Invention and Economic Growth," Economic Journal, Marchl
1971.





20


econoliy within a substantial unemployed 01or underemployed labor force
dand ai] uIdeiritilized capital stock. Under these conditions the incentive
to lildez'takZ. innovative activity will be weak and the incentive of
workers to opposee the introduction of inventions, especially labor-
1v1in in entions, will be strollng. Monetary and fiscal mleaslres which
\vill a.-:-re a siirtained high level of economic activity will therefore
strenlgthen both the incentive of business to introduce inventions
a., welI as the willingness of workers to make the necessary accom-
modation:i, involved in their introduction. This point deserves par-
ticLulair c iplasis because, as a result of the preoccupation in recent
years with "orowthI accounting" and thle attempt to measure the con-
tribt iion of technological progress to economic growth, there has been
a serious neglect of the reverse relationship-the contribution of
e',*on ii gi':wthi to technological progress. There seems little doubt
that that. contribution has been a powerful one in the past-that
expectIations of ]iioli rates of future economic growth have provided
highly favorable environments to the willingness of individuals to
commit resources to those activities which generate technological
progres+.
But this has been so not only at the level where individuals and firms
have made commitments of resources to developing new tecmhnologies-
i.e., inventions. It has also applied with respect to adoption decisions
concerning these new technologies. The point cannot be overem-
phasized that new technologies exercise their impact upon the produc-
tivity growth of the economy, vot as a function of the volume of
resources committed to the search process or even the actual achieve-
ment of new inventions. Rather, that impact given the productivity
differential between the new technology and the one. which it dis-
places. is a function of the speed with which the new technologyV is
diffused throughout the economy.27 New technologies generate produc-
tivity growth only to the extent that they are actually incorporated
into the economic life of the society. In this sense it is the decision
to adopt which is critical. Such decisions are, in turn, highly sensitive
to expectations concerning market conditions and. in particular, to
expectations concerning the adequacy of the demand for the product.
It is my distinct. impression that, in many areas of our economic
life today, and perhaps most conspicuously in the enerov field, impor-
tant innovations are being held up, not by supply .ide considers-
tions-fliat is to say, by the technical a fipncifi to innovate-so much
,9 by the pervasive uncertainties over tlhe state of future demand.
Such uncertainties understtandablyv generate a strong reluctance to
undertaLo ilnre-scnie financial commitments which will need to be
str in r out over long time period.. I believe that one possibly fruitful
route through which technological improvements of n deczired hind
can be produced is byi government meaiires to redluce the uncertainty
over the size of the future demand for certain classes of products.
Government. federal, state and local, can shape the direction of
technological change in such nreas of increasing concern ns environ-
m.ntfal pollution and energy by offering contractual guarantees which
will ,s.iire. the existence of markets for tecbnolozies which will meet
certain performance specifications and pollution-redaucing require-
ments. Or by commitments which will provide certain minimum price
27 5P Nathnn T1nsPnhPrg. "Fnartnr Affpetinz the DiffisInn of Tphnn1nrv." Chrntpr 11
In Nathan Rosenberg. Pv'r.specfire. on Trr irnJooi, Cambridge University Pres. 1976.







guarantees or other financial assurances for firms undertaking to
develop the technology for the exploitation of new enero'v sources
such as coal gasification, liquefaction, or oil shale. The development
of such alternative energy technologies is characterized by long lead
times, technological uncertainties, and very large scale financial coim-
mitments. The willingness of private industry to undertake such
commitments can be vastly strengthened by the .assurance of -o:ne
minimum demand for the eventual product, if it meets appropriate
performance specifications. Needless to say, the potential elements
of waste and misallocation in such arrangements are great, and our
past experience with government price supports in agriculture iden-
tify some of the pitfalls. Nevertheless, if the right combinhition of
assurances and incentives can be contrived over the relevant time
horizons, the social payoff may also be very high. Alternatively,
subsidies via tax reductions or more direct means are worth consider-
ing in the case of the development of new technologies which are
regarded as fulfilling certain peculiarly urgent social needs.
In some respects public policy toward technology may be much
more effective if it addresses itself energetically to more modest goals
and issues in addition to the big ones. We devote a large part of our
concern and public dialogue to such large questions as fossil fuel vs.
nuclear vs. solar energy, fission vs. fusion, etc. In our preoccupation
with the big questions we neglect the fact that there are literally
hundreds of things which we can do now, with our pi.--olnt tech-
nology, to reduce fuel expenditures. While no one of these miay be
very significant (actually some of them, even individually, are likely
to be quite significant), cumulatively they could be of enormous
importance. Getting people to respond to these possibilities for fuel
savings requires a combination of forceful political leadership to-
gether with the introduction of incentives into our economic life to
induce people to reduce fuel consumption-smaller cars with less
"performance," more extensive use of home insulation materials, sub-
stitution of glass bottles for aluminum beer cans, etc. These and
innumerable other possibilities for fuel savings are readily attainable
within our present technology. What is required is a readiness to
induce people to behave in energy-conserving ways by a more sys-
tematic exploitation of market place incentives, including in some
cases a further strengthening of the incentives to socially-optimal
behavior by a selective resort to taxes and subsidies. The obstacle.
here appear to be primarily political and not economic or technologi-
cal. While one may reasonably anticipate eventual technological
solutions to these problems, such solutions are likely to occur in the
long run. In the short run we can take far more effective steps within
the framework of our present technology.
To make a closely related point. The federal government in the
energy field has, in the postwar years, poured a ma:ive amount of
money into the development of nuclear energy. I am not concerned
for the moment to question the wisdom of that decision or t1l, manner
of its execution. I do, however, want to point out the unfortunate
consequence of having placed all the energy eggs in a single ba.lket-
especially a source plagued with miumerous uncertainties-and almost
totally neglecting all other options. It is truly astonishing that we
still know so little, in operational detail, about the technological







possibilities of energy alternatives such as shale oil and coal gasifi-
cation and liquefaction, in view of America's abundant endowment
of the appropriate resources. But, although the problem has recently
ari.-en and presently confronts us most urgently in the energy field,
I a111 anxious that. my point not he confined to that context. The
general point to be made. with respect to government, technology
policy, is that the national interest may require that we develop a
capability for shifting to alternative soullrces of materials in various
reIS.. ThIe point is, to be sure, one which is more urgent in an inter-
national environment where access to vital raw materials is likely to
1)e manipulated in response to either political considerations or the
prospect of exploiting some monopolistic or oligopolistic advantage
in world markets. Nevertheless, our interests in many areas dictate
thle wisdom of maintaining a capacity for flexible policy responses
to chlanging conditions (This is especially true when thlie productive
activity is one involving long lead times). Such flexibility in turn
would require some minimum, ongoing research activity at the engi-
neering and technological levels, and possibly even some support of
pilot or demonstration plant, projects in specific cases, in order to
facilitate our capacity to move to alternative technologies more
rapidly than appears to be possible at present. In a world of height-
ened political uncertainties it would seem to be doubly important
that we should, as a matter of national policy, develop a capacity to
reach specific goals via a diversity of routes.28
An implication of this discussion is that we have undervalued
knowledge of a purely technological or engineering sort. I would
like to suggest that this is at least partly due to the fact that our
thinking in recent years has been dominated by an overly-simple view
of the way useful technological knowledge is generated. Essentially
this view states that technology can be sufficiently understood by
regarding it as the application, to productive activities, of scientific
knowledge. It is easy to understand how such a model has developed
and come to dominate our thinking. Technological innovation in the
twentieth century, and especially in the past 40 years or so, has thrown
up an increasing number of instances where major breakthroughs-
for example in electronics and chemistry-have been dependent, upon
scientific knowledge of fairly recent acquisition.
I do ,lot want for a inmoment to challenge the notion that scientific
knowledge is plbin an increasingly-important role in the develop-
nme unt of new thlhnoloi,.. I expect that dependence to become even
,reater in tie, years alea(l. and I believe that the case for continued
federal si portt of ba-ic rc s rch, as opposed to tihe commercial devel-
opmient of nexv technologies, is overwhelmingly strong and should con-
stiitute a top priority. I do, however, want to insist that that model-
of technoloTv drawing upon and involving the application of recently-
acquired scientific knowledge-is only a part of a much larger and
2R Ti" prohblTns discussed in this paragraph arc typlfillv short-channed by the analytical
nl'I)-iratiu of th0 Ponnnii-t. which presumes that profit-maximizing agents can move
froilr ,n'vn!ir n wide rainc, of "known" alternative technologies. In fact. given the limited
nature of detailed technical Information.' moving to alternative technologies which reflect
different sources of materials or rliffpring factor prices Is far from the easy and effortless
(i.e.. cntle') matter that It Is made to appear to be. The smooth, continuous isoquants
of microeconomic analysis scarcely ever have a counterpart In available knowledge.
l-." ionl1v in a high technology world, the acquisition of suceh knowledge Is typically both
rotlv and time-c',msiininv. For further rliscussion. see Nathan Rosenberg. "Problems in
thp economist's eoneeptual1iatlon of technological Innovation," History of Political Econ-
oi,'t, No. 4, 1975.





23


more complex system of relationships and information flows. The point
is a vital one because our preoccupation with the science-tceliology
interface is leading us to pay insufficient attention to many other im-
portant aspects of the process of developing new and improved
technology.
The question of the dependence of technology upon scientific knowl-
edge is a conceptual minefield. It is essential, first of all, to distinguish
between the total stock of scientific knowledge and recent ;ficremects
to that stock. Furthermniore, it does not add to conceptual clarity to de-
fine science so broadly that it becomes virtually coterminous with all
of human knowledge. Once such a definition is accepted then, indeed,
all technological innovation must involve the application of science.
Such propositions then become simply uninteresting. If science is de-
fined, as it ought to be, in a more restrictive sense, it is much more dif-
ficult, to show that technological changes are tied to culr, cut or recent
increments to that stock of scientific knowledge. Failure to make such
distinctions frequently leads to platitudinous or merely tautological as-
sertions about the relations between science and technological change.
A more useful perspective is one which recognizes that there are dif-
ferent realms of knowledge-including the scientific and the
technological.
One of the problems created by the crude identification of science
with all knowledge is that it often leads to the incorrect assumption
that we already possess the essential knowledge to achieve certain goals
and that all that remains to be done is to go out and apply that knowl-
edge. In fact, often the knowledge itself-which is technological
knowledge-simply does not exist. Many American foreign aid pro-
grains. after World War II, which required for their success the trans-
fer of technological knowledge, foundered over this issue. Often we
did not possess the appropriate knowledge in the first place, and there-
fore we were incapable of transferring it. Such difficulties were often
compounded by the failure to recognize the location-specific nature of
much technological knowledge pertaining to agriculture. Fortunately
this range of problems is now being dealt with more successfully by
the establishment in recent years of regional and national agricultural
research stations throughout the world.
What has to be recognized is that much of the technological realm
remains, to a considerable extent, "self-contained" in the sense that
it exploits knowledge which has been produced within that realmn and
not imported from the scientific world. Such knowledge is often a by-
product of the productive process itself, in the sense that participation
in that process generates knowledge about productive relationships and
new design possibilities which are unlikely to be generated elsewhere.
Furthermore, much of the work of the specialized engineering dis-
ciplines is of a kind which cannot be adequately subsumed under the
category of applying pre-existing scientific knowledge. Indeed, it may
be asserted that. it is a major activity of the engineering profession to
develop workable techniques which specifically bypats the need for
scientific knowledge-for the excellent reason that the appropriate
scientific knowledge often simply does not exist.
Much of the most important work of engineers has involved the
design and development of products with certain performance speci-
fications and without the guidance of systematized scientific knowl-






24


,. Ill aii-io ?I ai iiii- :md flu id iil m 1:luiimic-. ior ,x:m pl., engineers
I:' V', ,4iiHtiH,.ly 1),4idledl infl 'iniation S ilIiciellt for a safe ;nln. worknable
soluti,,n to -:oiIe tIiiii,'-:1 ploblemll ],,r before -'ienitific'.Iidcr.-tand-
ing \\" ;i .hli,,v,,,. Tcchnol,:'i,.;! pro,,-l,- on( tele, m turlbie ])ns
ti,1,. i by e mpiri-il *meai.s. well ili aol\vice of -.'ieentifi understanding.
n vil.rly, over III.e via r- <-.i' important piecs of "-]ardware" as ship
liiill. ;id p),i,'ll r.-:. water turbine-R. airpl:1ie fiiselagcs. internal conm-
bust io aiid ,iesel eonileS liave al1 achieved their optiilll design
5<;1pes. by empirical iie:, I.-. well in advalne of :,eint iii' understanding g.
Indeed(L just as t!i. attempt to under-tand tlhe 'factors determining the
l ,1'rforiiia II e of the steam enarin, historically gave ris.e to the laws of
thermodynamics, so has the attempt to understand tlie principles deter-
mining the operation of oalreldy-cx.;.,?;ir technology 1ji\e rise to tlhe
development of further new scientific knowledge. Thus the relation
Iut ween the realms of scneie'e and technology i. not a simple alnd linear
one of caiisation, but includes much more intricate loopz and feedbacks
tI II is generally recognized. 29
Moreover, scientific progress is and always has beeni highly depend-
ent u11pon technol oical improvements which enhance our capacityy to
ol,-crve :mid to experiment. Tjlis is particularly itrle in the realm of
instrumientationr. Our plre-.nt knowledge of the natural world, rangigil,
from miirobiology on the one hand to .osm.iology on the other, would
11ave I lee l inconceiv'l able without the microscope and telescope. Further
impr-,vement in thio-e, "old'" techlmololfies holds out the promise of
fuidamental scientific breaktlhiroughs in the yeai-s immediately ahliea(.
Superior instrumentation-el(ectoni,-' microsCop)y, computers and per-
haps. new technliiques such as L.E.E.D. (Low Energy Electron Diffrac-
tionl)-is bringing us within reach of a genuinely predictive biology
and a theoretical chemistry of large molecules. The imminent placing
of powerful telescopes in outer space will almost certainly lead to
fundamental increases in our knowledge of the universe, as these new
observational possibilities lead to a resolution of conflicting hypotheses
or perhaps to totally new ones with respect to quasars, "black holes,"
the red shift, and the theory of gravitation itself.
Another basic difficulty in understanding the way technological
change contributes to productivity growth is that we are all but un-
aware of some of the most important routes by which this contribu-
tion takes place. The difficulty in perception seems to be due to a
variety of causes: to the small size of individual improvements, to a.
frequent preoccupation with what is tech nologically spectacular
rather than economically significant, and to the inevitable, related
2 This i a big subject which cannot be pursued lihere. It is worth insistin.. however.
that even in some of the nist advanced of our high technology industries, basic research
receiv-.l its stimulus from alre;idy-existing technologies. Thus, aft,*-r discussing varies
,1-vf(l'!, nifnts in post-war phyzics- nuclear physics, solid-state pliysivs, aIs-dschrnrge
I hl-ii to..-MIarvy Brooks points out: "It seems to me noteworthy, in this history, that.
contrary to si.ino of the mytholbgy concerning the relationship between ah.sic and applied
Tini- basic science was motivatoil by the necessity to generate ancillary technology to feed
the dTv.loririirtt a d, exploitation of an initial invention, rather than vice versa. Of comirie,
this srarvli for -mn,.ill.iry technology often generated new inventions in uInexlected (lirec-
nti,-. mnd the fact that it was conducted in a relatively free nrid inner-directed environ-
iment hl ,e'!d increase the number of unforeseen by-products. Neverthele-s.. we must note
Tlh:it in ;lini',t every case a tehlinolzlic:0l invention pirecetded much of the e,:pIosive growth
in n.inv siubtieldls of physics." Harvey Brooks. "Physic4 nnd the Policy," Science, April
'.:*. KiC,, rp. 399. See anso M. Gibbons and C. Johnson. "Relationship between Science and
Te, ilin'ld,, .," Yature, July 11. 1970, which further underlines thie comnniplexity of the
.-*ion.r tfrwhnonic,-.y iniranetinns in the case of the development of tihe Iransistor-a cnee
which is usually n'1-nmmed to be a classic nnd unambiguous example of modern technology
building upon established scientific knowledge.








difliclIy wlIichl an outsider ias iII ateimpllltingi I to a )tppreclat ti I :i j-
nificalice of alterations within. glihly ,Olliplehx a11 elabo".telk dif
ferentiated technologies, especially wheni th--, a;lteration>s ar,- ild(ti-
vidually, not very large.30
It is useful here to think in terll- of twhe life cvcle of individiu i
novations. Major improvements iln p)roductivity ot'tenil (co'tieil' t(o
come long after tihe initial innovation as thle p)lohlut )O(es tHr10ou,1g1
innumerable minor modifications an d alte rations iM design1t to mlweet
the needs of specialized wsers. Widelvy Wse( pw,(rld ts like the elc" t ric'
Imotor, the machine tool (or i lie t 'al; isolrw' expric aw(', ir1lileritio
of changet's as they are adapted[ ti il he varVinl, M: 1 eL, Of' i eteds 4 of 1lti-
mate users. Consumer dulrables have typl)ially g 0ole th11oug parallel
experiences with especial emphasis upon expalding 111t11ie quality ragre
in catering to different income Icateories. 11ch ldili, io' ;11 c!
achieved b)y unspectacular deshil.n and elgieering< Zctiviti, 1 1t th1ey
C(')I.-tifute the sub an'ce of m luh Iprodliuctii ty iV Ipi ee1 W10 and iti-
c-' : -e,: consumer wel l-being i ill 1,1 I -- ri ail econIo i ics.
Much of the technological change which goes on i an dvan ied(
industrial econoyiv is, therefore, if 11ot iflvisible, ait least of a low
visibility sort. It includes a flow of rallher 1pros:aic ili o proV, iilfets ill
such areas as mlateri'ials handli,'ll 1 Ile redesigc I of p1roc!,ive e(iuip-
ment; and final products for' ro''eater co( veliml'e. a11(d meast1'sures w icl
reduce maintenance and l'epail (osls. as il modlo1111' 1laCh11(inerv d(-
sign.32 In metalwor'king and introduction of new an, d harder material
in the cutting ed:_'e- of tool- lias niade p)-:ible I steavlv acc('elerationl0
in tihe pace of work. In tlhe steel inlil sti 'v the coltiliuedi llItoion il
fuel requirements per ton of outpilt., a treid wli] ich' cin 1)(, traced( well
b!lck into the 19th centlIry. contiliues liabatied. Tile ctuilillativ, ill-
pact of tho,,e individualliv sma1 ('llalnges las, aglail, b'ee very suil-
stantial. Whereas it required a190-t po1)1)01d(ls of' c(ke to p)ro(llilce
al tonl of pig" iron in 1949. by l.';' if re l(,iri'edt ( v o20)0l 1ollllo.;
Similarly ill electric power geeat io1, where tlitW 011-ie lin rate of
growth of total factor lp'o(llc1ivity las been Iigl e' tIlai ally otlie"
American industry.'" thie slow\. cmlulatitv' imlprovelelnllts- ti the c11-
eieucv of cenitr'alized lherl-ial p)over' )lalts l1,:ve .Tl:,Itcd eor'in--
lonlg-ternm increases in fuel ecoinovmy.

As Carter and Williams aptly point out. "Tie examples of the ti pl'Tl-ni ,f siioro
und technol* 'v to indu-ir which come most easily lo inid a;rv fthe revoliiionl:ry chli-',.
the basically new prodlit--- ieniucillin, nylon. Terylene, television sots. lthe t'ms iUmhioin". Ilh
electronic computer. Changes in proeesses-dhiih draft spiuinn-'. shell miouldin-, p'lliefizn
lionll -tend to be less well known, unless they are embfodied in some lfi:e 1 i clin. It i-
thin's,. rather hwni pro(,-''..., which catch the public e ye. But for eve" ra- ical idilUov-
lion which thus rises to fame. li,. re are tens of thousand s of minor iiilprvenents i
products and processes, which (thlioihi individually not a ciip, Ile htreak wil the pa-,
may over a period of years ornite sonietlin-' quite new. 'oin ider. for inst :iue. t",,
evolution of the i',' n-en-'inod aircraft 1'fr'iii the first uuimill. slow and ,-i' I
to the Super-Constellation. capable of maintaining re.nilar and fast services over Ihusipn'.
of miles . (T)lie closer one looks at industry, the,more plain it beomes thi,:t many '','
celi,iues are illhe product of countless steps of evolutionary deve-.liu ,it.' (-. 1. C'arr r ,',
B. R. William<-. Industry and Technical rri ,cs... Oxford UTniversity Press. 1I7,7. 1'1 1 I
See :lso Nathfan Tlo-erihb ,'r. Per 'fpeetires on Tvrrl. olt',, op. p it., C el ators 4r ;1 nd 1
.1 For example. In the construction Indu, trv "Therr are .1 plethora of 4materi5I;s hnallii1
improvements. They ran_,- ir rnm hoists of nil tylpe, to convey.-r-. to h-"ll r li.ne. !,. 1,
powered concrete Ihies. to more handleableo p:lh.i,- on thlie part oi uipiers. T-wi-Y
iil rnvoineints ha:'v' oiP eontinnoui s anTII prohal-r mi single clhan i 4e i ) inlividnallv sin-
nific:int . ." A. D. TAttle. Inc., Patterns find Problems of Tr' niriai Tnnoraltion in A trri
can, bidi,,.r.,. Report to Natinn.,il Science Foinl .,-iti,,. September 1I;'!. T). 1:'2'
:'' TnnmerabWe suclih exaNimples ma hlie -v f'ind in U.S. De ,f. of Lbihor (B L.S.) "'I', n
lo*qi, a Trends i 136 1rPrirr American 1liC.J.i',., 9".4, and 'Tece iilih,ii 'f, 7r h l iin J' c;
American !'1u'tfries. .lOr',i. Bulletin No. 1474.
3 P, ure:in of 'rinr-. Dept. of Interior, minerall F,,rt,( and Problm,. 197,. r.. 4T0.
John Kriidrir'k. Proruhr-fiti, 'frlfd.q in the United State., New York. lPrin.'eft l'ri
verify Press, 1961, pp. 1..-:,7.
79-91:9t 7 7i1- -5-






26

A strra'ii of JlliJIr p1a;iit imiprojiviemets. incldiilL, lie steady rise
in 'e1.:itin.g Ilili ati'tI.'- ;ild p)l'-uIlrts milade possible bv- metal-
ivuiral ipproveiit-It.-. 'iich ;i. w ;11W ill .Itls andl(I th1e increasin-
)plji-ti,-it il!on of lb)iler d:,1-:i, :lId rei.llt in inicreasel capacity, have
-, l)ly rVi.- (isl rv it o)put lpvr ilnit of el. Thlie loiu-teni ciunula-
live 11i11)porti, of sutich individually .small ilmprI-ovements may be indi-
cated a- folloNs: It reqIiired a1:(,( -eveii po;liis of (coal to generate
a kilowa;it-1ioii of ci tricit v in ]:(in, )i1, tll. -aine aiinoiint of dee-
i ".it v 1cm!(1 L .g, l eri Icr ll Iv i-. i:n iiine-tentli h. of' a pound of coal
i, t1r lOw u;s.3 Bult even if.s figure un'1'-Mate- the full im iproveient,
in tle u tiliW;ition of .1enrc,P. -OIure's.
1i)riiiz 1i1, 50-ye'ir period 1907-1157 'red ulilioii of 1Hie tot;i1 energy required
or 1-4 t in ci(;1 iiiling. in novig.r the coal from mine to point cif utilization, in
,. verlinig to (.t ieii.;al Oeicr-.v, in ei vering tlih el(ctric energy to consumers.
(d iln ,',ii r in, cl'Ctric energy to (enil ii'- v 1;ive increased by well over 10
times the ciler:,- !(-,its supplied iy a ton of c'il as a nmitral1 resou rce.3
In the eonst auction inditi. irvy, oftei ir'arded as a stronghold of
traditionalism and 'olinservati-,iii. there have 1eei innumerable minor
ci ,<'f:ret cum!hitive -i, fle.i' .,. but it may be. that the
oW, 1111 iza I iolla] crin c.A : rh e beeni eveil more .-il ifi( ; it: iaii tlhe purely
tI i(' olol- ica] oa es.
Durinii the last thirty y ears, Ihe U.S. building industry lhas undergone a radi-
'a;l ']ian-ev of .l;iracier. Project and corporate size has increased greatly. Equip-
ment. iihteriials, design and p)lanniug practices. -ire in many ways of different
Ili;n thi, :1 wli ile' has un(lerZone major ci.h:inge, this change has proceeded in the small
s,'c-",eils 'if the industry throu'hli many small increments. There has been no radi-
.':11: chino. of rv'ilt technical and economic significance, which is associated
with a; .,-inle invenlion or family of inventions. Nothing is to the building in-
dlustry as synthetic fibers and finishes are to textiles or as numerical controls
:re t,) iit;i linel tool,. In Ilhe building industry, change has been evolutionary-
like the many small process changes. accounting for increased productivity in
machine tool- ;ind textiles-and much of the most important change cannot be
described as technical at all. It ha. liad to do, rather, with methods of managing
.m il i-rgatiziii the building process.87
A more general source of small, low-visibility innovations of great
cumulative zminifimnce i;1. 1een the multitude of ways in which main-
tenance and service equireiiemonts for capital goods have been reduced
and the iueful life of capital 2oods prolonged. The suiibstitution of new
material.---e.,., aluminum, plasticls. al(l a wide range of alloys-for
old onei-. :mld improved techniques of friction reduction, have led to a
considerable extension of the useful life of all kinds of capital equip-
11ent. Su(h! im Iprovemenlts lare rarely visible to tlie non-specialist.
The significance of s.mnll cimulat ive improvements is further under-
lined by two valuable studies. In one. Sa;muel Hollander's study of
tlhe du Pont rnyon plant-. the author attempted to determine the ex-
T ans L ;n,] i, :a m id S:mi If. Sliii.rr, Encreqi in thci Unilc'l Stalc,, New York. Randii
H i,, ... T ii ;'. p~i. i;n i;1.
Ilii' fori'Il Sta Itistics of the Unifted Sta '.s, 1I. 5i01. Soee also Williniii huglihes. "Sne,
r p.,tiprs in EI'-.otrive Power," in Willinin Caproii (ed.), Tcchnoloo'irl Clinrfc in RegRi-
hitdf Imd f,'i ;v <. The P.roi,:Lins I Tw.litution. Waslilngton. D.C.. 1971.
'*7 Ti .. 1%. .it, i /. ff jl, an ( Problem.s, op. rif.. p. 119. Tlie ;av i;iil; iity of superior
m: ttprin1; lirs been particularly iii,,,ortant to constrnclion. "Tniproivinents In ronstric-
li Wn materials makif i 1,,,i idi more pflicient utilization. Prints. for pxnnile. require les,
hi stl Ir'!, iration :-:nil I.s, effort In their w pplinlion. Adhesives are hehiiL more widely
4s1 dl to save filiic0 1*ld r'fil ci wall rosts. Plastics oflTer the ;ilv.,ntnageo nf en;)s of 1a1-i ndlIn
;;1d al ilitv to be 1iildvdil to ,,xfremely clo.p tolerances. Thle development of high-strengIli
I'4 rust-rev.i*.d '*lt steals allows r.imntruiciion in whici the steel is e.xopw 1l to tli weather.
I'l;h-r :ani other cost savin'.z of 25 ipor,'-nt can be re.alizvd )by the use of prestressed Con
rt hi :1i,4i hi 1].l:-io of( striitural stop] in some areas. Prestressei1 concrete also makes
...-. ili wide ,p..,- lhli.re colnmin-free construction Is de.irable. Brick .iisfruetiin h;',,
Ii .,ii.liod by 1h<1 l ,1 ,'\,Il,,iipent (if hiphb-strpngth mortar." I'.S. Dept. tor L:ilmr (Office of
1'Uodu(i ?il i/ Tiif)1d t'luIOrf/n.liel DcrclopwnCft8), 7Tccvnological Trends in *G Major Amcri-
f C1 Indilfslrie8, op. fit., lip. 12-15.







tlelt o whlichl obsorvod 'led 1' inis In .()d c I o p io ;W t }' U'-
ular plalits were thie 'e ill olf idemhllt ,i.'Ile ilalges in the !w ch iq
of production. Hollanders findll 11- arc of great interest in thlie Imreseiit
conltext. mnit co4st dhclined si'ikil, inl the ill PoIt lants which lil
studied. Furtherinorei, hie 'imlds tliat tlie conitribition of techuiical
change in accounting for tliee roductiolls was" of overwhelnigr i-
portaciie, And, ]ilost significant for our p)r,.nt purpose. is 1i,
finding( that tihe icuintlative effect of mlinor technical chanifi-i u)lonl
cost reduction was actiUallv greater tlian the effect of major feelhical

Hollander is, of co1i.se,. aware that there is anl ilnterdep)endence b)e-
tween minor and llmajor technical changes, anid that "without :o1ie
preceding major clhaiige the potential stvall of mliiInor changes wil l be
exhausted." '" Nevertilieh.-:, t1i u findlins lend ])oweei iii pport to the
view that the economic importance of inior technical iimprovelliemits
has beenl vastly Ninder: Iliiatted.
Hollander's findings for i'ayonli are closely paralleled by tho.- of
Enos in his study of technological chanite in p)etroleumi refining-,. Enos
studied thle introduction of fou milajor iew pl'oceses 1in petrolelitil
refining: thlermial cracking, p)olymnierization, catalytic cracking, and
catalytic reforming. In measuring the benefits for each new proc,-- lie
distinguished between thlie "alpia p)hase"-or cost reductions which
occur when the niew process is introduced-and the "beta phase"-or
cost reductions which flowed from the later improvements in the new
process. Enos found that the average annual cost reductions whieli
were generated by the beta phase of each of these innovations co-idelr-
ably exceeded the average annual cost reductions which were generated
by the alpha phase (4..5 percent as compared to 1.5 percent). On this
basis he asserted that "The evidence from thie petroleum refinilngy in-
dustry indicates that imiiproving a process contributes even more to
technological progzrezs than does its initial development." 41
Finally. alolgL these lines, ter1le is much evidence that this sort of
technological improvemienit characterizes the most advanced of the
high technology sectors. Kenneth Knig'ht, in su mnarizinc his work
on the computer industry, asserts that ". . most of the developments
in general-purpose digital computers r,-ulted from small. undetectable
improvements, but when they were conibined they produced the fan-
tastic advances that have occurred since 1940." 42
The accurate percepttion of the economic benefits of technological
innovation is further obscured by the difficulties involved in completely
identifying the growth in productivity associated wit', a given innova-
tion. Specifically. mtany of the benefits of incre('.ased productivity flow-
ing from an innovation are captured in industries other than tihe one
in which the innovation w\as i lade. As i-esilt, a full accounting
should, in principle, encompa:.-' all of these interi-industry ,lation-
ships. In practice it is difficult to identify, mich lms- mei.u e the-e1
benefits. Partly this is due to the fact that inldus-trial development
Ia Samuel Hollander. 7'/I Sources of lnerefl', -l .'fiiofn, -.: Tie ftu i Stb f d. 'ont (ha 11011
Plahitt.. M.T.T. Press, P-6-;7-, plp. 192-9:1.
s9) IAid ). 196.
40 Ihid., p. "2 0',..
41 Iohn 1n'-., "A Measure of the Rato of Teclit l,'i-ical Pr.,-i in tho Petr leun i Tr
iihll n Industry." Joiurnal of lfi. ihitritl] /m ", i'. (, .June l'i ,! p. 1 .0. En s1' fi ndin 1i'-
presented in mucH h '-';i..er detail in his 1 .ok. pc troleim rq i. 4 >,':t. M/ m, P0,1.
C'ambhridge. Mass.. 1962.
42" Keinnetlh Knight. "A Descriptive Model of the Intr:i-(irm Tnrim-:tiol Prtce j., .," J.(m "-if
of Bu.i;iic.-.s, October 1 !W17, p. 49".







lender ;, dlvriieii< t,,l)hlol)ry leads t wholly '.new patterns of special-
l;z;tit,,' bot1,i b firn anid by indilstry', s-o 1hlIt it is impossible to com-
mi ,.rt,, .pt:li/, ti,, ,*',n-cji~'TK,'< (if tf,'l~ol,,:i,'ilminnoaion within any
-, of I('-1 :1li1 d indstrinl 1Iouindaries.
011v- on nlielilit of 11he .hrnlin.,ri., pat tei'rn of industrial specialization
;- tie' eJ1rT 'cl('e Of special1ized firnms- and in(duistries which produce no
finli1 pr.,ni<( :it :ill, lIht only capital (Tods. Much of the technological
,: 12 olf tlhe( past two cent llies or so l:s been generated by these
-.,,i:ili-i firms. Ti, main benefi,.i:ri,, o'f ihlonoloieal change e in
(I -I' ,';ipit:l wnol inmdustrie-,: ire. in hlie firht instinle. the lbuv(ers and
1qt.' of iltle-i, capitall 4ool!- ill other indust1'4iie. bnu the total benefits
;'. ,.fi' '\,rv widely dlifiir-,d in :1in 11 NOn(TmV of iner(,nSinlv speeinl-
i:',d pl',, l i'v units Ilid high rntes of inter'indlL.tr'y pilliehnses.
T'lie \,:1 \- in whibh teeli,,lojii.l cliniiLc- (oninl-1 fl) ln one ilndustrV
'()-1 ii te o-,I)1I",:- if tt('lioIol(),,'i,'!l piroL''r:'1- Ilnd p)ldhltivity Lr'owti
iii ,tlIdr inld i-'rli- defv cna-v -llll ii;. trV .11 t -'I ,.'ori/.i t o ion. In s ;i, 1, iwl
!i(e vl:.ittioislii,- l,:ivc' evolv ,,l over aI eol-ido;',lte ]r.iod of tillie, So
li:il rel:itively -ibl)le reltiofl.ips lave (10n4l1,l2] INI w,.en v in dilllsty
:.id it< supplier of capilnl _,'oods. Eql1i i:('iit Iialikeri are :1 Ill:lino
i,'icOe of t.,i no]o;o'icn1 eliin e in ii:i n- iidi-t 'ii,.. [ferton Peck liha
sdloW'., in a ri -2Olrols v -iy. tlhe do("isive ipi-, )t;n 'i-, of iuipilient ili:ilkdrs
1l' tecl1IIOlofoC;i Cl dinn'f in e le n:hllliiilllii jn|di'-fr<.43 On mainy ocna-
-iori- (tie ,Iv:1 ;l*,iiu v of mew ;iid -lip.rio inetnils hans plaed ;i aii;ijol
1'1,,1 in l) 1ini 11i, perforli!!;i c' ,-aMnd plrdlletivitv iri11)prove(l-nrits t, n wil,(
1i':1 of ti1d( -ll :- -ill 1i1aelilne tools, elect lic iowe "'lllhTIt ion, jet
eniiiies ml[ t:i isi ;ht -. aimx other-. The avna ilbil iIY v of politics lhns
11(i it .f- iin raisi': pI'rfldnf ivi\ in '1 i mV ",*0l irlny, 1114(1ldiflno "olI" Ind"-iri,::. 1'or eaSticpsle. iltionli plastics
11e. l11Ol1e e(xpNjn-ive tliall wood )per Ilnit of weil,_it, they li 1 ie1h
.asie'("i to sl:)ape and to i](old.
As Ia esult. the use of pialt s in -ihe filInitilre mdindi iry Ims nllinde
po-.ible very signifi-ant ncreasn.- in -'al)bor p',1diietivit\. ISiI(. ti.
.93, 0s t1ie b)llildin indll-'y h1as 1)een th le recipient of 1ilii 'roiis iOew
ll:,il-i ,]) liiefs whi.li have found i wide r; :ifre of -.-r<--iiot thle lest
of whi.lb 1,t- 1 ileen (enYe;; p1;.:-ii sheeting which h :id(le po--ib1)le an ex\-
telision of tlle constilructil). y< ;1' !y providinI- proitc' ion onil tlhe bnild-
ilil' iite :l.':'ilh-1- iilieii..nt wcialhier. The siharI) 11 er(.-ee i thie tIII iliZa-
tion of to1ii ,'re1al fertilizer Jinputs ill AlmleriC:ll :,.I2iclltlliv c',i be
tii .ly explained 'iO the deeline in fertilizer i,.,,i. 1Thi s decline, in
lili., w:i- -o 'a .o in tlie f(lrti 1Z(i.r iIdutIr.4 Agricilltllture is illn f1i L i1,comlLe dii ly e-

\erto'i .1. I'el-. "Inventions in the Postwvar Amnerilcan Al.kiiliijinio lndiivlrv." iN
b I.e hrfte (iid Direction of Inventive Al lirity, opl. cit., pip. 27)9-29Q. See espo-imIllvl '"I'lble 1.
I 2. -,.
r, Z i Grili.!th*., "I'lie l-I,'niln for Forillizer: An "Er.'iiiliiini Interpretation i'r a
'ITbniiic'alJ .'_-'e." Jo?)urnatl of I'rlIm Economics, A.ilwiist 19.-58, pp. 7,91-G06. A1erdrilng I,
(.ril ichs. if, use t' f ir thi'i r pr7-W\orld War II levels) TPlntivor to both farni producer nnid other Input priet Thir
ill \x; Is diue to a series of d.e -iipiii eonts In the nonf;rin sector: thie d,,line In tlio re.l
,,r:. i.! ,.iArg\, a: main input in the production of synthetic nitrogen : li hrenkmnp 01o
'., it' 1',n cartel as the result ,r _-tovernnient construction of new nitrm'eni plants tinr-
i,-' tl\io war and their subsequent resale to new entrants into the industry; nnd the snving.
in: tr vl-i,,,rtntion :i',, hnn'llnr costs, both at fli mrinnfa,'tmurln- ind retail levels. .as thi,
re' i l ',f : continuous shift tow.ird stronger Tnixtmures. Similarly, the smnbstitnlion (f'
mwchranieal rwer for human labor was induced by ihe rivin,, price of labor, which wva:
luie 1o ifi. lii.-l0ifir W:;iees in the rest 'itf the ,conalmy, and the r'-iiltinc owit-miliratinn of
f:riirimr:. :i,! i I',. decline in the- reil pri'ce nf inaciinery, which was inninly the resmil
,! Ihf ill;nr in the real p're of horsepower witli the d'vro.lnolnicnt of higher rinpre lin r oni
(,W linf -s." Zvi (irillihi.-. "l'ruiiii'etitity and T ehlmiolIonvy," iilder "Atgrl iliirt r'," Inleria-t-
I o iil ]'it i l'ii',lt;i of the .',if ill Sr'ipnrl VOl. 1, p. 2 12.





29


peleI ( up, 1 I lI e pu11vcIIasIe () inp I s pro I I Ie 1111( atr l'i I Ft os i-no
only fertilizer )but herb)i(ci'ds. insecticides, machinery aInd equipmllellInt,
ruel, etc.
(O)ftel, 1 owvever, ain i' oal(, ), tion (i0111 oiut.si(le will 1o10 meelrIy (1Il(duce
f(le pri.e of the pro(Iduct ill lie receivinly in(diulstry, but. ma ke possible
wholly new or (drstically improved prodcmW(ts or pl)roc"s-i' .. hi sc0li
(Jcir iAistiA~nces it becomes e(xteemlely (Lifiiellt even to s,,rest iL re:I-olnable
miieaisuNres Of the plo(lductivity impact, of' 1rigiggerigl2 iinovat iols be-
cause such inovaf tionis, iM effect, op)en thIhe doolr for entirely new eco-
1eomic oppor-tlUnities ani1 become( ille basis for extensive inPdusiralI
expl)ansion1 elsewhere. For exaONullple, the cellmlicial ildus r -y las exercised
t Il assiVe V e.ct upon textiles through thle ilntlodu(llt ion of n entirely
new class of I Ilat(eliNals- -syntl1(ic i fibers. The great popul'aritiy of these
new 111tel'ritals, especially in, clot- inog, is attributable to the, possibiliy v
for ilt roduclm)t pings)ecific (lesirhable chllar'ctleristics into lthe final pro(hlut,
often as a result of l)leliding (including blending with nature al fibers)
Thlus. nmaterials used(l in'l cl(ohin/. c:a now be dlesi-noIed -foi. li'lhtness,
/rieater strength, 1eae of1 l (Of"iderinw, fast drying1, ceasee iretentio(), etc.
Techlnologica l change iti tlhe chemicals in( istry has exercised a
similar triggieroing function in ill oier indutstries than textiles. Thlnero-
(hlemical (as well as electr the introduction of an expanded range of new metals and new alloy-
ing ml materials. Slch (1(eci niq(ues 1aIve Imade p1)ossi1(e th I-e re(uIlion o)I
o1res of high-m(ltino ngetals sluch as mi ana..,-'. chroi111 tulngsten
n1(1, most i 1)porltat, ,aluminnuni. In tihe ease of the electrical industry,
Ihe chemicals inldustvy played a critical role through twhe provision of
refractory m materials, insulators, lubrlicants, nd (oatins, ad po-
vid(ed metals of litigh degree of purity for iuse in (con(uctors. The
profound effe ts of chemiica ls innovations have had a relatively limitedI
visibility because of the intermedliate good nature of most chemical
products.
The electronics industry in recent years has I)eenexece'ising trigo'el-
ing effects wlhiclh have been, in many respects, c]oselv parallel to te
experience of chemicalss particularly with respect to the wide range
of product innovations which have been developed upon the tran-
sistor. Here again (><' o ,cannot suImmariize the economic importanice
of twhe transistor in terms of volume of sales or cost reductions. For
the transistor has ma(le possible the introduction of entirely. new pro(d-
ucts, it has dramatically improved the per 1or0na11 ce ( (, old produlits
and proces.-,s, and it has played a less direct but nevelrt hele-s 1)I'ofo111(1
role in many parts of tIhe economly.i. M ,ere retfe elce to th le inl pa(ct of the
computer in tlie last fifteen years will sulice to si ggest he natre
and scope of ti ese derivative innovat ion's.
The iranstn-ion (of techlnologic:l clang,,e f'roml om sector of the
(coionomy to another thro lie 2.-ie of intermIediate ouitputl has im-
po)rIaanit implic(atiolis for )otur ( u)tirist aiid(ling of tCite proc(-s of pirodue-
tivity growtIl. The contrast oftenl drawn Letween sectors which are
regarded as techologically eprogr. 'issive and s-ctors wlichI are re-
garded as technlological:ly staginalit Inay v e 1 badll ov(svesateud an(
islead(lig. A- Schlmloo)klev has pointed out
. the greater part of the output of most indnstrie-4 is sold to other idtlIvs-
tries, not to final consumers. Te he chemical and electrical indusltries- are like mo.l
otfiers in this ieslivet. In ionseq(uene, most chemiical, electriceil, and eleetroiiic
pr-oduci ConslitUte impr'ovemoients in the inputs of other industi.1ries. For thiis
rei .'on, coNt i -:t-s l)eI(\ i-ii the ,Jgr siveit, of the former with tlie ''un-






30


pirJgressiveies.-s" ", tilte lI.iter a;re likely to lhe inisht;IdiUnl Tle stability of llit
1roriier to market ne\v pr.odlucts dt'epends preci..ely oin hlie "1ji.ro 'eri\'tb ..-," of
Their customers. Morei)over, since impoiiVemients ill tlin liriduct to,'cnology otf tlhe
forluer usually iIlpiI)'ov le it rollctit 1 itliiiol,,y of o t oi r iOiet' otilier indl(li'-
tries. contra:sts lbet\\weell tihte slcep)til)ility of tile t hechlinIIlb ieis of the fIormiier it)
improvement and the lahik ,t" such sllsitepti iltiy ill ihe techllolohgies of tlihr.
industries are comnionily overdrawn. It \would perllialps l)-e 1i11 1P uisetful to ('i Jltr;isl
the ripeness (if the product technology of (lie Inew, sci(iiecV- aLld et.i iitering-.i.s(d
iidtistries with the ripenes. of tliet, product teLhnolfogies. of othi-er industries whose
pWtoduclts serve the : inie lp'p se. For examtijile, tlit,' nin t illg III a emtr;i.,l
h'etw ('en tlie potentiAlities of synthetic lilher t(-liil( ,.,,y \\i th tlose f l(Lnati il
filler technology is obvious. On til ot W iri li;.nd. a c'liilrnist lielt\een, .s-ay, the
possillilities of (.oal tar dye techlloll gy a lld Ii os of lilt It'xtile inhlustry in tlie
nimtteentlh centuryy needs inore e(Xljihii g llla 1 t11'1 si ,'li ,ni nst. snally get. Tle
ligh degree of iUtTrdepnenIldLce of thte indlustris in a ilndrln VeIs'nimny may meUaII
that tlhe net genuine superiority in the improvement pos.,sililitie.s of one indus-
try's total technology over another's may easily be less than ,ue might infer frumi
simple inter-industry differences in, ;Iay, thlie ratio of e..-li indust try's paltents tfi
its value added, because the best \wa y to ipllirwve an ind.istry's t.e.liidLy is
often to improve the inputs it buys from other indtstrsies.5
It, is essential to appreciate that a few iindiustrie- may be responsible
for generating, a vastly disproportionate amount of the total tech-
nological change in the economy. Government policy directed at stimu-
lating technological change generally, for example, or for stimulating
the output of certain categories of goods or serviwt.-, will need to be
based upon the clearest possible under.-tanding of the interindustry
relationships which have been discu.esed here. Enlightened govern-
ment policy in this area will require sophisticated knowledge of these
technological interdependencies. Similarly, an examination of the pat-
tern of R&D expenditures by industry may bie grossly i.isleading in
the sense that technological change and productivity growth in an
industry need bear no direct relationship to R&D expenditures in
that industry. For example, although electrical power generation has
one of the very highest rates of technological change and productivity
growth of any sector of the economy, the industry has had virtually
no R&D expenditures of its own. RIather, technological change in
electric power generation has flowed from the research expenditures
of the equipment industry, the metallurgical industries, and various
other federally-supported research projects. This. even though only
a few industries are research-intensive, the inter-industry flow of new
materials, components and equipment may generate widespread prod-
uct improvement and cost reduction throughout broad sectors of the
economy. This has clearly been the case in the past among a small
group of producer goods industries-machine tools, chemicals, electri-
cal and electronic equipment, and metallurgy. Industrial purchasers
of such producer goods experienced considerable product and process
improvement without necessarily undertaking any research expendi-
ture of their own. Such inter-industry flow of technology is one of till,
most, distinctive characteristics of the contemporary American econ-
omy. Indeed. Indeed, it might even be more appropriate to say that
such technology flows have radically reshaped indust rial boundary
lines, and that we still talk of "inter-indnitry" flows becawze we are
working with an outmoded concept of an industry. As one study las
pointed out:
Some industries and companies have gotten bigger at tihe expeniise of others.
But, more to the point, traditional industries have changed their filrli. An\y cVon-
sideration of the textile industry would be artifiticial which did not include tlie
45 S'h 1lo,,ll. r, op. cit., pp. 174- 17-5.








chemical, plastics, and paper industries. Con(hidraIion of lhe machiine too! ididus-
try must now take into account the aerospziae, precision casting for-i ,i.. iidt
plastics forniingi industri,,-. The.e industri'-. are now complex tiiitirs of
companies from a variety of SIC cate.,,ries. -ojme functioniiing as -iilpilieris to
the traditional industry, some competing with it for end-use functii, amild
markets. "The industry" ncai o longer be defined as at -*f of cooijp;inips who
lhare certain methods of production and produet-prioperti s: it must le defined
a a -t,. of coijlpatnies, inten'',inlicrted as suppliers anid iii rket. (ommiti.d to
diver<, 11',eproe.thr, atnd produl-'t, but overlapping in the end-l --e functions tlhe,
fill. We can talk about the "shelter" ind'i-try and the "materials foriniii"
industry, but we cannot make the a-suiptions of coherence, similarity and unmi-
formuity of view which we could formerly make in speaking of "builder." or
"machine tool manufacturers". Similarly. compiries are corning to be d'- (-
voted to a single family of products and manufacturing methods, and itioro i
diverse conglomerate of manufacturing enterprises, stationed around a ccntr,
staff and lank, and to some extent overlapping in the markets and functions they
serve. These .t.lI:ages are part and parn.l1 of the pIro(c(ss of innovation liy
invflsionl.6
CoXCL'lION

The essential point to be emphasized Ihere is that technological
change and its associated productivity improvemenIts enter the econ-
omy, as I have tried to indicate, through many doors and take a wide
variety of different forms. Moreover, the location of these doors seems
to shift periodically, so that any rigid mapping of the most significant
relationships is bound to become outmoded over time-and not very
long periods of time at that. It is of basic importanc-e to the formula-
tion of policy to recognize explicitly this diversity of routes and fornis
by which technological changes lead to improvements in productivity."
Unlike basic re,-carch. fori which there is a strong and cominpelling case
for government support, technological innov action can ordinarily rely
much more directly and successfully upon the commercial incentives
of the market place. Government can exerc(i-e an important influence
by policies., directed toward the a-,suralice of high levels of economic
activity but, in general, it can contribute more by providing a suitable
environment for the operation of market incentives than by specific
measures to aid particular industries or interest groups.
Many of the things which contribute to the overall goo(l health of
the economy, and which are therefore desirable for other reasons. also
contribute to the more effective exploitation of new technological op-
portunities. I include here the reduction of barriers to entry and
resoue mobility, legal and institutional ohanlgis which more effec-
tively link individual incentives with the attainment of largier collec-
tive goals (including the modification or elimination of th,,: govern-
ment regulations which are- clearly coluinterprodu(tive) anld t1le
achievement of higher overall rates of employment anld economic
activity than we have experienced in recent years.
Finally, we need to discard as a chimera the view that Amnerica
should attempt to maintain an across-the-board techlologicil sulperi-
ority. Such a groal is, I sulbiiit, unrealistic and unattainal)le, but. l the
mere pur7m;t of such a goal is likely to be fraught with dangerous (.()-
SA. D. Little, In,-.. Patterns8 and Prospect8, op. cit., p. 18 1.
47 This divr-ity. which is closely linked to the highly h-i't ro-'.t,'.,i, nature o n-
timporary American industry and its varied teehnolonir-., is probably ihe main r,1:01
why it is so dliflivilt to say .4oiIlthiiig rneperal about the enfl ects ," the p:;tent system If
(Oe tlhiii.: is clear. it is that tHie pa tnt-'sivst('iii p\xrr.i'r- very different kinds of effOcl
in differf.iit infllstries. It is a highly important device in. say. I Ie phiarm eceutical indus-
try but it is much less important in. say, thp automobile Indliit-ry. Any serious evaluation
of its 1i'oei or of the probable eon.fs itqlIuce1 0f specific alt,-rations in the ipatenit law. will
have to await a series of careful cae st uii-n, of inl idilu:il industries.






32

sequence.-. T1re is a fudaeiiItil ditfeence bet ween1 tecl lholrical
success and commercial success. Indeed, 1 believe that Amnerica's success
in thie high teclinologv areas lias been (1ile iln 11 small mlleasirte to tHie
exercise, by private industry, of a shrewd comIL-ercial .juIdg,,,ent. CMIn-
ceerning adoption decisions-i.e., decidi(ing whelnl a nllew technology lia.
reaclied the point of commercial feasibility and profitability. TlIe at-
tempt to pushl a new technology too q(lickly into coumercial use, espe-
cially with the encouragement of public fuii,-,. is likely to be highly
wasteful in the long run. It is worth recalling. tliat, in the early 1950s.
the British introduced comn ercial jet. service (( 'omnet I) two years
before tlie Americans began the development of a j*etl air'liner. As we
now know, the Americans eventually won out and lhave dominated tlhe
international aircraft market ever since. Boeing and Douglas inade the
correct commercial deci-ion in choosin-" to postpone adoption, and
derived thec great benefit of being able, somewhat later, to d(.esign :
commercial airliner around more powerful e'zinle- Xwhlich offered ,great
economic advantages, while the British de Havilland firm sniTfered the
penalty of premature adoption of a fast-improving technology.48
One of the great-and perhaps least celebrated-virtues of a capital-
ist society is that capitalists- are exceedingly good at minimizing their
losses, at. sentimentally cutting olff expenditures for projects when
tlie prospects for commercial exploitation appear sufficiently weak o(r
dubious. Recent experience strongly su,2gests that projects receiving
-.:izeabl)le government support are likely to suffer from an etirely dif-
ferent dynamic, one wliere it becomes increasingly difficult to cut off
expenditures upon project- to which a overnmient and its 1luIZreaucraev
thave alreadlv made, a heavy commitment of finance and prestige.9 It
is characteristic of such project that firm and essentially irreversible
large-scale financial commitments are made at a very early3 stage when
t1he technical knowledge necoss-iarv for intelligent decisions is necessar-
ilv fragmentary, and when therefore the level of uncertainty is still
very 11iirh. I would not be entirely .surprised if, in ten years' time, this
"t wendoe to be -eeii
propensity were to be referred to as. the "Concorde Syndrome." In "lie
meantime I would suggest that we should remain highly -kepi ieal con-
cerning the commitment of sizeable public funds to the final sta.,g.es of
commercial exploitation of a new techloloay. Althoughli there is a
persuasive case to he made for government support of basic research
and for exploratory technological development in some specific areas.
such a case has little pertinence to decisions concerning, the final devel-
opment and commercial exploitation of new or improved products.
T'T'his penalty included tragic accidents due to the 1plienmnevuon. still not iiidarsf at 1lie HImne. of mnietal fatigue. For a more general discussion of the problems involved in
the adoption decision of rapidly-channing technologies, see Nathan Rnsenber--, "On Tech
niolngicaIl E':ixpectations." Economic .lourial, September 197(.
SPe George Eads and RiTUchard Nelson, "Government Support of A;dv;inr-ed Civiili;in
TI'chnology," Public Policu, 1971, pp. 405-427, for a cogent and Incisive ,isc.us-ion (f
so411 of the relevant issues.











TECHNOLOGICAL CHANGE AN)D .IT4-)E GROWTH 1:
ISSUES AND OPPORTUNITIES
By J(,-I,'Ii F. COATES ::


SUMMA-\HY

Over the next three decades we may anticipate major technioloical
advances_ and clhanges in American society in the area of electrolic-.,.
automation, information handling, food, and biological manipulations,
as well as in the more commonplace areas of industry, commerce, and
domestic device-. Dominant elements driving these changes are funda-
mental shifts in tlhe availability of energy and materials, which will
stimulate major innovation in substitutions, extended -ervice life, and
easier maintainability; and the increasing role of science as a well-
spring of new technologies. Furthermore, the movement of U.S. society
into a post-industrial society with its emphasis on knowledge based
industries will stimulate major shifts in the nature and loiztion of
work, land use. and information-associated technologies. This will be
accompanied by a flourishing of social, institutional, and psychological
technologies.
Market forces will play a dominant role in the realization of these
new technological developments. In addition to the(,c forces, tech-
nological needs and opportunities will arise which lie outside the
market system, such as developments with regard to geophysical
manipulation, earthquake control, and weather modifi, nation.
The principal role of government in assuring continuing" benefits
from technology is guiding the socially effective interplay of the b;,io
variables: land, labor, capital, resource availability and knowldere.
To be socially useful, the interplay must be f itire-oriented, flexible,
and information driven. One specific role for government is setting
reliable boundary conditions on private and public endeavors with
some clarity and incisiveness to permiiit market and non-market forces
to operate. Put differently, a principal role for government is the more
effective management of uncertainties with regard to f;itnre potential
opportunities and risks in order to encourage new and needed develop-
ments and innovations.
A principal limitation on technological and -cienti.qc decision-
making is the inadequacy of knowledge gathered and organized for
the purpose of illuminating public policy. Meeting the-e inform nation
needs is a si'cond specific role for government. Since mo-t information
is collected for other purposes. modific'Itions which explicitly generate
and collect policy-related information would effect a major impro. e-
ment in public and private decision imakinag.
*Assistant to the Director, Oltice of Technoloy As,-essment. U.S. Con.rosq.
*"The material in this paper is the rejnuiliil itv of the author .ain1 does not reprc-ernt
the position of any go',rnn,.nt agenv'y or the U.S. Co.,ngre-S.
(33)





:}\

The wider pr:,cti'e of tile c(oncel)t of technologyv assessment as a
liani- to I',tter undrh.ta nd options, alternatives. and consequences for
technology should 1e (,encoluraged ini and out of government.
Aliv 1:1 jer regurllatory agencies of government reflect needs and
1)1ro0)!l"!s decadess old which are no longer of pri iary importance. A
tlird1 -p'cific role for government in guiding technology, the reform
of tlhe rerilatory agencies through their re.-stricturing, offers major
ol)ortllnities for more effective IIlaflagmi(ellt of technology. Primary
({llidlates for this spe(! lie role of goverInent include agencies regu-
lating communications, drugs, banking, securities, energy, health care,
t -;, n-ii mportation, and marine and oceanographic affairs.
The fourth major role for government, research and development,
should be driven by several convergent factors. There are opportuni-
ties for new and expanded technological developments with regard to:
(a) The wiring of metropolitan and rural areas for fuller teleconi-
municationis; (b) the introduction of major new energy sources such
as solar, geothermal, and ocean technologies; (c) the reformulation
of education technologies, welfare, and health delivery systems; and
(d) the reconstruction of cities and other habitats. Furthermore, the
economically mature society implies not less but different technology
emphasizing: social and biological as well as physical technology; per-
sonal improvement and fulfillment, and accomplishing more with less.
There also are numerous problems of a high-growth society such as the
propensity to maximize bureaucratic efficiency at the expense of social
effectiiveness; alienation of workers; adverse effects of excessive size
and integration; societal needs not accommodated by market forces,
and the negative side effects of technology. Each of these clusters of
problems and opportunities could be profoundly influenced by research
and experimentation.
I. INTIODUCTION
Technology is universally recognized as a crucial, if not the domi-
nant, consideration in the present and future economy of the United
States. This essay explores the basic factors influencing future tech-
nological developments aid highlights their implications for the econ-
omy, the society, and public policy.
The profound stimulus of technological change for economic growth
is so well known and dociiinenited that it will not be discussed here.
Perhaps more important to note is that; at least four basic factors-
land, labor, capital, and resource availability-limit the economy s
choices and in turn limit and influence the technological choices ap-
p)ropriate to meet the market demands of the private economy and the
non-market or quasi-ma.rkct demands of government.
In the United States the relationship among these basic factor in-
putibs and determinants of technology is undergoing major change. The
increase in the cost of energy is perhaps the sharpest recent change. The
longer-term shifts in general resource availability have been steadily
and continually accommodated by the economy and this adjustment
will continue. While resources have gotten relatively cheaper over the
long run, we may be reaching the point where resource depletion and
incrca.silg worldwide demands will reverse that trend. The limits of
land av\ailability have given rise to a growing discussion of competi-
tive land uses. For western land water exploitation, farming, cattle,
and urban development are in competition with recreation and re-







source d(levelopmnent. Around the fringes of our great cities the steady
takeover of high quality farmland for urban development is now con-
troversial. And finally, the changes in labor force development can be
seen in several ways. Amongr the most important changes are in tlhe
quality of labor, the change in its orientation toward work, the passage
of the large postwar baby population into the work force and the
expected subsequent rise in average worker age, and the entry of
minority groups and women into the labor force in greater numbers
within greater demands for upward mobility.
A fifth key element must be added to the traditional factors of land,
labor, capital. and resources. This factor is knowledge. Knowledge,
particularly from science, is expanding and affecting society so
profoundly as to merit independent recognition.
One can anticipate that these forces, in striking a new balance, will
initiate continuing waves of technological change. In much the -;ie
way that charcoal was replaced by coal in the British iron and steel
industry, in the way in which synthetic rubber arose to replace scare
natural rubber in World War II, and as the Haber process for am-
monia was devised to relieve the shortage of natural nitrogen fertiliz-
ers in Germany in World War I, one can anticipate continuing and
steady initiation of major new technologies. Since new technologies
will be a primary (means of accommodating to the changing balance of
energy, materials, labor, and land, these changes can be regarded as
stimulants to invention and innovation.
Guiding the interplay of these five variables will be a major function
of government over the next three decades. The principal implications
for government in this regard fall into four major areas:
The management of risk and uncertainty in order to promote
useful tech no-economic change.
The generation, distribution, and use of knowledge, especially
knowledge for policy planning and programs.
The institutionalization of technology and its regulatory and
control institutions.
The support of research and development.
But there is more than that to technological change in America.
There is almost nothing: that Americans touch, hear, smell, eat, live
with, work with, or use for pleasure and recreation which has not
either been generated by or drastically transformed by science and
technology within the past 50 to 75 years. The intimacy with and de-
pendence on technological change in our personal and collective lives
is likely to continue to flourish over the next few decades. The likely
and potential technological developments leading to new capabilities,
new products, new industries, and new social functions are so many
and diverse that it is difficult to do more than hint at their widespread
impact.
Major new technologies will almost inevitably develop in electronics,
automation, information handling, agriculture, food, biological ma-
nipulation, in social, psychological, and institutional technologies.
water management, oceanography and space. Attempts to anticipInte
probable specific developments in these fields are likely to fall far
short of future reality for at least four reasons. First, fundamental
new discoveries in science will spawn vast new capabilities. Second,
many new developments flow out of synergistic developments among
technologies. These are difficult to foresee. Third, while there is a





36


ten(lencv to be overly optimistic about what might be accomplished
in the short rimn. 1 onger-run projections covering several decades tend
to lbe too conservative about what might be achieved and about the
soial changes derivin" from those achievementss. Fourth, the presence
or absence of effective government policies will have a primary effect
on choices among the. alternative technological futures before us.
One useful approach to technological policy is in terms of the inter-
play between the basic characteristics of technology in general, and
the principal social isSues bearing upon it. In tlhe next section several
sull issues influencing technology and choices in technology policy
will b)e discussed. Section III offers a number of basic propositions to
illustrate the central role of technology and science in the contempo-
rarv world. Those propositions attempt to provide a conceptual frame-
work for understanding America's technology and the public policy
issulles surrounding it. From each proposition, some implications for
new technology and public policy will be derived. The final section
draws together policy recommendations for shaping government's role
in dealing with technological opportunities and problems.

II. SoMNE FACTORS INFLTUENC('ING FUTURE T:C.,NO'LOGICAL
DEVELOPM-ENT
In this section, we will consider some key economic and social forces
influencing future technological developments. These forces derive,
in part, from the consequences of our traditional high rates of eco-
nomic growth and from the evolution of the U.S. into a post-industrial
society. Others stem from the fundamental shift in availability and
prices of raw materials and energy, from changing social values, from
new markets and from the role of government intervention.

A. Some Problems of the High Economic Grow:th Society
Features of our laws. institutions, and culture, that, are outmoded,
inefficient, or pose obstacles to human satisfaction and progress must
be judiciously but steadily designed out of the system. That redesign
implies, as a minimum, foresiorht, anal sis., and coordinated action, i.e.,
p] mning. While major structural problems exist in all economies, es-
pe'ially low-growth, less developed economies, there are some nmore
characteristic of the economically advanced nations. From thle point
of view of this esQav, the problems of our high-growth economy have
implications for present technology and the introduction of new tech-
nologies over the next several decade'-.
1. EFFICIENCY OFTE'.N IS AT TIHE :XPE-NvS; OF EFI'ECTIVENEISS
Adequate attention to the overall -o,.ial effectiveness of many pulblic-
and priv\ite-se-tor programs and products is often obl)-cured by orga-
iin;;', ional behavior which substitutes criteria of bureanucr-itic efficiency
for nieasire(s of .-ocial perform nce. Optilization onl readily quantifi-
abhle, bureaucratic clliciency criteria and tlie as-ociated co0ftii-ion with
so0( al effe'tiv(ne.-SS ('iteri'a often generates negative externalities. An
exa;inple is the $29.95 toa-ter' which require- s(;.50 and two hours of the
owne-r's time to replace a 35-cent part. Inattention to such externalities,
of course, is a common reason for allowing tliese criteria shifts to occur.
Because internal bureaucratic or economic efficiency or some putative







i ..itsure of it is almo-t alays easier than "ecti ( to ..e.s.. t:
is......Idi\~X ('d"" ('dl l 'Iel(- t ldSl" r
'jiantif.y, efih.iencv tends to become the s11rr<,-0i:zte for cletctiven.--.
Eventually, the si I irogate eilfcctiveMi -.- criterion a'(jI a life of its
own. This relationship between social etfectiveness and or',.ii.i;itiolnal
efficiency often g .- as follows:

Institutionally SLbstitured
Task Social -ftectiveness criterion efficiency measures
Research and de.'elopmeni.- Impacts on economy 'so ef i.-------- Bureaucratic budge' -.o.'.th
Welfare- -------....................... Extent to which people are helped---- Cases closed.
Food stamps ---.. ------- ------- Improved nutritional status-..-..--..- Nuumcers of people assisted.
War------.....-.....- ..-..---....- Relation to political objeci,'es..------. Body count.

Analogous displacemients of social effectiveness by efficiency criteria
occur throughout the market system in which consumer go ods are often
made with limited durability to save relatively small marginal initial
co-ts. This situation is either unrecognized by the consumer, hidden
from him, or not structured out of the market by the regulatory
apparatus. A mi'iiiiium role for government in these c-,s is to -.
that the relevant information is available to the consumer, for example,
requiring energy-consumption and repair co-tIs on consiiumer devi's.
As we move to more explicit use of social effectiveness criteria one
can expect major clianges in technology and technology-supporting
stn.te s, notably R&D. Particularly promising areas for the introduc-
tion of social effectiveness criteria are in social technologies in health,
education, training, welfare, insurance, and services. These areas are
open to new, explicit criteria because they deal to a large extent with
externalities and often incur externalities.
Factors promoting, but not guaranteeing, a move to effectivene-s
criteria include the growing concern for externalities and social co:-t.
the movement within government toward greater accountability, and
a generally longer planning-time horizon in government and busing -s.
There is also the consumer movement which is focusing attention on
total lifetime costs of goods, in addition to the traditional initial cost.

2. ALIENATION
The alienation of the worker from society, from li mnself, from the
political sy.-tem. is widespread in the Amierican society. Alienation is
the feeling thait the worker is in, but not a willing part of, the world
in which he lives. Ile works to enjoy leisure and aieniti,,-. Ie iv-ts
to recover from thie str.:: of unnecessarily dull work. We i::ve move(d
in too many places pact the criterion of "the wol.: i good" to a sitil.:-
tion in which "the work is terrible but the nmonev's good." 'Tlie tradi-
tional worker was so intimately a part of his work, tha.t it wa- d!i'.ii'lt
to distinguish the leather fr oin the leather worker, the clay from the
potter, the iron work from thle smith. Today, in cotn rai-t' for ii"yi,\
work has become empty travail. Compared to the at r',ious sitilt1ioI-
of the 19th-century factory sv.-.tem, wit] its fourteen-hour dayv-. child
labor, and dangerous practices, virt ally every American worker to(da v
is well off. But that is not tlie appropriate comparison. The imnpro\',.d
working conditions of American life coupled within ed(,iation, pros-
perity, and leisure for reflection are raising, new coii ,rns and new
standards of expectations. These new standards are not measured






38


against tlhe conditions of battles long won. but against the liullanee
potentialities of thle future. Work is an instrumentality consuming
large portions of the day, but focused only on providing rewards, such
as bread, board, and recreation, almost totally disassociated from the
work place. While alienation is not limited to the unskilled worker,
it is clearest there. In any case, this ultimately creates alienation frowl
the political system, one principal function of which is the governance
of institutionalized work and its products.
A recent Gallup poll in response to the question "On the whole,
would you say you are satisfied or dissati-fied with the work you do"''
showed tlhe following:
[In percent]

Whites Blacks

Satisfied-------------------------------------------------------------....................................................................... 83 63
Dissatisfied-----------....------------------------------------------------- 9 25
No opinion. ------------------------------------------------------------ 8 12

Other data suggests that the Gallup survey may overestimate satis-
faction. For example, the HEW survey on lVorck in America reports:

PERCENTAGES IN OCCUPATIONAL GROUPS WHO WOULD CHOOSE SIMILAR WORK AGAIN

Per- Per-
Professional and lower white-collar occupations cent Working-class occupations cent

Urban university professors---------..---------. 93 Skilled printers .--------.---------.... ----.. 52
Mathematicians............................... --------------------------91 Paper workers----------.----------...------ 42
Physicists.................................... -----------------------------89 Skilled autoworkers........................... ----------------------41
Biologists..................................------------------------------... 89 Stilled steelworkers...---------------------- 41
Chemists-----------...---------------------.. 86 Textile workers----------------------------.. 31
Firm lawyers-----------....-....--......-------------....... 85 Blue-collar workers, cross section-----....-------- 24
Lawyers-------------------------------..................................... 83 Unskilled steelworkers.---....----.------...-------- 21
Journalists (Washington correspondents)---------....... 82 Unskilled autoworkers ------.....----....---.-------- 16
Church university professors ----- --- ---- 77
Solo lawyers-.------....--------------- 75
White-collar workers, cross section------------- 43

Professional workers who enjoy the highest levels of education,
income, or autonomy, i.e., occupational flexibility, find the most satis-
faction with work. The break seems to come with nonprofessional
white-collar workers, where less than half would select again their
occupational group. Least satisfied are the unskilled blue-collar
workers. Of all the blue-collar workers surveyed, skilled and un-
skilled, less than half, with the exception of printers, would go back
into that occupation. Should one choose not to interpret these data
as revealing a problem, they at least suggest an opportunity for the
improvement of American life.
Perhaps the situation is best grasped from S. Turkel's introduction
of his book Working:
This book, being about work. is, by its very nature, about violence-to the
spirit as well as to the body. It is about ulcers as well as accidents, about
shouting matches as well as fistfights. about nervous breakdowns as well as
kicking the dog around. It is, above all (or beneath all) about daily humiliations.
To survive the day is triumph enough for the walking wounded among the great
many of us . .
For the many, there is a hardly concealed discontent. The blue-collar blues
is no more bitterly sung than the white-collar moan. "I'm a machine," says the
spot-welder. "I'm caged," says the bank teller, and echoes the hotel clerk.





39


"I'm a mule," says the steelworker. "A monkey can do what I do," -;ivs tie
receptionist. "I'm less than a farm implement," says the migiraniit worker.
"I'm an object," says the high-fashion model. Blue-collar and white ,.a: upon
the identical phrase: "I'm a robot." "There is nothing to talk about," the young
accountant despairingly enunciates.
In countering or preventing alienation the reorganization of the
work place will have to go beyond simple shifts within the factory.
Major changes in work can go hand-in-hand with the long-term trend
towards an information society and greater involvement of teleconm-
munication in the economy.
I estimate that roughly 50 percent of the labor force is now in the
business of generating, packaging, distributing, storing, interpreting,
or in some other way manipulating data and information. This major
structural change in the labor force is accompanied by the growth
of telecommunications as the physical technology for this intifor-
mation-ia-sed society. Many fundamental organizational clamio-ue il
the work place and the condition, for work are possible, if not likely,
in these information-based, white-collar and professional occupa-
tions. For example, one possible long-term shift is to distribute work
in such organizations as banks, insurance companies, government
bureaucracies, and local government service agencies, to smaller,
neighborhood work places.
Some white-collar, computer-assisted work could even be done in
the home. Assuming, for the sake of discussion, that there are some
long-term social benefits in this kind of restructuring of the work place,
it is unlikely to come about simply from the operation of conventional
economic forces, since there are major legal barriers to change. For
example, should work in the home become, in any sense, commonplace,
new tax legislation would be required to guide the kind of space avail-
able. Similarly, fair-employment opportunity programs would impact
and interrelate to the re-distribution of the work place. Since many
communities in the United States are economically, ethnically, or
racially segregated, the distribution of work to neighborhoods might
conflict with fair-employment objectives. Regulations governing health
plans, occupational health and safety, and working conditions would
undoubtedly retard or accelerate a shift to smaller work places. With
any movement toward localized jobs, with the quick and convenient
access to the home, one immediately has to consider the possibility of
conjoint jobs shared by husband and wife. Assuming, for the mollelit,
that these are socially desirable, it is clear that various kinds of institu-
tional arrangements within corporations, with labor unions, and
with government would have to be re-negotiated. To make the-c shifts
realistic implies major government initiatives, first, in understanding
the potential options; secondly, in probing their iniplic;Itiom.s: an(l
finally, in taking concerted measures to guide and promote the dc-ir-
able and to di-.-courage the undesirable.
Within the factory itself, the shift to rein literate the 1 lue-,Ilikl-wl ite-
collar worker whether in terms of team, job shifts, or a more interest-
ing repertoire of tasks, suggests changes also in the nature of funda-
mental machine tools, the organization of the work place, and tlhe
work process. For example, should any substantial port ion of the manv-
fact during economy move toward tlYe use of robots, of the sort now enter-
ing the automobile plants, there will be some displacement of skilled
and semi-skilled labor, and an increased need for computer-prog021in-





40


m1ers :-nd tho-e skilled in illainiteniance and repair of this sophisticated
eqrtjipment. This may be an opportunity to Ipgrade the factory work-
(ers. aIs well as an ol)portllnitv for exchange programs between the
w\iit-,.r, 11;(ril blii-roH:ir worlIerse. Tlhre 1,ay 1be iLst ituti onal obst a-
clr. to 1,rm tiil.2 lie.-e kild of illlmovafioll- in tlhe traditional iinion1011
ia ;'ii;. i ient relatioli-hlip,:. A -aiin. the tol--:. of gov'riin llielt. such as re-
:. ,rech, experimentation, information diss.emination, and innovation
in work in irovermnient t'-ervice could play a large )parIt ill determining
the ea:-e with which this could l)e done and in the relaxation of the
iuicrtiint ie- i ,,'iat pl with t lIcS, U'la ,,_'es. A iliifiiii ii government
role i:- tie expl( ,ration of i e.-e potenlitialit ie, and t he determination of
a :y-l.:,(tic ,et of policy options for proimioting the good and retard-
inl the bad.
3. EXCIL.STVE SIZE AND INTEGRATION
Tie high-growth industrial society absolutely required the scale of
1,mi1y enterpris.es to increa-. This, i turn. lias led to new ways of
doing business and new modes of management. The conglomerate, for
example, is a technique for maintaining an increasing scale of opera-
tions and profit growth. Within the framework of management of large
corporations one sees., insofar as the thesis of John Kenneth Gal-
braithi is correct, that the new mode of collegial management attends
less to slhort-term profits or even long-term profits, but rather, seeks to
-tabilize its business environniert. on the supply and market side.
Present shifts in the corporate environment reflecting changes in the
resource and energy areas (concerned with environment, present legisla-
tion dealing with health and safety, the changing characteristics of
the consumer and the work force all imply change in management, and
new strategies for organizing corporate affairs. So far, we have seen
little response to the need for new modes of minanazement in the cor-
porate, labor, or government sector. Since each is increasingly bureau-
cratized, that tends to retard innovation unless the change is fully
compatible witli the existing bureaucratic stricture. In the corporate
s.(.tor, we appear to need new w-ays of organizing work, and new cor-
lporifae stl'toes operating on decade to generation time-frames. In the
labor se-for v-e ned to see the development of a view of labor and the
life of the l:lboring r]nin which breaks out of the convelntionalized
+',te',:,ris of the early labor unions .and the Depi,-sion mentality.
VFrouI government t we need(l approaches. which r'ai-e new qe.t',itos. eew
I:)ptions, ,\v goals for society which go\vermnent, in I urn, can help to
implem.-nt.
We know, for exaniple, relatively little alb ot the eff-,ts of size, loca-
tion, alternative work irrnn i Meients on worker morale, productivity,
and corporate decision-making or short- and long-term profitability.
1Per3iiiaps government-inspired experiments could wid(len corporate man-
en.i+ment options or give laor a freshly perspective on its objective. One
CMi1 St 0 this conflict between the de.iraflble social *tai i.repnllJt, and tlhe
inertia of LI,--ae institutions in the relationship of lalor unions to
i eri a of t A (,al inie w-ii itoio ei
reform in larl.re cities. The iinionization and bureaue,.'tization of semi-
profrs.-ioiinla workers such as school teachers stvymie progress and en-
trencih ;i(l protect uindesiral)le strcictu1'es., cI.stom is, anId tec, nologies.
Tlioe. identifying and inaimimrincr of negative effects of large-scale in-
duistrial enterprises, such as chemical pollutants, or the promotion of







diver-lty in la;l. --*,ale infornmiation ente(Opri;e(, btii als e i-arS
and television, are,( often stymied oi extrieei slow eIaue of the
arthritic striiL2-le l).-tweeln r.i-t;!pt )i2 )1usi-ei- a Id I( rttiO1at,,d 1)11-
reaucratic goVter!letli Tlis is not to (dlenli I1 .it pl)ro2T is h. ig
made, but only that 1 -at prog're-, seeslll to 'ollie exC. --v ly slowly.
at very high eo't. ant d n as tlie '. -ult of constant zitrle.
XiAn interestingl example of tie simultaneo-: g2(rowti of diV.r-it5 ;l(id
sainene,.-s is in information and1 news service'. As (,"s -n s Vces ..'o
centralized thr()o, thlie pte -.- service and national I iaazin,-, t it i iI
their interests to offers aln increase ingly teehnirallvY excellent p" -p)Ollri
of information, app)ealing to a conventionalized diversity of inte,-..
This growing sophistication in technique, touting a ;)predictable diver-
sity of materials, may drive out the more unconventional, l1 cal.
ideological or special intere-ts. The situation is rowthlv anal0,oii- to
the way television has driven amateur sports off the s-,,vne wile
promoting supl)erb profe-s;ional sports. Television also killed aimaiteur
night and neighborhood entertainment while nationwide, first-ilas
heavily marketed entertainment prospers. It is not at all cL\ir that tlie
shifts are in the national interests.
A major future role for the government will be in setting the con-
straints on the size of enterprises. The debureaucratizing of govern-
ment service systems is one example of this. The reform of health
services, the localization in smaller units of education institutions.
the possible breakup of excessively large monopolies are further ex-
amples. The importance of integration and scale and the long-term
implications of poorly conceiv-ed correctives, however, should promote
comprehensive and systematic studies throughout government of alter-
native ways of handling these problems. For example, a commission
with a three-year life to look at the restructuring of the teleeonmmuni-
cation industry might be of great social value and would have strong
long-term technological implications. Similarly, the study of the re-
construction of the Federal Communications Commission would )be
a narrower, but equivalently important task. In any consideration of
measures to limit the size of integrated firms, a heavy inve tent in
examining alternatives and means of transition is osl.intial to avoid
undue disruption. There are numerous other problems of thle high-
growth economy. Planned obsolescence, for example, is discii-sed below
under raw materials, while consumption as a measure of succez. is
considered under value.

B3. Pri," Structure of Energy
In the last few years the economy has undergone what is widely
thought to be a permanent increase in the relative price of energy.
Aside from the question of whether this is intrinsically desirable, tfhe
fact remains that the shift has occurred. As a result, thie relative cect
of energy-intensive technologcries has increased. There is a consequent
demand for more energy-efficient systems. Striving to accommodate
the fundamental shift in energy prices over the next several dee:n,'. -.
therefore, will engender a massiv-e reordering in technology. SI, 1e
energy-intensive systems will be- replaced by others less intensive.
Other energy-intensive systems will be modified,. Some energy-inten-
sive functions may disappear. Readjus.tina to the permanent shift in





42


IenerWv costs will be a inajor stimulant to invention and technological
('ha :!Ce.
C. Aicaretnc. of Lhnstatwons on Pair Materials
There, has been evidence going back at least to the Paley Commis-
sion in the 1900s that tlhe total domestic or worldwide repository of
basic law materials could not indvleiiitel v siistaiii 2"rowth rates chlarac-
teri-tic of tile last several fdec'ad's. A striking development in the last
few years is tlhe growing public awareness of the limitations of raw
materi-als and tlhe sublstantial shift within many sectors, such as copper
and iron ore beneficiation to ores which were far substandard as
recently as two decades ago. This growing awareness of the limita-
tions of raw materials will have an effect quite similar to that of the
fundamental shift of the price structure of energy, leading frequently
to substitutions, extended product life. and so on.
One source of resource waste is formal planned obsolescence, which
has become characteristic of many traditional industrial systems as a
mechanism for stimulating high levels of manufacture. The high turn-
over is promoted by relatively low durability goods as well as by style
an(d fasi)ion-consciolsness, especially in consumer goods. Planned
obsoles('ence and hig]h turnover-rate designs imply high cost for main-
tenance and repair since these items are not designed for ready main-
tenance or inexpensive repair. The cost and inconvenience of main-
tenance and repair stimulates high turnover, and it encourages more
shoddy goods. This, in turn, stimulates corporate dependence on high-
volume outputs. Closely related to planned obsolescence is the increase
in disposable goods, such as paper cups. plastic containers, and throw-
away beer cans. The resulting pattern of movement from mine to fac-
tory to shop to store to home to trash heap, which is only three or four
dec:ides old. is boing severely challenged by structural changes in the
co-t of materials, and concerns about side effects of accumulating
waste. It is undoubtedly the case that resource scarcities would induce
more or less rapid shifts to more durable product designs and more
easily maintained product designs. The adaptation of the appropriate
technolo-ical siblstitutions may be relatively straightforward; in
other cases, it may be quite complex.
The reordering of society to conserve resources and energy does
not imply the elimination or reduction of material benefits. The neces-
s:' ry extension of product lifetime through an increase in the quality
of materials, and more effective design for maintenance and repair
could r:nlke more and better goods available to a wider, not a siiialler,
number of people. To the extent that planned obsolescence could be
eliminated without increasing costs, buyers would get more for their
moncy. In this connection a recent public survey shows that the public
is ](-: concer1od with quantity than witlh quality and durability of
roodss. A movement toward a longer lasting, higher quality product in
the marketplace would have further advantages of reduced transaction
costs and less time spent by consumers to purchase and repair goods
and to negotiate about deficiencies. As an incidental benefit, more free
time would he available.
Substitution, which is the technological key to materials conserva-
tion, comes in many forms. It may involve materials, for example, sub-
stituition of aluminum for copper in electrical wire. It may involve





43


components, as the substitution of transistors for vacuum tubes. There
may be functional substitutions, the replacement of beer .an.is or non-
returnable bottles by returnable bottles. There are system siil-,titu-
tions, such as the partial replacement of the automobile by mass transit
or the use of telephone instead of travel or heavier insulation of hoi iie-
instead of increasing energy consumption. The first class of the--c
substitutions is that most susceptible to the direct operation of market
forces. The larger systems substitutions having the greatest effects
across society are those least s.-ceptible to the operation of short-term
market forces, and yet, are the systems and substitutions most likely
to have major effects on society. Substitutions will be a major stimulus
to innovation. However, it is not clear whether undesirable negative
multiplier effects from such changes due to displaced labor or lower-
volume production may occur. Furthermore, it is not clear whether
these shifts in design will occur in those areas that are of the greatest
social significance in terms of resource conservation and other social
needs. One of the roles for government is the explicit probing of sub-
stitution alternatives, and public policy measures for promoting some
and encouraging others through laws. regulations, subsidies, re.z larch.
information generation, incentives, sanctions, import quotas, and other
tools of government.

D. Societal Needs Outside the Market System.
There is a growing awareness, notably since the Great Depre-ion
and World War II, of the potential role of science and technology
in improving the lives of our citizens in areas which, either by nature
or historical accident, lie outside the market system. Traditionally,
government activities include roads, dams, waterworks, and canals.
More recently, they also encompass technological developments in
health care, mental health, human rehabilitation, recreation, airports.
and many other spheres. The first wave of the application of postwar
science and technology to social needs has been completed and a num-
ber of more subtle applications and developments can be expected.
As it now stands, the overwhelming number of Americans have
available to them cheap, plentiful food, clothing, shelter, and informa-
tion. The next wave of technological advance will deal with the ques-
tions of improving the quality, diversity, and satisfaction in thlee
consumer areas; and in meeting neglected needs, such as those of the
handicapped, those. suffering from unusual disease. and the socially,
the culturally isolated. As discussed below, technologies will be devel-
oped dealing more directly with man as an organi-m and with the
social relations among people.
It has now become commonplace to recognize that many of the
effects of technology which turn out to be important are outside the
influence of the market proce ,. Consequences not covered by the prices
and costs of the sellers and buyers are referred to as externaliti-.. In
a parallel way, we are coming to be aware that many of the opportuni-
ties and needs for technology are also outside of the present market
mechanism. An example of this is in pharmaceuticals, where indii-trv
is not motivated to invest tens of millions of dollars in searlching for
new drugs to combat certain uncommon d(liseases because, of the sm,1ll
market for such drugs. Similarly, many major diseases, such as





44


s'Li-tosomial.-is, a COllmOli di-ease in Asia. Africa. and :otith Anmerica
which debilitates by blindness and tis.-i damage. and other vector-
1,orn, diseases of the tropical and sub-tropical world, have not at-
tracted the interest of the plhiarmiaceiitilal in1l)i-tr Iv because the indus-
tr lihas focused on the more profitable and reli:ile markets of the
ind(i-t trial and advanc'ed nations. To imneet tlie needs of tlie developing
nations, directly or through aid, a market would have to be created by
- Ierme'll101t or the procc-s would have to be carried forward by sub-
-idization of rc-ar(lcl, so that onl comp)letioll of tlhe research cycle
knowledge would be available to be exploited by the market. It is
worth noting, as an incidental point, that with the decline in European
colonialism, the interest in tropical medicine in the. Western centers
of medical research has virtually declined to zero. While malaria has
been, and continues to be, a major public health disease, it was only
under the stimuli of World War II and the Vietnamese war that the
U.S. government initiated major episodic programs in malaria
treatment.
Another example of technological opportunities outside the market
system is that of wiring the nation for telecommunications or cable
television to facilitate public feedback and participation in executive
and legislative processes. This is not likely to come about by the opera-
tion of the market and requires the intervention of government.

E. The Drift in. Social Values
Over the last several decades, mass education and communications
have led to a highly educated population, and rapid technical progress
has yielded prosperity and the expectation of continuing prosperity.
Associated with these long-term trends is a measurable shift in a
wide range of values held by Americans. The degree to which these
are fundamental or permanent changes, or merely superficial responses
to shifting circumstances is unclear. More immediately relevant to
the problems of technology is that leisure reinforced by education and
prosperity has led many to reflect on the quality of ]i.fe, and to insist
on further improvements'in that quality. The permeation of society by
middle-class values has produced a strong trend toward public partici-
pation in government and non-governmental decision processes. It is
influencing decisions in all spheres. Changing social values are creating
new demands and new constraints on technological developments with-
in traditional areas. On the one hand, increased education is creat-
ing a population and an electorate which is eager and prepared to
assimilate information and to deal in an informed way with its im-
plications. The educated also more effectively impact on decision-
making and politics. The participation movement itself is perhaps
most clearly reflected in the environmental impact statement process,
but it is occurring in hundreds of areas and elements of government at
local, federal, and state levels.
Participation seems to have its clearest, most unequivocal values in
local or regional issues, where the affected parties have direct. and(
immediate knowledge of tlhe situation and can perceive most effec-
tively the implications of change. Public participation seems to be,
at least by the present processes, less clearly applicable or less clearly
socially effective in those isi.es, which involve costs or inconvenience in





45


one location, but benefits delivered el-ewhere, as. for example, in the
siting of a utility, or the opening of a mine in one region to meet the
economic needs of another region. We have not yet developed an
effective cross-community participation and compen-at ion mechanism.
The participation proce-s also seems to be somewhat leos effective in
dealing with issues that are more speculative, remote, diffuse, or
nationwide. Examples of this sort may be recombinant DNA, mili-
tary and strategic developments, international technological a-i t-
ance, regional development policies, and technologies which operate on
a national rbaqi-, such as transportation, telecommunications, and
weather modification.
Values are shifting in other ways affecting technological options.
Conspicuous consumption, which has been a prominent part of the in-
dustrial society, reflected in the acquisition of goods as a measure of
social progress and personal success, may not be coming to an end. but
it is changing. Conspicuous consumption can evolve into a pathological
system in which emphasis on trappings and superficialities is increas-
ingly at odds with the needs of individuals and their mature develop-
minent. There are decreasing margins of satisfaction from the second
home, the third car, the fourth TV, fifth radio, and the tenth maga-
zine. As each technological development is assimilated, it forms a new
baseline for expectations for more and better rather than a stable level
of individual contentment.
Some of the shift to new conspicuous consumption involves personal
services of a social, psychiatric, psychological, and educational sort.
It is also manifesting itself in concern for higher quality, as for exam-
ple, in the move toward stereo and quadraphonic music, and in greater
diversity in such areas as hobbies and recreation. These trends are
being promoted, and are consonant with the changes in the costs of
energy and materials, and become one additional factor in promoting
the technological changes associated with those price shifts.

F. Government Intervention
The expanding government roles in the economy since the Great
Depression and World War II are neither accidental nor ideologically
driven. It is rather a general worldwide phenomenon, particularly
strong in the United States, responding to the complexities engendered
by rapid growth and technical change, and increasing interdepend-
ence. Society has mandated government intervention also in the man-
agement of technology, for example, the SST, nuclear power, the new
chemical substances screening processes, controls on biochemical re-
search. etc. We must hope that the role of government will become
more. flexible, future-oriented, and sophisticated in these matters.
Government intervention may al.-o find a ,-)ciallv critical role v ith
regard to the export of American services, know-how, and prodt .
There is a class of international aid and assistance objectives which
are not particularly susceptible to the multi-national corporation
mechanism of technology transfer. These deal with such basic things
as crops, food, medical technology, education, and what have come to
be. called "appropriate technologies." These areas may present signifi-
cant export opportunities for the United States. A crucial element in
dealing with these opportunities outside the multi-national corporation
framework is the mechanisms for identifying the needs and oppor-







(unities and the know-how that marry up to make exportable prod-
uict-. Government could help to identify these needs and to stimulate
thlie associated enterprises.
.As government lncrea:l.-.s ;1i1d l)co(lme,11 1ore0 sophisticated in its
intrusion into the techino-economic structure, of society, one can an-
ticipate that these initerventions tlhemnselves will generate technical
innovations in management, in information generation and handling,
in public participation, and in decision-making. One can, for exam-
ple, already see how 7,000 environmental impact statements has en-
gendered an intellectual cottage industry. Government intervention
in nianaging externalities such as pollution have created demand for
technical innovations in physical control, as well as in management and
dat a. collection to monitor ei iviron mental changes.
Much of this paper is directed to highlighting these opportunities
for governmental policy intervention. They are summarized in the
last section o.f the pa per.

G. Maturation of the U.S. Socio-Economyny
It is widely argued with great credibility that the U.S. has passed
through a major phase of industrialization and has moved into a so-
called post-industrial society. The post-industrial society is charac-
terized by a knowledge-driven economy and shifts in the production
methods and output mix toward fabrication and services, which in
turn, generate new demands on technology and new opportunities for
economic growth. The movement toward a mature U.S. economy is
part of the natural development of the society. The problem for gov-
ernment, industry, and the individual is to anticipate the implications
of that change and to prepare for them through timely adaptations in
public policy. The high degroTee of integration of the modern world
leads to a need for social stability. That implies technological systems
which are stable enough to permit well-ordered change. Adequate
government policy requires preparation to develop better knowledge
and understanding about the behavior of the technological system.
Similarly, shifts in the price structure of energy and the increased
public awareness of the limitations in the number of sources are fur-
ther stimulants in the movement to a mature economy.
A mature post-industrial economy and society would emphasize
conservation in materials and greater durability and efficiency in
product design, greater prominence of knowledge and information
enterprises, depending upon science for goods, services and knowl-
edge to build social controls. This section will explore other aspects of
the mature economy and their implications for technology, such as
the social movement toward human fulfillment, i.e., the opportunity
for each person to more closely approach his full range of potential
developments. Economic maturity does not imply less of what we have,
but rather, more, different, and better.

1. A MATURE SOCIETY IMPLIES MORE AND DIFFERENT) NOT LESS,
TECHNOLOGY
The present dominance of physical technologies may move into
relative decline to the advantage of biological and social technologies.





47


But physical technologies. also may become absolutely more important
in the future. A major area for continuing development is telecom-il-
munications. This is consonant with development of an inforn;itlion-
service oriented society. Expansion of biological technologies. not only
in the farm sector with improved plant gil-etics and bioplt-t ici(lt.-. but
development of fundamental understanding of photosynthesi and
its application in new ways, such as possible expain-ion into the energy
plantation, can be anticipated with some confidence. The growth of
biological technologies for main, the imnl)rovemelnt of human genetic:.
the conscious design and development of improved quality of hlinimi.
the improved ability to maintain health both on an individual and on
a public health bai-is are immediately ahead of us. Environmental
technologies of earthquake control, hurricane moderation, rain mak-
ing, and major civil works on land and in thie oceans will become
national and international opportunities.
A main arena for future development, however, is likely to le in
the still uncertain and ill-defined areas of social technologies: The
design of new approaches to social institutions and instruments to
achieve social objectives.
One can anticipate for the future a rich burgeoning of technology,
the early glimmers o.f which we are beginning to see. Tlhe-e technolo-
gies, however, do not necessarily imply more and bigger apparatus
and organizations, but rather simpler and more personal ways of doing
things. Perhaps, the one central characteristic for the technologies of
the future is that described by Buckminster Fuller in the phrase
"more with less." In its crudest form, better design at perhaps only
small costs can give better, longer, cheaper service. Better automobile
engines and smaller cars will use less fuel and will make more effective
use of national and personal resources. In general, improved insulation
and structural design in the built environment could conserve material
and lead to functionally more effective st ructures.

2. MANKIND TO FULFILLMENT
Progress has been associated properly with measures of goods and
income as the standards of growth. It has been quite correctly assumed
that each person's lot will more or less improve with the acquisition of
goods and income. Having reached a general level of prosperity there
is now a new view coming forward that would focus more explicitly
on the personal or internal development of the individual as a crucial
element in the post-industrial or mature society. Personal aggranidize-
ment, cultural fulfillment, close attention to interpersonal relations.
and a more variegated, fulfilling set of social and institutional ar-
rangements are various facets of this general sense of mankind to
fulfillment. One term often used to imply the core of tlwe-e personal
changes is self-actualization, which could be interpreted as the oppor-
tunities for greater individual development, autonomy, and choice.
One can get suggestions of what self-actualization means when one
considers the leisure world of the iminizrants of the last century
through the 1920's. Then, one or two weeks of rest in the country in a
stylized vacation, away from the sweatlshop and the factory, was
considered the apex of leisure. Compare with that the next generation
or two-a vacation with its numerous opportunities of travel, recrea-
tion, skiing, sight-seeing, scuba-diving, amateur archeology, and so on.





48


Co, pa re ti(t I-,'rn, pI a-e of sel f-act Ilalizati nm wit lI t Ile opp)ort unities
of tlle fltulre in ternm-; otf Iarninr, Ile(lditation. experieinces, and so on.
()ne finds it diificult to ainticipate what that lnew society would be
like. 1But ,,e 1 .:ll M-1 se that what mlay l)e in -torte i-s likely to 1)be pro-
f,'111,ly lv di'ti'relt. "e newlv enmrgill .ycloloii'l technologies of
1 io-f,'cii ilk.le. n'(dit:itio,. conditionimig and otllhers will go far toward
rlievinlr hI ,imi 4li-tres- and oj )eliing up nw vistas of internal per-
-<,i:i1 ilprovllnclt. Similarly, tlhe social tec'irologie-; of group inter-
action, conflict re:,dlmtiion. informimatiol t[ra1sfer, and juldgilent
expli'.at it will bc(tter r.lat, ma1,1 to li:- iI.-t it Iti ioIal ;1 id governmental
(,n Vil'" I f ,t. I l -c1 relat i vely III co(I l. it io,1 l ,'plinologies are teclinol-
ni-fs by virtNue of bein* examples of thle conscious use of human arts
or sciencez- for tlhe avcomipli.slc'Int of h a .iii oaln. It is this (idefini-
tion whlicl m:akes electric liglrht bulbs, hybrid corn. and tlhe invention
of i' )ix t:i\ each an ex;uiple of teclnoloryv.
"l'h potential opening, up and ventilation of govtrnlnent implied
by tl e!'s, tc"'Iol noi-ies m1ay simulatee (lemccr:ltic proctesses and make
public participation more effective and practical. To a sulbst4antial
il(e'ree tie t, Latives a-sociated with the mattur, society (incorrectly
lal)eled a no-,growth society) flow out of our natural ability to antic-
ipate the negative with apprehension and our inability to antic-
ipate thc, joys of new concepts and breakthroughs in the overall qual-
ity of life.
Likely to become increasingly important in tlie future are some good
adl( bad technologies whlichl directly affect people as organisms, such
as:
Recreational drugs.
Genetic manipulation.
Biofeedback.
Meditation.
Organ transplantation.
Bioengi nee ring for handicapped.
I. Q. and aptitude tests.
Bel savior modification.
Individualized teaching.
Genetic and social counseling.
Man/mac line extensions.
Sex -election.
Radical cosmetics.
Mind-changing techniques.
Torture.
3. MORE WITH LESS
Taking Buokminster Fuller's concept of "more with less'" one can
fanta:ize along tlie. incorrect axis of less of what we now have and
trace out ,1ark and depressing versions of tlie future. The more likely
and more positive element of more with less is a world which is sub-
Itanf iallv different from tlhe present. Consider, for instance, tlhe pos-
sibility of thirty percent of all work being done at home. Thle implica-
tion of that for -avi ns in fuel, in transportation., in automobiles, the
implications for more highly integrated households, more intimate
opportunities for cooperation within the family and with neighbors,
and local social groups, the greater availability of discretionary time
for personal development-imply a qualitative difference not just a




49


quantitative clhanse. These potentials for q a"litative Ii Zat MN
t iark tle iliajor tranisfjoriatio n in society alieadl of us. Tli'e possiilit V
of cooplerati\-e teaam work for husland, and(I wife llas major I i t i i -;
for a worl(l suibstantially different from tod]y's celitriftlgai I faililv
life. witli 11o01e as a donli-tic service station. Tile hist orical. coo' 'ia-
tive. stable life of rural America nmay be revived inl l ':,i Almlerica.
ns joint work, gender equality, and local work places ,drw t1he O anuily
togr. her.
If shoIld Ij e elar tat sf11'1 r,, ,diwal clihanges in thle stru ctue, of
work in society are -o poorly und(ler.t, o d as to make it difficult to even
id(lentify what principal benefits ani shortcomings of such a new soci-
ety might be. The crtecial role for government now is thie elaborationl.
the probing, the study of the policy implications of tlihee kinl of
options.
It is important to mipliasize that the plain, naked concept of no
growth, the shutting down of economic machinery of Americaln -( ciet v.
could quickly lad ii- into degenerative decline. But the opportunity
facing us is not to shuit off that machinery, but rather to transform it
steadily Iand consecioIsly i ito machinery working toward(l fulfltillmnent
of ouitr-elves and our society. It cannot come about sI)ontaneoiusly.
The 'social forces discussed above are not in themselves sufficient to
explain or forecast the course of technological change over the next
three to five decades. The central characteristics of technology itself
in our society may, in some sense, set independent constraints on or
open opportunities for future development. These factors are consid-
ered in the next section dealing with technology itself.

III. BASIC PROPOSITIONS ABOUT TECILNOLOGY
Technology itself is a crucial factor in shaping future technologies.
The particular ways it is institutionalized and its degree of complex-
ity have their own imperatives. The fact that basic science now leads
technological applications in many fields (rather than trailing, as
often in the past) opens a new bounty of potential benefits and risks
for the future. The unde-ir able side effects of technology drive toward
new countermeasures and alternative technologies. some aspects of
technology that will influence future development are discussed next.

A. Technology Has Created a MIan-Made World
Modern American- live in a man-made world. We know very little
about the stability and resilience of this complex social structure. But
there are numerous suggestions of serious risks associated with this
new world: dami collapse-, nuclear energy misuse, thalidomide, kepone
in the Chesapeake Bay, misuse of diethylstilbesterol, vinyl chloride,
and asbestos. These vulnerabilities have one clear implication for
government: There is a need for closer and earlier attention to the
stability and the weakness of technological systems. Existing systems
must be probed and strengthened. New systems such as electronic
banking and unconventional energy- should be examined promI)ily
and designed to minimize vulnerability. Stability should become a key
goal in the future social management of technology since the techlno-
logical complexity of society and-its national integration leave it v1l-
nerable to catastrophic collapse through economic., technical, or social
breakdown.





50


B. The Compleaity of the American Technologcal System Is
Unique
Technology is at work in every society. What i I ulniqlue about tech-
nology in the United States is its large scale; its interrelatedness; its
pervasiveness in life and the economy; the incredibly large dollar
investments; the rapid rate of turnover; the degree of integration;
aMid its universal and rapid impacts on every aspect of our lives.
highly integrated industrial sectors. such as motor vehicles, telephone,
television. or petroleum, provide both a ready market and a stimulus
for a new technological development. These systems are so large that
their needs automatically create a massive market, and this provides
a profound stimulus for research. development, invention, and inno-
vation within the company. On the otlier hand, any external develop-
ment which will improve thlie system is likely to be adopted. The big
Pvstems have the resources, drive, and potential to define and meet
their needs internally or by stimulating and assimilating external
R. &D.
This regenerative system of invention focuses on and makes it possi-
ble for one technology to survive at the expense of other technological
alternatives. The development of petrochemicals shut off interest in
coal or forest chemicals. Consequently, some kinds of changes neces-
sary in that massive integrated system may be very hard to bring
about.
In general, the role falling to government in connection with an
integrated socio-economv centers around the need to understand better
how that system operates as well as how it could operate in competition
or cooperation with alternatives technological subsystems.
C. All Major Societal Problem.q Hare a Technological Origin
Many people believe that there is no major problem in our society
which is not either directly or indirectly a consequence of the develop-
ments of science and technology.
Unfortunately. most. of the more serious problems stemming from
technology do not arise immediately: they rather tend to build slowly,
to converge with other effects, and not to be clearly associated with any
particular action, event, or decision; i.e., they are externalities.
This proposition on the technological origins of social problems is
not intended to suggest that other social, economic, cultural, institu-
tional factors are unimportant. It only points out that technology is a
basement consideration. As an historical example, the development of
mechanical harvesting of cotton created a mass displacement of black
farm workers. Personal need to resolve issues of joblessness and re-
stricted opportunity caused emigration and the associated immigra-
tion to the northern cities. Thle creation of a new social problem was a
result remote in a time and place from the interests and the reasonable
and d(eCiJ-ble social and personal goals of more, better, and cheaper
cotton. The free play of self-interest with too poor public understand-
ingr of the fiuthre societal implications of mechanization led to this
unfortunate situation. Roughly the s.nane phenomenon is holding now
with regard to Puerto vireins,. internal underclhnsc(, in America.




51


A growing awarenes-s of the importance of external diseconominies
and the widespread feeling that many of them are avoidable is lead-
ing to modifications to correct old problems and prevent new ones, for
example, the emission control devices on automobiles and the air and
water pollution controls in industry. These controls themselves stimu-
late growth and have the overall effect of improving society.
D. The Capabilities of Technology Are Limitless
With regard to future technological developments, there is no goal
which we cannot effectively work toward. This is true at least in the
minimal sense of beginning to systematically explore rational move-
ments toward manipulating, controlling, and managing our affairs to
make any goal ever increasingly likely. The only ultimate constraints
are logical contradictions and violations of fundamental physical laws.
Our Promethean capabilities apply not only to day-to-day goods.
products, and services, but also to the grandiose: the management of
the planet, continental engineering, revamping of the surface of the
earth, the oceans, the ice caps, and the atmosphere.
This truly new capability to move in virtually any direction creates
a new problem. Until recently, ideas and opportunities were limited
by capabilities. Now it is resources which limit ideas, opportunities,
and capabilities. While we can do anything, we cannot do everything.
Learning to define, orchestrate, and guide these new societal choices
is a major unfolding task for government. The social direction of
science, technology, engineering, and their applications will have to
become more sophisticated, flexible, and use-oriented.

E. There Are Social, Psychological, and Intellectual Technologies
While the limitation of physical technologies have by no means been
reached, there are more new opportunities in biological, psychological.
intellectual, and social technologies which have been relatively little
explored. These may come to be the new dominant element over the
next half-dozen decades. A true technology of man, not just of his
artifacts, seems to be immediately ahead of us.
Recognizing that social technologies exist is important on three
grounds. They are increasingly significant for society. Secondly, many
of the analytical and research techniques appropriate for physical
technologies can be fruitfully applied in this area. Finally, the social
technologies comprise the major mechanisms for social control.
The following list includes some areas in which new social tech-
nolo2ies might be applied:
Work arrangements.
Institutional rewards and motivation.
Family life.
Care of needy, handicapped, poor, elderly.
Health care delivery.
Foreca sting.
Crime prediction and prevention.
International cI rrency.
Boundaries of countries..
International peacekeeping.





52

(O)ne-stop governnwient services.
(Colist it lutiolial reforml.
21st-centurv Bill of Rights.
Recrevat-ion.
Edi -at ion in mIaturity.ft
F. Th,,'' Icch 4 4 .o-E, n(i,,M;c PIloi,;g C',f r,'a Dolninate Dcci.sioi-
3[alehfy

Thli ee and o0ily thlr-ee ba,,ic t(echllno-economic planning criteria enter
Alto tle (deisio11 to (, OP 11 a lhand laundry or a McDonald's quick food
sta lId, to lI ild (ai (radilI ( "()lee I).aI or tl t. Ala-kan pipeline, con.-truct a
water works or a public health program, or niarket a new camera or a
new car. The -aiiw three principles drive every s.Ocio-economic enter-
prise in America. These criteria are:
(Can -ou build it ?
Will somebody pay the bill?
Is it safe ?
When one considers all the trouble now' uianife-t in every ,-ector,
whether it is crime in the streets, urban congest io.n, alienation of work-
ers, disruption of family, tlhe, movement of minority groups into the
new jol)s. o'cupations and home sites, whether it is a question of en-
vironmeluntal pollution, international tra (de, or war and peace, every
ono. of these questions have become a major national issue because of
side-effects of technology. But factors outside of these three techno-
.noiiol c planning criteria, factors not entering into the chain of
buyers and sellers, now ('em to be dominant, in creating our prob-
lenis. It is not that these criteria are faulty. In our complex society
tlh e planned, slow-building side-effects frequently become the critical
or dominant ones. Therefore, the traditional planning criteria should
1), enlarged, not diplaced.

G. There Are Three Stages of Technological Evolution
A major new technological invention generally, if not always. classes
through three stages. Thl first stage is that of substitution for a pre-
vious function or activity. So for example, the introduction of office
machines substituted for or augnnented activities performed by humnian
labor. In the second stage, one finds the reaction to the substitutions.
The in.-titution or the system in which the technology is embedded
b)e-ins consciously to evolve and change to better utilize the new tech-
nological capability. For example, one finds billing procedures, office
forls,, data flow and the structure of the information within the
corporation changing to better utilize the new office technology.
Finally, one reaches the point where the new technological gadgets
have permeated the institution or the society, as tlhe case may be, to
thlie extent where one begins to find new and undreamed-of uses for tlhe
technology. The e.,sential condition for that stage is that the tech-
nology be pervasive and so cheap that new things can be effectively
tried. Tis stage is marked by the most general and complex societal
iI p);'Its.
The first two states are dominated by market considerations. But
the third wave and the most important impacts are usually remote
from the thinking of those dealing with tlhe first two phases.





53

The stages in tills evolution, wliile genielally c(le('ar. often, i, nvo(lve
IInierouis small minor c1ag11'es ad multiiple te!,l1OhnooieS i6 lti 11
in numerous sHiaill wav,,s of the tilree-fold( cvyc'le before tHie major
pattern of effects of the full thlree-fold cycle :ire clear.
In part, the w\vave- of change eni(endered by te,1 su)stitutio, 1- occur
because technological chaiige-. ;ire Ileither cOliinfilol1s o l.r tftilgilel .
The replacement of paper by plastic !:g.- tlie (di ltlaceilen)t of IojLe
cooking by canned and their frozen food. the replacelient of the Ilor-.
by the automobile at' not simple substittiojis. VWhiile no iijor tecl -
nology represents a simplle. single, straightforwvnir. tidylv -,tiiittion.
technology is almost Ialways offered on the basis of tlie -1iort-teriil it-
provement in products o()r proc,-ses. i.e.. offered on its sul,.:t itutability.
Clo-ely related to this is tOe general behavior wiiicl s-i ,u,,sts tlhat
technology is viewed as if it were continuous, whereas, at :-ome point
almost every techmolgy ologves discontifnuities. The wo,-t ietre-t-
iig recent examllple of tlhis is tlhe req(tcureent for continual iml prove-
ment in the quality of automobile exhausts., applying pr'e-i-i'e to tlie
industry as if the necessary changes were in a continuingi smooth rela-
tionship) to lpressu Ie. But a half dozen analyses rather unequIivocally
make the case that major discontinuities of teclmnologie, are inpIlied
in meeting those -standards. Continuous pIressure 0.cariot alw.;L- Yieldl
continuous change. Knowing wlhen it cal an(d cannot is a c*ucial aeed
of government. The social implication of those discontinuities can be
enormous to society and the economy.

H. Tee-71ological Ge( 'mflous (Comjpete
The concept of a technological generation is helpful in understand-
ing technological change. For example, the first airplanes repire.-nt
first- generation technology. The next wave of new. iniproved planes
are the second generation technology, and -o forth. In genei-;il, in tite
earlv development of a new major technology there are substantial
improvements with each suicces-e generation. IH[owever. i order
to hold onto contiinuino" econominic 1)profits froim imt jprovemjen ts n(ld new
technology, tho-e g."ains often become p)erverted to cosmetic style sti n's.
appl)eals to conspicu ious coisumlip)tio,. and appeals vwhich! are int ',-i-
callv resource wasting.
There are inter-,'enerational conflicts between e-lablished and comii-
peting" new techniolojiesz. Enthii -ias'-s advoca;,, ing a new in vention,. Iech-
nology, or social strategy often pit overly opt!imi.tic liopw-s for thw
new againstt the proven, old technology wlicli lhas a liili d(iegree of
reliability or efficiency. One les-on out of tbW- iCMntr'-.,ne'nerati)onl con-
flict is neither ie-simism nor rejection of tlhe now blit t 1le' ,. for
caution and forcefullyv inve4tigativig the a)pplications and tlie conse-
MI ,'D .- of tlhe major teclhnological :altern:1tive.
The second lt--'oh is fliat a new dlev'ice il it- eaily ,e geea(rati isl
usiiallv competing against an e(tab]lished te-linoc,'v. esii4-hed 'r-
kets. established c' ItoIms. and esta!)lished1 ed',oro itc -..' T -,
are all roadbllocks to change.
Thlie third lC--oin i tlihat experience ill tr-tiniU and ii-c caln iot l,.
linm-ied beyond! a certain critical pa(e wit1lout -ren.', 'isk- tlitt fl.v
will 1e 1,ndlvy done. (Con-e;!>'.,ntlv. first ,,geea!io tfeclllnoo1oi,- id
gad2ets are often at a .e1ous nolo 'jes. One of tlie roles for ,overnm' "1l here is to be sure that lte





54


early generations have a fair competition with their more established
forebears. Without appropriate government inItervention to assure
fai r testing new technologies may bIe stultified or smothered before
their promise is proven.
I. Science Is Begnq'nIg To Lead Teclhnology
Tradit ionally, technolo 'yv and technical problems spawned and st im-
ulated science. In the pa-t few decades, this relationship lias been
reversing. Electr onics :,idl genetics are conspicuous examples of science
preceding and becoming a prolific wellspring of new technologies.
Lasers, holography, other developments in optics liave vast potential
for impacting on communications. Developments in low-temnperature
physics (cryogenics) are only just beginning to move into areas of
application. Biological developments in understanding the nervous
system and the electrical and biolchemical bases of behavior and growth
offer boundless opportunities. Fundamental developments in mathle-
matics coupled with new theories of control, feedback, and cyberna-
tion will undoubtedly have practical applications in building more
stable technological systems. Knowledge in geology is likely to affect
our technologies of minerals, waste disposal, energy sources, food,
and natural disasters.
The opportunities from science are perhaps greater than from any-
where else over the next several decades and hold at least two implica-
tions for government policy. The first involves a need to identify goals
for the development of basic knowledge in areas of major social
concern.
Traditionally, science perceived its task as one of disclosing funda-
mental knowledge about the structure of nature. It was largely a
privately funded activity and a relatively small part of the economy
at any time or place. As the scientific apparatus has grown to be an
institutionalized part of public policy, fundamental questions arise
about the direction of this powerful machinery to more public-directed
goals. Assuming some goal-setting is appropriate the second and even
more difficult question is choosing the means of intervention and
direction.
As it stands now, virtually no basic research program of government
in the civilian sector has delivered significant technological benefits to
deal with education, welfare, crime. justice. public safety, peacekeep-
ing, bureaucracy, etc. A fundamental need, therefore, is the stimulation
of basic research on our social problems.
The prepositions about technology and the social factors discussed
earlier are among the. dominant influences in our technological future.
The next section draws together some implications for government
from this complex situation.

IV. SOME IMPLICATIONS FOR GOVERNMENT
Some principles useful in defining more specific policy implications
for technology and economic growth:
Future policy with regard to technology should be premised on
the need to anticipate the depth and diversity of the consequences
of technology; to maintain flexibility in implementation; to pro-
vide feedback mechanisms to generate information useful for





Oa

public and private decision-makincg. Lack of knowledge about
impacts, alternative technologies and related policie- is a principal
limitation on present decision-making.
Major clanges in American society colic in different :.'ctoL- at
different rates. Fifteen to thirty years usually are needed to bring
about major changes. Attempts to achieve them it shorter inter-
vals are likely to be unrealiti4c or wasteful of r.-ources. C(rrentlv.
automobiles, highways, buildings, power plants, and das -av(
expected lifetimes of ten, twenty, forty, fifty, and a 1hund(r.l or
more years, respectively. Change must take the-c lifetinn -: into
account.
Uncertainty promotes conservatism, risk avoidance, and eon-
ventional choice:. Consequently, a major role for government is to
structure and manage uncertainty, to activate market forei- to
explore and develop new technologies, and to give specific focus
to desirable public projects.
Bureaucracy is a major element in public and private instl-it-
tions. Its usual risk avoidance and conservatism should be colm-
pensated for by specific programs encouraging risk and em-
phasizing accomplishments, rather than fear of sanctions.
A better match between the techno-economic problems in our
society and the division of public authority is essential to the
social management of technology. No major problem area is the
responsibility of a single or even a few units of government. Con-
sequently, every problem and opportunity is likely to be c-uight
up in conflicting, paralyzing pre-,ureO. Examples are in the areas
of energy, pollution, traffic, housing, and health.
The three traditional technical economic planning criteria of
feasibility, marketability, and safety in the public and private
sectors must be enlarged to include new considerations of wider
scope and deeper penetration into the future. These criteria, for
example, should deal with effects on mental health, family sta-
bility, the environment, law, crime, international affairs, busi-
ness. and cultural patterns.
Market forces, while powerful, are not likely by themselves to
deal effectively with technological consequences outside the market
system, or with long-range social objectives of education, foreign
assistance, or social welfare services; major technologies not part
of the market system; or public service, human rehabilitation, and
mental illness, and unprofitable needs, e.g., rare diseases.
Major sectors of the economy have not embraced research as a
key element of their corporate or industrial strategy. Doing so
would have a large pay-off. Ten companies account for 29 percent,
and twenty companies for 40 percent of all industrial R & D. More
R & D effort could undoubtedly help the construction industry,
mining, fisheries, forest products, shipping, ground transporta-
tion, food preparation and delivery, textiles, appliances, and
retailing.
The principal implications for government in regard to technology
and economic growth discussed below fall into four major areas:
The management of risk and uncertainty in order to promote
useful techno-economic chang !e.
The generation, distributing, and use of knowledge, espec-ially
knowledge for policy planning and programs.





56


TI'ie institutionalization of technology and its regulatory aInd
control institiitions.
The support of research and development. Wlile tlihis is a sub-
set of the knowledge area. it is sufficiently important to merit
independent note.
A. The Pln-',pal Role of Go,'ernmrnt in R(lation to Techinology
The central role of government in the future development of tech-
nology is in the management, of uncertainty. One imlp)ortant way in
which this may be achieved is throughll setting stable. effective con(ldi-
tions on market operations to encourage powerful market forces to
develop needed technologies. Other ways are through research, by tlhe
production of information for public, private, and personal decision-
making. by tlhe skillful orchestration of the instruments of government
for flexible fiitiire-oriented-feedback-engendering policies and pro-
grams. Government must enrich, not foreclose, our options.
The attempt to seek too rapid shifts in time of crisis, on tlhe one hand,
and the unwillingness to carry out gradual, systematic change on the
other, are the Scylla and Charybdis of government intervention. The
tendency to over-specify rather than permit the operation of normal
economic forces to prevail under general constraints, and the tendency
not to be flexible enough in legislation, not to build in feedback, and
to create, therefore, a rigid rather than an organismic policy toward
necessary change are other shoals on which public policy may founder.
As an example of reducing or otherwise managing uncertainty,
consider solar energy: It may be that a necessary condition for the
wider use of solar energy technologies will be the provision of tax
incentives, government research funds, indemnification programs.
changes in Federal housing regulations, new rules of ownership, and
so on. The identification of an appropriate social goal and the re-
setting of the constraints to meet that is a major conceptual challenge
to government. Perhaps the single most potent tool for examining
these( complex situations is the concept of technology assessment. But
more on that below.
As an illIst ration of am energy area in which present uncertainties
ma;y act as an unnorcessary crippling constraint on the development of
n future resource, consider geothermal energy. There are three kinds
of uncertainiie- of such importance to the industry that they may
delay adopt ion of the technology.
The first is whether geotherminl resources are to lbe treated as min-
eral resources or as water resources, or md grineri.. Either of the first
two options carries an encumbranclie of legislation, regulation. etc..
whi,'l was not defined for and d(lid not even consider geothermal
'-our(.ee. The-e present, severe impediments to the development of
4reotherm a: resources.
The second kind of cons -:iint is n lack of knowledge on how to
-.tiiiate thlie enferav content of the field. This, in turn. creates un-
eertailtyv O on Optial plant size and( desifrn. and hence. influences
qli('i-tions of retiurn on investment and reliability of future supply.
A third uncertainty hlias to do with the optimal rate of (nerV with-
draw:,' from a reotlermal source in thlie absence of adequate experi-
ientiallv Lrollnded information. Thlie utility would run tlhe risk of
idevithdra'.vin and hence, not utilizing; its investment to the





;) '

optimal extel-t or perhaps Vorle. overwit lN drawing an I Iinding it-elf.
so to speak. high and dry at some futuIre ti mie. lThe imanage,.,ient of
these kinds of intrinsic uncertaiiiiii.- i- e-sential o llie gLov th of i.i-
new teclihnical opportunity.
With ref ard to setting stable conditions for enterpri.-,,. a liajor
consideration should be the establishment of conditions which avoid
carrying large numbers of issues into the courts. The mlovem(ent of
issues into the courts generally involves miteclianism1,- wliclich are not
democratic, which are not subject to broa(ad publ)lic discussions, ;ind!
which do not nece-anrily act in tlie best shor't- or long-terml inter(.sts
of tlhe nation. (Court proce(dure- often only emallm: 1 i defective law.

S. A\ 1I''IOPRIATIE TE l NOL)GI IES
An intere-ting mixed use of advanced and imundanM e technology
leading to vigorous growth is in the area termed "al)propriate tech-
nology." Freed of its ideological overtone- it is the de.-ign and eiploy-
menmt of technological elements and systems nmore appropriately sc.aled
to maxiinize the long-term social return. Insofar as appropriate tech-
nology is one strategy in re.,)onse to energy and material price shifts.
as well as to externalities of scale, it may modify the size, kind. and
distribution of devices.
For instance, the employment of solar electric technology on a
decentralized basis at many sites will not necessarily imply advanced
technology although it will imply tlhe growth of new kinds of appli-
cations. SintilarIy, feeding surplus electric power generated on-site
bl:i'k into the electric grid may not involve high technology, but it mnay
involve substantial technological clhianges.
One role for government in managing uncertainty here is to define
gonils in operational ways. Furthermore, it should encourage comnpe-
tition between strictly technical solutions and social and market
solutions.

B. TVe Need for Knowldqe for Po7lcy Pun pose.
Within tihe framework of technological and scientific decision-
making in government., the principal limitation is tlhe inadequacv or
absence of knowledge organized for the purpose of an informed public
pol)oicy. Most information is collected for other purposes. A major im-
provemient in executive branch information gathering would be tlhe
explicit identification of the information needs for technologlical and
scientific 1olic(v both in and out of government.
Thie 1)rineipal knowledge needs for policy-making in and out of
governnlent. and for those influencing decision-n:iaking are encapsu-
lated in tlhe concept of technolon- assessment. Technology as-es-ment
is the 1m11p for a class of policy studies which attempt to look at the
widest po-.sible range of imniplications of a new technology, or the
extension of an old technologv in new ways. Includiled in that study
would l)e anticil.pation of iinpact s on social, environmental, economic.
and poliiic(u l aspects of society, and( in the analysis of public policy
option,. alternntives. and consequences for mianagoing that technology.
A siishut i.l number of technology ns.esinents have been con-
dci'ted. Tliev h:.nve ilemonstratedl their value for public policy. Con-
sequentlv. tis approach. if vijrorously pvropagn:ted throumirh the public





58


and private sector, would raise the understanding of technological
issues to a new, higher level. Technology assessment could serve the
purpose of widening public choices and assist in opening the bureauc-
racy and the decision-making process to fresh ideas.
The complement to setting constraints which are likely to avoid
litigation is to extend and expand the application of technology assess-
mnent to regulations, legislation, and other government procedures
which set long-term processes in motion. This would be a major break-
through in the effective management of technology for the
commonweal.
The integration of the economy reflected in the nearly total net-
working in all sectors tends to negate the basic principles of tradi-
tional Adam Smith economics. Smith economics has as basics: (1)
Large numbers of buyers and sellers, none of whom is large enough
to have a commanding effect on the market, and (2) full knowledge
flowing among the buyers and sellers themselves. This second condi-
tion is very difficult to'meet today. One role of government, therefore,
is that of dealing in new ways with these non-traditional markets.
Another role of government where a clear impact could be made is in
addressing the information needs of buyers. Information in a form
and timeliness that is useful for personal and institutional decision-
making is of growing urgency.

C. The Instltutionahization of Technology and Its Regulatory and
Control Institutions
Many technologies are not likely to develop adequately unless they
are set in a proper institutional context. Among these are: Weather
modification, earthquake control, hurricane mitigation, telecommuni-
cations in both sparsely and densely populated areas, and health care
delivery. In the energy area alone there are numerous needs for new
institutions, such as in geothermal energy. A crucial policy problem
is to identify the significant options which will simultaneously meet
public needs, stimulate innovation and accelerate changes, and where
suitable, promote the operation of market forces.
Subsidiary to institutionalization are major questions of equity asso-
ciated with new public technologies such as earthquake control and
hurricane modification. The primary role of government is the identi-
fication of the equity issues and institutionalization of the mechanism
for dealing with them. For example, one can anticipate that within a
decade there will be a capability to mitigate earthquakes. If this in-
volves cutting a potential for an earthquake of Richter level 8.5 to
an acceptable level through the continuous activation of earthquakes
at Richter level 3.0, this would imply a virtually steady day-to-day
operation of low-level earthquakes. The implications and associated
equity questions are currently totally outside public policy. Hence,
the technological developments of these socially beneficial technologies
may be precluded.

1. RESTRUCTr'RING THE REGI'ULATORY APPARATUS
Recrulation of some sort is essential to the operation of complex sys-
temis. Yet most major regulatory agencies of government were set up
decades ago in response to problems which are no longer of primary





59


importance. The internal evolution of the regulatory agencies to re-
main current is of mixed and questionable success. Consequently, a
systematic approach to the restructuring and reorganization of the
regulatory apparatus may be in order. Primary candidates would in-
elude those dealing most directly with technologies which have (lra-t i-
cally changed. The.-e include the Federal Communications Commission
and tlhe Food and D)rug Administration. For example, revamping of
the regulation of telecommunications would give needed new structure
to government policy. Siice tihe generation alnd deployimenlt of knowl-
edf'e is at the heart of ouir society and econoniy, effective riv.ulatio1
of telecommunication is a prvc sing concern. Parallel studies are in
order with regard to other regulated sectors such as energy, banking
securities, marine, and oceanographic affairs, health care, and trans-
portation. Included should be the e-crious study of the future state of
society, the identification of several different regulatory strategies and
the full analysis of the implications of those alternatives.

2. DEALING WITH FUNDAMENTAL NEW TECHNOLOGIES
Fundamental new technologies such as weather modification, earth-
quake prediction and control, ocean engineering, construction of arti-
ficial islands, harnessing of tidal power, and deriving energy from
wind on a large scale, open far-reaching new possibilities. Insofar as
these capabilities have significant potential implications for the
economy, government is faced with new sets of issues that will require
new kinds of choices. These may include questions of whether the
technology should be permitted, encouraged or prohibited from de-
velopment on either a public or private basis. If the decision is to en-
courage market force:, then the policy questions involve the kinds of
intervention which should be made, i.e., a decision among subsidies,
regulations, incentives, prohibitions, etc.
The third class of policy issues is that involving equity or fairness;
for example, if earthquake control technology develops, there may be
sudden large shifts in land values or selective losses of property. What
should happen if good judgment suggests that there should be modi-
fications in control of flood plains? What are the equity issues in dis-
couraging population movement into and promoting movement from
these areas? And then finally, there must be mechanisms to deal with
these problems. Obviously, two of the main things to be avoided in
such mechanisms are: (1) costs which approach or exceed the fair-
nes claims under consideration, and (2) mechanisms which become so
highly procedural and stylized as to thwart rather than promote
equity. The number of areas in which these questions rise is not limited
to the physical examples above.
Health technologies such as therapies for sexual dysfunctions, ge-
netic manipulation and bioengineering present similar issues and de-
mands on government. Even traditional areas such as mass transporta-
tion and housing technologies (e.g., directed at energy conservation
or new materials) present parallel issues.
In general, where the new technology is not compatible with the
existing market system, or where it implies major public initiatives.
it behooves government to attempt to limit and manage the uncer-
tainties. "





60


(;n '1'1iwil't l}' )' plo(id(d the market for space exploration and it
nu-t tliiort. c('ertaiiily Iprovide a market for weather modification,
alt houghl i1o.-t wenlth.r modifications now condiucte(d are private efforts
in ilmn'1iiakiing anld hail. :-i1 repression. But when we move to major pro-
.,ram^ Iof hurricanes, cyclone. or typhoon maaniulmation, government
im,,st prov ide the 1markett and the codltrol for such techniques.

1). .t,/I,.',u,, 0 ii,,,',< I, fft'/;,e Tool of Gocc'rnment
Va.- airat- of gov('villlent have not yet come to enjoy tlhe benefits of
'-(':rlI aiulid policy itudie s 1.ms a aid to internal management or in
te development ; vtd execution of their programii. Consequently, it
would 1)be iiseful where federal agencies wlichll do not have significant
',-.iicli fiii<'tions to specify a list of major issues confronting that
;,1'Icy over theV next" 25 or 30 years. Further specification of the appli-
c(Iations they are making of :-Cience, technology, and policy research in
ad(lres-ini cach issue would further sharpen planning.
For tho-.e areiicivs with sillbtalntial commIIitim-lnts to research, a
-e'rivs of questions probing the identification of issues the agency is
facing, the general and policy re-earch undertaken to relate to those
ies 11 and specific meamis for organizing, presenting, displaying., and
deliverinfr general research and policy research results to users would
he in order.
1. SOCIAL ACCOUNTING
Subsidiary to the development of policy information is the pressing
need to modify the social accounting systems to augment and comple-
ment tlhe current economic accounting systems. With regard to eco-
n1omlic ac'co its explicit attention to the accommodation of externalities
is appropriate to deal with social costs. Other kinds of accounting
sv-t4ens (ldealing with energy balances, quality of life. attitudes, aspira-
tions.. roals and satisfactions would be useful. Such data could pro-
foundlv inform economic and technology policy if collected and
anmlyzed in an appropriate way.

2. IAR.GES.CA.LE SOCIAL OPPORTUNITIES
The identification of large-scale social opportunities, and needs now
outside the market system, could have major payoff for the nation.
Amon, those are : major civil work, tilhe wiring of rural and of urban
America for telecommunimi(ations. the introduction of energy alterna-
tive -vstcms -uc'h as :-olar or geothermal. seabed technologies, artificial
isands and so on. WVithin the social sphere, major opportunities, for
reformulating publ)lic ed,,lcation. the distribution of welfare, tle re-
strueturimnLr of citie- and other habitats present various large social
opporthminitie.- for technology.

3. R. & D. OBJECTIVES
Roearch and Development (R&D) are so crucial to the future of
Ameprwn and to technological chnnvgp tlhant tlheyv mut play a key role
in p0A)li* policy. Some overall social objectives of R&D should include:
The iienvation of knowledge basic to tlhe minderstandinr of
current ad iunfoldin. so,)iet;.. i-inics. Tlii- inpliez a modification
-'" ., i i pli, modfic tio







ill tile inatl,'e of l)si. re.-eaI., whlic.h lairgelv anll lhi-101irallv
flowed fromll sciel'ce itself 1 I, l ind internal l,_,-l ]wric or fromi tll
pul)llrsllit of 1ma' or miiilitary o," l m.oI iiltiti]t lives suil :s thlie sla(e,
TIl( ( 'developi wielt ()f rIesearch thed li' so'I )!, etfec-
tive tools- foir :11a cI1IaV. waVr11i ab2o" relt(1'i 1,i! lial lio all1. .( ia
aill itntelllational r'i ks' ItnzardL n1d( dlisa ter-.
Tle extels ilon of It e md t ioialo'rv L:o v o1 0 oci
problems and thle 1coural 1tlemen 1(Itt of ipplied oil sie 0 1 e
The silIItIha(,,Iw ws initerrlati(,o;sh l aIT cisn ain iad
OP1etw eelt i i' tIi I itiii te. i l( l !11



Iberwe 8.1a)diUt i onal. CU1 Tecinoli 'i Ua1 Sand e-~ n ii 1 ezhnoloh-ic1eI. a-d
tioi. N xv iieliiii~iu> o~ 11 J.oE ,i 11 lei ll)Vi-o(rlill,'lS ha soc1'ial tec nilo)lo'ial stiate i es .!v id "Im liiio .
T'hs at )licaton io )f R1 &D to int ernal o al ) 't)11 e 11is d l CIIi-'ies.
Tlie aip l) lical o)i (t' lo I)to() &t'I e f ( i I0- -;Iss li 1i ai i()1 I ra) l i t i ide.
Tli' e cIlarificatio n oi f the Ia Iler n li rat ioa l ; lt coi l I i{p)eti io() I1 ) ,,lve lit
estalb)llished tec lnolotties 1and po bentiallb 1 i8ificalil e\v 1 l i-
nololries. The hatter a.llmst of, lnece1ssit \ canInIoIl (,t i'efectielv comt)poe
Iecalse lthey are I not i latul e en.''to o pte i t ni ll it)her a iiark l( It
or a! nlOl-mlar'ket sys tem~.



01, Il 11e01ei -11 11 11 11Vd (v*&tIf1( Oil 12c1 pzivii
Thle application of researh t) l'^"e ,'scale s)cial] expTerillmellnta-
tion. \ew" lechall iIsms fio 1te1a public p ail)i r) t'vis lave inii the
past too often been ba8e5(1 o1n a(lec-o-'-trily ;- dlinm elvid e](.eoa. The
extension of tie 'conelit of tile seocial-experiellie t aIs elilmol(ie(l ill
edlecational .i vouchers and(1 11l)(1iie iiVal iinte1nalce experiments 1()
otliher public policy quesl io)s coul)ld Ne aI miajo)r vt I) 1() :o-ocielY.
Tle i idenitification of syV'tesll vullerabilities ill (il. s. om-
mun1i11icationis. urb-Ianl struct'tlres. etc. with (- view to their bett(el r
111a1 eme1tsell V it, Improved dv1.I-i 'n alid contill""ne nc, plalillill '.
Learninlic 1() promote eiltreprelneurship aI Id tlie willinll.liess to
ftake ri*-k whether ,as alit owner. a corporate (maiaer. or a -overn-a
ment buireailcrat.
Specific indepth studies of alternative future worlds, for exam-
ple. working out in 7"reater detill thie iniplication of 10, 20.30. 5"0
percent less enlerrv and materials per capita are urgently needed.
TI1'w-e scellarios would become a public' and private planning" rui(le
and public information base.
Stiniulatilnn' the market in new and non-traditional ways.
Tlie utilization of new and old R&D results bv go-verninent a-n1d
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