In good times and bad we do love our gadgets.
Even in our latest economic misery we enjoy fiddling with our laptops, pads and tablets. And in the coffee shops while our cups cool we often find ourselves staring lovingly into the screen of a phone that is smarter than we are and knows it.
Our level of curiosity about technology varies a lot. Most of us just use the stuff, enjoying the features and occasionally cursing the baffling imperfections.
There’s no doubt that technology and innovation are crucial to economic growth and our continued prosperity. And the concept of te
chnological change has been a loosely bolted-on part of economic theory since the 18th century.
In more recent years, though, as economic theory gave way to the mathematics of economic models, technological change became more and more difficult to integrate into economic thought.
One reason for the difficulty is that innovation and technological change isn’t what it used to be — and that isn’t as silly as it sounds.
From an economics perspective, innovative technologies in the 19th century invariably resulted in higher productivity, higher efficiency and economic growth. The interaction of technology with market capitalism usually guaranteed this result. The new replaced the old because it was an optimized mix of faster, cheaper and better.
By the middle of the 20th century, though, we could see the beginnings of a change in the nature of technological change itself. While most technological improvements retained the key characteristics — faster, cheaper, better — some innovations had only one or two of the attributes, not all three, and certainly not optimized.
In the past, these technological developments that couldn’t meet the tough standards of the marketplace would have been exposed to the elements and left to die. But our economic system itself has changed and is now more accepting of technological changes that are not clearly more efficient.
A recent example may be found in the decision by the Shoreline School Board to buy 1,600 Apple iPads so that each student at Shorewood High School has one. The complete package of tablets will cost just over $1 million.
The board made its decision after realizing that repairing and replacing the aging laptops in use by the students would cost even more.
The merits of the decision are not an issue. The district is committed to its policy of a laptop for each student, and the iPads are a continuation of that policy based on a cost-benefit analysis.
What is an issue from an economics standpoint is that personal computers in one form or another have become a part of the educational environment, a kind of “cost of doing business” for educational institutions. They have been adopted despite any convincing evidence that they increase the efficiency of the educational process. Schools do this mostly because they have to. It is part of preparing their students for further studies and for the real world.
More broadly, though, from an economics standpoint, it is a kind of “technology tax” that all of us must pay, directly or indirectly, to function in today’s world and today’s economy.
The most vivid examples of technology tax are found in the medical care sector, where costs have reached critical mass and threaten to drive Medicare, Medicaid and private health insurance into extinction. The technology tax in the medical care industry is a major barrier to our ever solving our federal deficit problems.
There technological innovations are often adopted because they have to be, not because they are more efficient. They are needed in order to remain a first-class facility, and to avoid lawsuits for being anything less.
The ultimate impact of technology taxes on our potential and actual economic growth isn’t really known with any precision, but it is a process that is troubling.
We can still believe in technology and its promise of a better world. We just have to get its economics-busting behavior under control.
Technology and innovation still fascinates not just consumers but Wall Street financiers as well. During our difficult times the tech sector has been one of the more cheerful corners of the investment market.
The reason for Wall Street’s interest of course is the belief that sellers of innovative technology will increase their profits. Whether purchasers of innovative technology will profit from the transaction, though, becomes a little bit more complicated.
When things get complicated our slow-moving but lovable economists almost always seem to be involved somehow.
Technology is a part of economic theory that is known to be important … but that is pretty much all that is known for certain. We recognize that economic growth and prosperity depends on doing things more efficiently and technological innovation often delivers just that.
James McCusker is a Bothell economist, educator and consultant. He also writes a monthly column for the Snohomish County Business Journal.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
