Despite the importance of technological change as a primary driver of economic growth, economists have traditionally treated it as a single entity, described by a number commonly called "total factor productivity." But a group of SFI researchers believes technology progress is a far more complicated beast requiring a much richer description.
This summer SFI hosted its first workshop exploring how best to study such progress. The August meeting, wrapping up this week, was hosted by SFI External Professor Doyne Farmer and frequent SFI collaborators Eric Beinhocker, Deborah Strumsky, and Jose Lobo. The meeting assembled economists, biologists, physicists, engineers, archaeologists, and anthropologists for talks and discussions about new ways to quantify, analyze, and model technological development.
One approach posits an economy as a trophic structure, where goods flow as energy does in an ecosystem. "The flow of goods has a direction, and we can organize it accordingly," says Farmer. "You can think of an economy as having a trophic flow precisely analogous to food webs in ecosystems. Raw materials play the same role as basal species, and final goods are like top predators. Improvements are amplified as one goes up the economic food chain, so that sophisticated final goods like computers drop in price more quickly than raw materials."
Farmer and Oxford colleagues James McNerney (a former graduate fellow at SFI) and Francesco Caravelli believe this might at least partially explain why photovoltaic solar energy has dropped in price by a factor of more than 3,000 since 1957 while the contribution of coal to the cost of electricity has remained roughly constant for the last 150 years, with no clear trends and varying by less than a factor of five.
The invitation-only workshop, "Getting Inside the Black Box: Technological Evolution and Economic Growth," took place August 7-30 and was funded by the Institute for New Economic Thinking, the U.S. Department of Energy, and SFI.
For more information, visit the workshop page