General purpose technology
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General-purpose technologies (GPTs) are technologies that can affect an entire economy (usually at a national or global level). GPTs have the potential to drastically alter societies through their impact on pre-existing economic and social structures. Examples include the steam engine, railroad, interchangeable parts, electricity, electronics, material handling, mechanization, control theory (automation), the automobile, the computer, and the Internet.
The introduction of a new GPT to an economy may, before improving productivity, actually decrease it:
- The obsolescence of old technologies and skills
- Learning costs
- Time required for development of new infrastructure
- Readjustment of labor to new industries, causing temporary unemployment
This initial inability to exploit the benefits of the new technology is known as the Solow Paradox.
Is government investment necessary to develop new general-purpose technologies?
In his book, Is War Necessary for Economic Growth?: Military Procurement and Technology Development, Vernon W. Ruttan, Regents Professor Emeritus in the Department of Applied Economics at the University of Minnesota, examines the impact of military and defense-related procurement on U.S. technology development. Ruttan reviews the development of six general-purpose technologies:
- Interchangeable parts and mass production
- Military and commercial aircraft
- Nuclear energy
- Computers and semi-conductors
- The Internet
- The space industries
Based on his reading of the histories of these technologies, Ruttan finds that military and defense-related procurement has been a major source of technology development. He believes that the current technological landscape would look very different in the absence of military and defense-related contributions to commercial technology development. However, from his research, Ruttan determines that commercial technology development would have occurred in the absence of military procurement but more slowly, e.g., the aircraft, computer, and Internet industries. He cites nuclear power as an example of a general-purpose technology that would not have developed in the absence of military and defense-related procurement.
New general purpose technologies in energy systems transformation
In the book Global Energy Transformation, author Mats Larsson refers to the work of Professor Ruttan and argues that large scale government programs for energy systems transformation will become necessary to drive the development of new energy technologies. Energy efficient technologies and infrastructures will become necessary to drive economic growth in a future situation after peak oil. The task of developing and implementing these technologies on a large scale will be too complex and demanding in terms of resources, for the market to drive this on its own.
Larsson refers to earlier large scale development programs and projects, to support his argument. One is the transformation of US industry to war production during World War II, the second is the Marshall Plan and the third is the Apollo program. A similar government funded program will become necessary to transform global energy systems on a large scale.
History of GPTs
Economist Richard Lipsey and Kenneth Carlaw suggests that there have only been 24 technologies in history that can be classified as true GPTs. He defines a transforming GPT according to the 4 criteria listed below:
- It is a single, recognisable generic technology
- Initially has much scope for improvement but comes to be widely used across the economy
- Has many different uses
- Creates many spillover effects
A GPT can be a product, a process or an organisational system.
Steam engine increased labor productivity annually by 0.34%, IT - 0.6% (in 1995-2005), robotics - 0.36% (in 1993-2007).
- Ruttan, Vernon (2006). Is War Necessary for Economic Growth?: Military Procurement and Technology Development. New York: Oxford University Press. ISBN 0-19-518804-7.
- Lipsey, Richard; Kenneth I. Carlaw; Clifford T. Bekhar (2005). Economic Transformations: General Purpose Technologies and Long Term Economic Growth. Oxford University Press. pp. 131–218. ISBN 0-19-928564-0.
- General Purpose Technologies and Economic Growth Edited by Elhanan Helpman.
- Economic Transformations:General Purpose Technologies And Long Term Economic Growth by Richard G. Lipsey, Kenneth I. Carlaw, Clifford T. Bekar