Assignment: Intermediate Macroeconomics Technologies

An article in the latest (last week’s) Economist talks about the importance of an existing infrastructure before new technologies are introduced. If there isn’t any solid infrastructure, then it’s almost pointless to introduce a new technology:

…as a recent report from the World Bank points out, it is the presence of a solid foundation of intermediate technology that determines whether the latest technologies become widely diffused. It is all too easy to forget that in the developed world, the 21st century’s gizmos are underpinned by infrastructure that often dates back to the 20th or even the 19th. Computers and broadband links are not much use without a reliable electrical supply, for example, and the latest medical gear is not terribly helpful in a country that lacks basic sanitation and health-care facilities. A project to provide every hospital in Ethiopia with an internet connection was abandoned a couple of years ago when it became apparent that the lack of internet access was the least of the hospitals’ worries. And despite the clever technical design of the $100 laptop, which is intended to bring computing within the reach of the world’s poorest children, sceptics wonder whether the money might be better spent on schoolrooms, teacher training and books. [link]

This is of particular interest to us, because judging by what we have been doing in class for the last couple of weeks, it seems almost heretical. Consider that we learned that the only thing that can cause long-term sustained growth is the improvements of technology and labor efficiency.

Assignment: I’ve uploaded the article to the ‘Handouts’ section to the right. Read it and think about it in the context of what we have learned from the Solow Growth Model and its implications on American and world economic growth. Once you have done so, leave a comment on this post (a few short paragraphs, no more than 50-60 words) on what your thoughts are. This will count as one assignment (a maximum of 1 point). The deadline is next Friday (2/22), 1pm.

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55 comments for “Assignment: Intermediate Macroeconomics Technologies

  1. Alina Hunanyan
    February 22, 2008 at 12:44 pm

    In order to develop successfully and improve the efficiency of labor, most countries must go through a medium technological stage first,. They need to invest in basic infrastructure, instead of leaping directly into high-tech mode. Cellular phones are one of the very few high-tech examples which does not require much infrastructure to implement. Unfortunately this case does not apply to most high tech devices. These countries must develop the basic infrastructure to enable further development.

    According to the Solow Growth Model , Efficiency and the growth rate of efficiency (technological advances) are the only variables that can account for long-run economic growth. However, this does not account for countries with yet undeveloped infrastructures.

  2. Ulrika Belin
    February 22, 2008 at 12:46 pm

    Studying Solow’s model for economic growth, we have learned that sustained economic growth is mainly a function of the rate of improved efficiency i.e. technology. The Economist article points out that technology alone is no “silver bullet” to development, but that other factors such as infrastructure, technical know-how, and a functioning educational system must be in place as well. The article thus claim that there are limits to Gerschenkronian leapfrogging, and that developing nations must establish a base of medium advanced technology before moving on to high-tech.
    In this sense, he article reminds us that economic models are but simplified versions of reality, and in order to really understand economic growth we must deconstruct the “ceteris paribus” assumption. Rostow would later come to acknowledge that technology’s effect on the economy will depend on the “stage” of development. In other words, different from what many economic models would have us think, there are no “one-size-fits-all” solutions to development, and policies must be rooted in historical, social, and institutional contexts as well.

  3. Lorena Rossel
    February 22, 2008 at 1:01 pm

    The article about technical leapfrogging gives us interesting “real-world” insight onto the Solow growth model. We might assume that developments in technology might increase E (efficiency) and therefore necessarily increase economic growth. Nonetheless, as the article points out, high-level technologies without intermediate support (i.e. reliable electricity) or increases in the population’s level of education will do little to trigger growth or promote sustainable development.

  4. Josie Alvarez
    February 22, 2008 at 4:02 pm

    I think this article complements what we have been learning in a very unique way. The last few lectures we have been discussing the Solow Growth Model as well as engaging in the possible advancement in industry through efficiency. However, as the course continues, I realize that economist are constantly using models and coming up with solutions with the idea that in a “perfect world” these models would work. Unfortuntely, what we do not take into consideration is that every country is different and works in different ways. In economic policy, we are constantly wondering why the thrid world remains stagnant in a world of so much rising industrialization and rich in resources. This article points out two things, that I believe are very important. The first is that every country is limited in resources in their own way. The second is that it is not beneficial for certain nations to skip the step between “medium tech” and “high tech” simply to reach the level of other leading nations. Connecting this logic to that of the Solow Growth Model, suggest that in order for this model to work in the Long Run, countries in the third world need to achieve basic and proper infrastructure to support technological innovations. We cannot expect leapfrog technologies to work in countries that lack basic human resources such as education, health care, and labor. Until economist learn not just to have a birds eye view of economics and policy management, a lot of models significant to leading nation will not work in those of the second and thrid world.

  5. Natalie Camastra
    February 22, 2008 at 11:21 pm

    The conclusions of the Economist article are not surprising. A country must develop the intermediate technology and infrastructure to maintain, support and disperse high-technology. The existence of a new building will have no impact if there are no roads to carry people. From the Solow Growth model, we learn that g, labor efficiency growth rate and E, labor efficiency are what most contribute to long-term economic growth, or sustained economic growth.

    One of the issues facing developing countries is the lack of investment in education for the labor force. Any developed country can hand over fancy water towers to a developing country. However, if the developing country’s labor force do not have the skills to maintain and innovate, the water tower will run dry. Another would argue that the innovation, creation and improvement of society must come from within, and education plays an important role here in promoting labor efficiency.

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