At this stage in our discussion of globalisation and technology, it would be useful to examine some aspects of the basic economics of technology.

Meaning

While most people think of technology in terms of gadgets, equipment, and machines, economists describe technology more broadly as all the available know-how or knowledge, whether embodied in products or the skills of persons, which can be used to produce real output in the economy. In this sense, therefore, technology like business skills, labour, capital, or natural resources, is another factor of production. More precisely, we may say that technology is anything which raises the amount of output of either a firm, farm, or country, with no change in the level of the other productive factors.

Technological change, or better still technical progress, is simply any improvement in technology over time. Such an improvement increases the amount of output that is produced, from a given level of inputs. Technological change or progress is a central element of economic growth. It includes, as well, the increase in the quality and variety of goods and services, which normally accompanies economic growth.

In its simplest meaning, no particular means of transmitting technological improvements is identified. Indeed, the early economists treated technology as something outside the economy. It was assumed that it fell "like manna from Heaven." To them this meant that technology was "disembodied." Modern economic theory, however, recognises "embodied" technical progress. This refers to technological progress, which causes the improvements it brings to be embodied or built-in to the new capital of a country, firm, or farm.

Elements

Owing to its broad meaning, technological change has several more or less distinct dimensions attached to it. First, it includes an element of "invention." Invention is the discovery of some new knowledge or a new principle. Good examples would be a new way to recover mineral resources from the earth or new methods of teaching, which allow people to learn faster.

Second, the new knowledge or principle often leads to an "innovation." For example, this would occur if the new methods of recovering mineral resources were used in the bauxite industry and the new methods of teaching were applied to computer training in Guyana. In both instances we observe that the new knowledge and principle are applied to products and services.

Third, the innovation itself is "diffused" to other sectors of the economy. This would occur if the new mining recovery methods spread beyond bauxite. For example, to the gold, diamond, and quarrying industries. Or, alternately, if the new teaching methods are applied to every school in the country. "Diffusion," therefore, is the spreading of the innovation throughout the country.

Organisation and specialisation

The scope of technology includes the manner in which enterprises, firms, and institutions are organized. Better organisational methods can lead to more output per worker per hour, without the addition of other inputs. New technology, however, also affects how the other productive factors are organized. For example the technological change may be "labour-saving." In which case we may conclude that fewer workers are needed to produce the same amount of output. This type of change leads to reduced employment in the enterprises where it is introduced. In Guyana we saw this happen when tractors and trailers, replaced manual labour on the sugar estates.

The technological change may also be "capital-saving." In this case fewer machines and equipment are needed to produce the same amount of output. An example of this occurs, when a new and more powerful computer makes several older ones absolete. Another favourite example to economists is the introduction of a three shift-system into a factory to replace an eight-hour working day. Here the existing plant is used more intensively 24 hours a day.

Finally, the technological change may be "neutral." Here it has the same proportional impact on the labour and capital used in production.

Learning-by-Doing

An important aspect of technological change is the improvement of workers' skills that occurs when they repeat a task so many times that they come to perform it perfectly. As the old folks say: "practice makes perfect." This basic common-sense principle contributes a great deal to the improvement of an economy. We see it every day in our lives. Economists call this the "learning curve," which follows from "learning-by-doing." Learning, in other words, is a form of technological progress.

Human capital

Related to "learning-by-doing," is the concept of human capital. This refers to the education and training of the workforce. This human capital is similar to physical capital, which we see in plant and equipment. To accumulate human capital, it is necessary to train and educate people. But to do so requires that people invest time and other resources in acquiring these skills.

Some economists believe that persons make the same type of decision when investing in human capital as they do when investing in other forms of capital. That is, the cost of investment is measured against the expected return to be obtained in the form of increased income, arising out of the improved skills persons acquire.