Wednesday, November 27, 2013

Marco-Innov 5: The technosphere & slowing innovation

In my previous blog I tried to argue that technologies have complex interdependencies - not always with what we think of as technologies. Economics has always promoted the idea that what matters is change - mostly focussed on economic growth. Innovation studies has taken up the same view and focus on Δ (Delta - change) mostly in regard to technologies but more recently the introduction of new products. But I want to make the argument that this was always insufficient and certainly now needs urgent revision.

The Frontier View of Change

There are two ways of looking at what the frontier 'curve' is:

  • New products; and
  • Product frontier.
New Products. In my previous blog, I included the product diffusion / sales growth curves, with its typical S shape.

Product frontier. In traditional economics there are a series trade-offs that make it difficult to account for the new. 

Where does innovation fit? Take note for example of the capitalisation of R&D expenditures. Is R&D really capital in the same way a factory is or an office block for a KIBS or purchasing computer equipment - I'm not sure.

At present there is a debate going on about slowing innovation.

Slowing Technological Change: The Bernanke view

Back in May this year (2013) Ben Bernanke chairman of the Fed Reserve made an interesting speech on economics, growth and technology

The speech reads in part

Fifty years ago, in 1963, I was a nine-year-old growing up in a middle-class home in a small town in South Carolina. As a way of getting a handle on the recent pace of economic change, it's interesting to ask how my family's everyday life back then differed from that of a typical family today. Well, if I think about it, I could quickly come up with the Internet, cellphones, and microwave ovens as important conveniences that most of your families have today that my family lacked 50 years ago. Health care has improved some since I was young; indeed, life expectancy at birth in the United States has risen from 70 years in 1963 to 78 years today, although some of this improvement is probably due to better nutrition and generally higher levels of income rather than advances in medicine alone. Nevertheless, though my memory may be selective, it doesn't seem to me that the differences in daily life between then and now are all that large. Heating, air conditioning, cooking, and sanitation in my childhood were not all that different from today. We had a dishwasher, a washing machine, and a dryer. My family owned a comfortable car with air conditioning and a radio, and the experience of commercial flight was much like today but without the long security lines. For entertainment, we did not have the Internet or video games, as I mentioned, but we had plenty of books, radio, musical recordings, and a color TV (although, I must acknowledge, the colors were garish and there were many fewer channels to choose from).

The comparison of the world of 1963 with that of today suggests quite substantial but perhaps not transformative economic change since then. But now let's run this thought experiment back another 50 years, to 1913 (the year the Federal Reserve was created by the Congress, by the way), and compare how my grandparents and your great-grandparents lived with how my family lived in 1963. Life in 1913 was simply much harder for most Americans than it would be later in the century. ....

Firstly; lets deal with the purely ridiculous understanding of the past and present.

  • "Commercial flight was much like today
    • Look at ANY cost estimates and air travel is massively cheaper now than in the 1960s. Australia due to its isolated island but reasonably wealthy status seems to be a good test case for the Bernake view. For example, in 2012 there were 8.1Million overseas trips by Australians. That is the equivalent of more than 1/3 of the population making one international trip in the year (pop in 2010 =22.3m . The Australian Bureau of Statistics reported that for 2010 there were 13.4m outbound passenger movements in total [equivalent to 60% of the pop] (YearBook 2012).
    • In 1962-63 (a decade before the 747) there were 247,827 passengers that left Australia for overseas by aircraft - that is 2.36% of the population for that year (Year Book 1967).
    • The change in commercial flight is simply massive. The planes may look somewhat similar but the change is beyond transformational - Aust air traffic as % of pop has got up close to not 10X but close to 30X.
  • "For entertainment, we did not have the Internet or video games" 
    • - spoken like a retiree - the internet is primarily not about entertainment, and in the immediate future with the 'internet of things' a substantial proportion of it will not be websites, which is true even now. Modern international supply chains or international finance would simply be impossible without existing digital infrastructure.
So Bernanke is putting forward the idea that we haven't seen much transformative change in the last fifty years. Even if you ignore such obvious flaws as those above, if you look both at form (how things look not function) and the frontier (the curve as you might call it) then that view maybe persuasive, and depending on the circumstances I might make a similar case, but it is missing some very major underlying changes.

An argument for the Technosphere

To examine the idea of change behind the curve let's take a closer look at Bernanke's perspective.

It can be difficult to comprehend just how far life really has changed. So I offer this. It was filmed in 1964 (close to Bernanke's date) but in Brisbane Australia and close enough to the time I was born in the town I was born in, so this video brings back a number of memories. Obviously, it is a government propaganda piece for advertising outside of Australia but it does give a feeling for life in the sixties for the middle class.

So you tell me, does this video support the Bernanke view? Okay, there is a tv and cars but; has there been little innovation? The point that captures my imagination about this film is not the state of the technology not the cars, trams, telephone etc but the disconnectedness of it all. Every piece of technology is a separate individual entity.

The blokes sanding timber have no computer controlled cutting equipment. and the stevedores are working with their hands. Everywhere you look there is something that is hard to put your finger on.

What we are fast moving to a grid of technologies where the internet of things has everything wired together.

Change behind the curve

The technological productivity frontier is not enough to explain how changes in the very wiring of the economy is changing. The problem is that we tend to take a business / industry focus to innovation not an economy wide perspective. Much of the academic literature will focus on the patenting in x product classification in a particular country or increasing globally.

But take one just one example from the little film above, the loading of a ship. Notice that it was being done by hand. No containers. Containerisation has facilitated not just a change in the volume of trade, but also the nature of the products that could be traded (delicate products), but also the port city configuration of the global economy has grown stronger.

Why have companies been able to improve the efficiency of aircraft so much; two answers; computing power in design and electronics controls in the planes.

In academic circles, the big movement in the 1990s was to move from the heroic innovator to the innovation systems idea. Innovation is not developed by businesses in isolation. We need a similar transformation in the 21st century. It matters less how an individual technology moves forward than how those technological changes will facilitate changes throughout the economy.

Friday, November 1, 2013

Marco-Innov 4: Technology Accounts

Every reader of this blog is, I'm sure, at least somewhat familiar with economic accounts. But what would technology accounts look like? There have been many concepts trying to account for the structure of technology. I start with a scattered sample, move onto discuss Brian Arthur's notions of technology and then introduce what this got me thinking about.

Standard accounts of technology

There is the life cycle perspective and the famous S adoption curve. One version that is famous although it seems to deliberately leave off TV is from the New York Times.

Like anything there are problems with this graph including the comparisons but its not bad. It gives an idea of how technologies were adopted across the 20th century. But there are other perspectives.

Autio and Hameri 1995 present a kind of hierarchical view that finishes for some unknown reason at national political borders, which for technology I have to say is a bit odd but consistent with 1990s and the blurring of innovation, technology and political jurisdictions.

This paper focuses on the construction of an integrated model of technological systems. The model has two purposes: (I) to clarifv the scope and relations of various concepts in this peld, especially the concepts of technology, of national systems of innovation, and of technological systems; and (2) to pro- vide a framework in which to study the conceptualization and construction of evolving technological systems. These purposes require the creation of new concepts and the redefinitions of some familiar ones. The model is structured at four levels of aggregation: (1) the individual; (2) the organizational; (3) the sectoral; and (4) the national. From within this structure we can identify parallaxes, or changes in the appearance of each of the four levels as the level from which observation takes place is changed. The structure of the model and the concept of parallax serve to clarify some important complexities of the dynamics of the system within which technological change takes place. 

Richard Lipsey Kenneth Carlaw, and Clifford Bekar constructed a detailed historical view of General Purpose Technologies in their book  Economic Transformations:General Purpose Technologies and Long Term Economic Growth.

1)The domestication of plants. 10000 BC 
2)The domestication of animals  8000 BC
3) the smelting of ore 7000-6000
4) Pottery 6000 BC
5) The wheel 5000 BC
6) Writing 3400 BC 
7) Bronze 2800 BC
8) Iron 1200 BC
9) The water wheel - Early medieval period, The heavy plough - Early Medieval period
10) The three masted sailing ship 13th century AD
11) Printing 14th century
12) The steam engine 18th century
13) The factory system 18th century
14) The railway 19th century
15) The internal combustion engine 19th century
16) Electricity 19th century
17) Mass production late 19th early 20th century

18) New GPT - computer and digital revolution.

The concept of GPT ended up being too limited for all the technologies being contemplated in the list so GPT includes organisational technologies, product technologies and process technologies. My problem with the notion of GPT is that unwinding what is a GPT and why seems unendingly complex every technology is a web of co-dependencies - but that perspective always seems to be missing from technology studies.

The Nature of Technology (2009)

Okay so that is three completely different perspectives. Then a couple of years ago I found something that really got me thinking and took me back to my studies of ecological systems and which got me interested in innovations systems at the start.

Brian Arthur (p41) The standard view - I am talking about the one most technology thinkers have taken - sees a technology as something largely self-sufficient and fixed in structure, but subject to occasional innovations. But this is true of technologies only if we think of them in the abstract, isolated in the lab, so to speak. "In the wild' - meaning in the real world - a technology rarely is fixed. It constantly changes its architecture, adapts and reconfigures as purposes change and improvements occur. A [aircraft] carrier's jet fighters may act as more or less  independent components one day. The next they may be assigned to the protection of a radar surveillance aircraft, becoming part of a new temporary grouping. New structures, new architectures, at any level can form quickly and easily, as needs require. In the real world, technologies are highly reconfigurable; they are fluid things, never static, never finished, never perfect. We also tend to think of technologies as existing at a certain scale in the economic world. If the technology is a traditional processing one (the basic oxygen process for producing steel), this is largely at the scale of factories; if it is a device (a mobile phone), this is largely the scale of products.

Arthur has the order differently - the following text precedes the text above butfor the story rvesing it makes more sense.

Following a lengthy breakdown of the technologies within the F35 fighter Arthur writes. We could follow the hierarchy of executables upwards as well. The F-35C is an executable within a larger system, a carrier air wing. This consists of several fighter squadrons along with other support aircraft, whose purpose is to provide both striking power  and electronic warfare capabilities. The air wing is a part of a larger system; it deploys aboard a carrier. The carrier is an executable too: its purpose is (among others) to store, launch, and retrieve aircraft. It in turn typically will be an executable within a larger system, a carrier battle group. This, as the name suggests, is a combination of ships - guided missile cruisers and frigates, destroyers, escorts and supply ships, and nuclear submarines - grouped around the carrier. And it has varying purposes .... Therefore the carrier group is an executable....

and on and on up the scale....

All of this is built to support Arthur's three definitions of technology

1 - a means to fulfil a human purpose (an executable).
2 - technology as an assemblage of practices and components
3 - technology as the entire collection of devices and engineering practices available to a culture.

I must admit that, and as any reader of my blog will understand, this book has revolutionised my understanding of technology. Not what I had an intuition for but it gave it detailed expression, a language for it. I have been surprised how little reference to the work I have seen in the academic literature. For me it has been mind expanding and fired my imagination. For a couple of years now I have been trying to figure out how to illustrate the above concepts even for a simple thing like the car through time.

For example the car (a technology) reconfigured the world geo-politically due to the need for petroleum products ( so we have companies, ships oil refineries etc etc), spatially (city structures) spurred many new technologies (road management, health systems - spinal care) etc etc. That gets wildly complex very quickly.

What will the Google car do - maybe just as much. By linking the digital world and cars why not redesign the car all together - put a desk in it (thanks for whichever blog suggested this), car parking spaces on streets can disappear, multistorey car parking can become vastly more efficient, police enforcement will change, hospital ERs potentially will change over time ...etc etc. I gave up trying to illustrate this one example when another my scribblings led me to another idea - every major technological era has been accompanied by institutional, spatial, and soft innovations.

Constructing National (?) Technology Accounts

It has been popular amongst statistical agencies for more than a decade to collect internet sales data, but this about the only 'technology' data being collected. In an age emerging where advanced technology is at once ubiquitous and second fundamental to the economy we need to start thinking about technology like we think of basic economic data. But there are challenges, technology has twin processes - changes in artefacts are preceded by and followed by soft technologies.

Fig 1. Technology Through Time - Till The Digital Revolution.

At any point with any technological era, technologies reshaped the politics, the urban structures, the organisational landscape and the connectedness of the technologies themselves. In this diagram I left off the digital technologies.

In the 1960s Galbraith talked of the Technostructure - the technocrats of large corporations, but the nature of corporations is changing who is in them and who is not. Just as likely today companies are linked together in tight or loosely coupled networks - product networks and chains.

I want to draw the distinction between traditional mechanical, chemical and biological systems because they have proved to be difficult to manipulate. Progress in these technologies is slow, not for some conspiracy but because they are really hard to improve. Getting an object through space takes a lot of energy and the physics of that are a problem for us.

Fig 2: Technology to the Present.

However, we have discovered that we can manipulate technologies that send information signals much more easily. Although obviously the digital has evolved from and remains embedded in many ways in traditional industries it is revolutionising industries, products and space so if we separate it off it helps us look for what might happen.

So far, most energy has been spent examining what the digital revolution means for industries, (incl universities etc), or humans themselves (the arguments over "what this is doing to us"). But it is and will continue changing the institutional identity of our society.

I'll make one argument - this is the cause (not the GFC) for macro-economics as a discipline being in so much trouble. Macro-economics emerged as a necessary technology when other technological changes (globalisation) meant that economic shocks were transmitted between economic zones (continents). With new wave technological change - we need to invent new modes of thinking - a mode I am calling Marco-Innovation in this current series until a better name turns up.

I have not discussed here biotechnology or nanotechnology as I think both of these are still in the hype stage.  I know biotech has some wins but I don't think it has really arrived as a technology so I will reserved judgement for now.