Saturday, July 26, 2008

Some general concepts as they play out in technology and development

It occurs to me to post on some of the concepts that have been around for a while, and how they play out thinking about technology and development.

The Technology Gap

Think about marginal propensities to consume. Compare the consumption patterns of someone with an income of $1000 per year versus someone with $32,000 per year. The more affluent does not eat 32 times as many calories or 32 times as much protein as the less affluent. To some degree the more affluent will spend more to eat more desired foods, but after having fulfilled food needs people will allocate added income to fill other needs or desires.

So too, countries will marginal propensities to allocate added wealth and income to different technologies. In the area of information and communications technology, for example, countries will seek a level of telephone access as a fairly high priority. There is a limit, however, to how many telephones are needed, and eventually added resources will be allocated to other ICT needs and demands. Thus one finds that rich nations can afford and will invest in supercomputer networks and other capital intensive ICT infrastructure, and will therefore create comparative advantages in some areas that benefit from high power computing.

Failure to understand this phenomenon seems to have resulted in misunderstanding of the so called Digital Divide. There are differences in penetration of telephones, personal computers and the Internet between rich and poor nations, and those differences are coming down. However, not only do you have a 32 to 1 difference in GDP between some rich countries and some poor countries, there is a tendency for richer countries to allocate more of their GDP to ICT investments. The overall gap in ICT capacity will not be eliminated simply by diffusion of low cost, personal ICT technology in poor nations.


Developed countries have existing plants as a result of past investments with their embodied technologies. With the development of new, disruptive technologies, it is sometimes possible for poor countries to obtain a comparable or even superior technological capability without treading the paths already taken by richer countries, and to do so without so large a capital investment.

Thus with the development of mobile phones developing nations have been able to rapidly create very broad telephone connectivity without the expensive investments in land lines that were made in the past in developed nations. Indeed, they seem to be utilizing the cell phone technology to enable phome mediated financial services that are not available in developed nations.


The question as to whether the income gaps are increasing or decreasing among nations has been of considerable interest to economists. From my amateur perspective it seems that some countries are successfully closing the income gap and converging on the rich while others are failing to do so, and in fact are seeing their per capita GDP further diverge from that of the wealthiest nations.

I would suggest that exactly the same pattern of some convergence and some divergence is happening in technological capacity, and indeed there are probably circular chains of causality. That is, some countries which are successfully developing economically are also successful in technological innovation and diffusion, utilizing their increasing income and wealth to invest in technology; at the same time, those developing nations successfully acquiring, inventing and disseminating technology are often successful in utilizing that technology for economic development. On the other hand, the factors (political instability, corruption, repeated disasters, financial instability) often inhibit both economic and technological progress.

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