Friday, July 30, 2010

Is the economy an expression of its technology?

The penultimate chapter of The Nature of Technology: What It Is and How It Evolves begins with Brian Arthur defining technology as "the set of arrangements and activities by which a society satisfies its needs." He then states that "the economy is an expression of its technologies." The then proceeds to give an elegant explanation of the way in which technology and economy co-evolve. I suspect that this is a discussion that it would benefit many economists to read. At a minimum it combats the tendency of economists to treat technological change as exogenous to economic models, treating such changes as both induced by economic needs and creating economic forces.

The word "need" always bothers me since it is sometimes used to mean "something without which we can not live" and some times "something someone thinks we should have". In the latter sense, there seem to have been many situations in the past where donors have used the concept of "need" to provide something other than that which the recipient wants most. I suspect that what Arthur means by "need" in the sentence is "something which society will devote resources to obtain if possible".

Arthur is an economist and has an expansive view of the economy. I would suggest that there are needs -- such as the need for love and nurturing that is met by the family and community or the need for religious belief and support that is met by religious institutions -- that are not economic. There are technologies that play economic roles within the institutions of the family (e.g. household technologies) and church (e.g. construction and architectural technologies) but there are aspects of both that I would prefer to see as other than economic.

This is one of a number of postings on The Nature of Technology.

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