A Simple Algorithm for the Discussion of the Role of
Technology in Market Economies

John H. Walsh

A limited number of hard copies of this text are available from the author.


This note has been prepared in the current difficult economic climate as an aid to the discussion of the reasons the rapid scientific and technological progress of the age does not seem to be benefiting ordinary people. Part of the problem is due to confusion about how the dominant force of this era is related to a market economy. A simple algorithm is proposed with the object of at least organizing and clarifying informed discussion on this important issue particularly when those participating are not technically trained. The algorithm makes three broad distinctions: science is differentiated from technology; winning technologies are differentiated from losing ones; and technologies with a barrier at the demonstration stage are differentiated from those with none. The policy implications of these distinctions are examined including the role of government support for technological advances in a market economy.



This note has been prepared because of mounting evidence of increasing economic difficulties around the world. Economic progress in the developed countries has stopped in the sense few people believe the next generation will be as well off as the one that preceded it. According to recent OECD reports, the gap between rich and poor is growing in the U.S.A. and the U.K. and this is probably true in Canada as well, though the spread here is not yet as bad as in those two countries or even Italy. Despite the economic uncertainty, the present age has been a period of unparalleled scientific and technological progress in many fields of importance including medicine. The question is: Why have these advances not brought more wealth and leisure together with a greater sense of security particularly to poorer people? Why has not the almost universal presence of the computer in the workplace not brought the benefits that were expected? Some of the possible reasons for the pervasive sense of decline which now grips the nation will be explored here using a proposed framework to aid discussion. This framework is based upon a simple algorithm proposed as the basis for the classification of technologies.


The Problem of Economic Indicators

To say a nation or the world is in advance or decline implies there are objective indicators which give at least something better than a qualitative sense of the situation. The most objective of such indicators is the Gross Domestic Product but the limitations of this measure were widely understood from the earliest days of its widespread introduction. To cite a simple example, breaking a window-an obvious loss to the economy as a whole-leads to an increase in GDP on its repair. With rising concern over environmental degradation, attempts have been made to devise various Green GDPs which purport to compensate for damage due to economic growth. Most of these, however, have changed in step with conventional GDP although at a reduced level. For example, if the GDP increased two per cent over a certain period of time, the compensated Green GDP may have increased only by one per cent. The Green GDPs, however, are more subjective that the conventional GDP because what is counted as a positive or a negative is more a matter of opinion. Consequently, it seems to many better to maintain the integrity of the calculation of the conventional GDP, but apply a correction for environmental damage afterwards. The situation has become more complicated now that other, more complex, indicators have been devised which have been moving in the opposite direction to GDP. The proponents of these new indicators believe they more accurately reflect the actual situation and so go a long way to explain the apparent paradox where people generally feel poorer at the same time the conventional GDP has been increasing. Two such indicators are the Genuine Progress Indicator devised recently in California (see The Atlantic Monthly , October 1995) and the Social Health Index proposed at Fordham University (see The New York Times , October 15, 1995). With all this activity, it seems likely there are serious difficulties with economic indicators in general. The economist Lester Thurow has recently noted (see The New York Times Magazine , November 19, 1995) that, for the first time in the history of the U.S.A., wages and salaries have increased more slowly than GDP.

 A major cause of the problem may be the increasing stress current economic policies place on ordinary people's lives. In a previous paper (see J.H. Walsh, What Went Wrong and What to Do About It , Proceedings of the Canadian Association of the Club of Rome, Series 1 , No. 15 (September) 1995), it was noted no satisfactory way has yet been found to measure the increase of stress on people resulting from the widespread and rapid adoption of policies that intensify competition such as freer trade, deregulation, and privatization. Nevertheless, the effects of greater stress may account for the view now gaining acceptance that the adoption of these policies has not benefited ordinary people greatly if at all.

The question of increasing stress is important in the study of technology in two quite different ways. First, there is as yet no sure way to determine whether the introduction of a new technology helps or hurts people. There is no indicator available except perhaps from the anecdotal evidence provided by the medical profession. Also, it is not entirely clear how some universal stress meter could be applied in a market economy if there were one that was generally accepted. Many people now believe, however, that if the former Centralized Planning Economies were understressed to the point of ossification, the Market Economies are rapidly becoming overstressed to the point of excessive pressure on a good part of the population. If there were an objective measure, it may be possible to avoid the worst choices of technology in the first place. But advances in technology could also play a mitigating role in a second way. Once identified, changes in the technologies concerned might be found to compensate for the worst effects. A general example might be any changes that increases the amount of time available to hard-pressed working couples to spend with young families. The computer equipped with a modem makes working at home a possibility in some jobs: the saving in commuting time at rush hours cannot be but a benefit no matter what other problems the widespread adoption of such a practice raises.

A more subtle difficulty arises, however, if it is not the technology itself that causes the increasing stress but the rate and manner in which it is introduced, particularly if the technology is unreliable in its early stages. New centralized automated techniques for accounting may in the longer run bring efficiencies, but in the shorter run may be associated with loss of control at local branches which can only lead to greater stress. Nothing is more stressful than the feeling of helplessness most feel when a computer system breaks down: there may be no way in which to by-pass the computer as is frequently the case at present in Canadian banks. The stress on the branch personnel is palpable even to the casual observer. Perhaps many more precautions should be taken at the early stages of the introduction of a new technology and it is at this stage that the advice of psychologists may be helpful.

A Simple Algorithm for Technology in a Market Economy

The Distinction Between Policies for the Encouragement of Science as Compared to Technology and the Intellectual Property Contradiction

There has long been confusion between policies designed for the encouragement of science and those aimed at the promotion of technology. For the purposes of this note, the fields of science and technology are distinguished from each other in this simple way: scientific activities are aimed at gaining understanding whereas technological activities are aimed at actually doing something definable in economic terms. Scientific activities may be supported by universities, governments, and industry quite independently of market considerations. The experience of the last century or two is clear: no one can predict where such activities will lead in the sense of pre-determining the technological advances that may result. Policies for the enhancement of science have thus as much similarity with those designed for the strengthening of the Arts than they have for the support of technology. The availability of talented people may be the most important criterion to justify support. Only inputs may be measured with any certainty. Of course, a technological field may be identified as important for either economic, defense, or national health reasons and the relevant associated scientific fields may be supported on this ground. At worst, the specific technological objective would not be harmed by such efforts since, if it were, the project was wrong in the first place. But such an approach to determining priorities cannot be considered the main answer to the problem of how to fund scientific research.

This distinction between science and technology is helpful in considering the two contradictions that have arisen concerning the protection of intellectual property-patents, copyrights, trade secrets, and the like-in a market economy. The first is the sharp contrast between measures well known to stimulate scientific advances as opposed to those required to encourage technology. Long experience has shown that competitive openness encourages scientific advances: there is ample evidence that the strong human desire for recognition, usually manifested by a race to publish first, leads to the greatest progress. The idealistic young often make the most important advances. With the advent of the Internet, news of a fresh discovery now flashes rapidly around the world. A flourishing science is important to technology because it constitutes the platform on which vibrant technological developments arise.

In the field of technology proper, the general experience is exactly the opposite: to justify the high initial costs of most such activities, particularly in a globalizing economy, a high degree of secrecy in the course of the project and a significant degree of protection for the product or findings are needed once they are introduced to the market place. This contradiction leads directly to another. As the main nations of the industrialized world continue to seek the reduction of tariffs and other barriers impeding the flow of goods and services, there is a equal effort aimed at providing additional protection for intellectual property particularly in the international sphere. This is usually accomplished by widening the definition of this class of property, by extending the terms of the monopoly position of its holders or owners (who are not necessarily the originators), and by devising improved enforcement procedures. In effect, these measures increase monopoly power at a time when less protection is being sought for trade: ironically, this contradiction is usually negotiated concurrently in the same multilateral and bilateral fora. Moreover, perceived infractions of intellectual property rights are often remedied by placing restrictions on the offender's trade as a penalty. Thus, for attempting to break a monopoly, the penalty is more monopoly!

At a personal level, it is now commonplace for employees to sign over the rights to anything they may devise while under employment (and sometimes beyond that) to their employers. They may not be allowed to use their own work if they seek other employment at a later time. As with other forms of property, intellectual property rights so come into conflict with human rights.

As might be expected, the difficulties caused by these two contradictions are most pronounced in those activities where there is currently rapid progress in both scientific and technological aspects because the two motivations tend to overlap. In some of these activities, at a time of great competition, a single person may be working as a scientist one minute and a technologist another. Current examples where such internal tensions are common include the computing/information technologies and biotechnology. In the computer/information field, many practitioners at the present time find themselves constantly asking for more protection against what they consider unauthorized use of their products (`piracy') both at home and abroad and yet, at the same time, they have begun berating the patent offices of the world for granting protection to some recent inventions that are now generally recognized as much too broad in their claims. In the U.S.A., several patents granted in the last few years have had to be withdrawn under the overwhelming weight of protest of others on these grounds. To confuse the situation further, many of the more significant developments in this field, to note only the World-Wide Web developed initially by Dr. Tim Berners-Lee (of the U.K.) at CERN in Switzerland, were made available in the public domain without seeking any protection at all. It is becoming increasingly clear that the computing/information field with its rapid advances cannot be serviced adequately by mere adaptations and extensions of legal systems devised for earlier times and other, mainly mechanical, activities.

In the field of biotechnology, the problems are much deeper philosophically. Patents have been granted for life forms in the U.S. sometimes even to universities (example: new forms of mice at Harvard). This is a new question and again the protection already granted in several instances seems too broad in the U.S.A. There is also an international dimension to this issue in that developing countries (especially Brazil and India) resent global corporations patenting life forms and agents derived from their own natural biodiversity as representative of a new class of imperialism.

There will be no easy resolution to these issues but a clear understanding of the distinction between scientific and technological activities is certainly a prerequisite to arriving at a fair and reasonable compromise as compromise it must be. The Canadian position has been to delay action thus supporting those humorists who say fundamentally there are only two Canadian policies: compromise and deferment.

The Problem of the Losing Technologies in a Market Economy

Since advances in technology are defined here in a very simplistic way as the finding of better ways of doing specific things, at first glance it would seem axiomatic that no one would set out deliberately to devise a losing technology in the market system but this view is wrong. That many technologies unintentionally turn out to be losers is not what is addressed here: rather, the concern is for those important technologies, known in advance as losers, that must be pursued for the general good. Examples include technological advances in medicine, space, public transport, and perhaps the general field of the protection of the environment.

In the field of medicine and health generally, almost everyone wants to lead a longer life of higher quality. Life expectancy has increased markedly from the start of this century. In the first decades, it is likely that the productive lifespan increased on average by extension of the number of years a person could work: the result may have been positive overall from an economic viewpoint. Now, however, the extra years gained are mainly in the later unproductive retirement stage of life and few believe the additional medical and other costs involved can be recovered from the beneficiaries. This is the fundamental reason medical technology must on average be a losing proposition. There is even one professor of economics in Canada who believes smoking does not cost as much to the economy as people think because this habit tends to decrease the number of years of life of smokers in their unproductive years. (Whatever the validity of his calculations, it is interesting to observe that in some chronic care hospitals, only the patients are allowed to smoke.) The constantly rising proportion of national output devoted to health supports the view that medicine in general is now a losing technology. Indeed, there is considerable evidence large amounts of money are being expended to extend life only for a short period. With the increasing financial strain and with the growing recognition that the largest costs occur in the last few months of life, there are those who believe lives should in effect not be prolonged by withholding the more extreme and expensive measures from people in poor health. A rationing attitude is becoming more common in the U.K. where expensive procedures such as kidney dialysis or heart operations may be denied to people of advanced age. A fundamental conflict arises because most people believe medical research into life extension should continue, yet, in the main, such advances can only lead to still higher costs.

For this reason, advances in medical technology are leading to two quite different dilemmas. In a free country, if medical treatment is to be rationed, is there a way of preventing people with money from meeting the costs of their own treatment? The answer in general is no because the well-off could always move to a jurisdiction where the treatment could be purchased. To deny this option would be to deny freedom of movement although it is true Ireland tried this approach by controlling passports with the object of restricting abortions before being forced by public opinion to abandon such policies. There are two commonly held opposite views of this problem. There are those who believe that the rich should be allowed to pay for procedures denied to the poor on the grounds that it is an effective means of redistributing wealth in a society where the spread between the rich and the poor is widening. The opposite view is the moral one often stated as a question: Why should one person live longer and another die prematurely when there is treatment available? There are also those who believe the rich would tend to monopolize limited medical services for minor or even cosmetic treatments and by so doing deny essential treatment to the poor.

The second dilemma in the medical field arises from the fact that not all medical technologies are losers. A recent example is the improved means of treating benign prostate enlargement in men by using a microwave device which, compared to traditional procedures, is more effective, less costly, and does not require a stay in hospital. No one doubts advances of this kind should be encouraged. But who should get the economic gain from such treatments? Surely such gains should be used to off-set the wider number of new losing technologies. If otherwise, the nation ends up meeting all the costs of the losers with few of the benefits from the winners.

The same dilemmas arise in the technology of space but in a less highly-charged atmosphere. How big should the inputs be in this field since it is unlikely on present evidence that the costs will ever be recovered no matter how calculated. How are intangible benefits to be measured? Up to now, the rationale frequently given for these expenditures has been simply because the Russians are doing it. This problem is somewhat similar to the question as to how to support the Arts in that at heart it is a cultural decision.

The protection of the environment is a special case since in the market system, in principle at least, it should be possible to internalize the costs of a given technology. In practice, this has proven very difficult to accomplish in many important cases. How does one internalize problems inherited from the past? Much will have to be done by public expenditure. The justification will be that such expenditures are essential to protect people's health (the problems with lead, for example) or to assure biodiversity. Nevertheless, there are also cases such as the preservation of amenity which are essentially cultural. What one country thinks important to preserve may not be the choice of another. It is clear that the criteria for the selection of a technology known from the start to be a losing one are very different from those relevant to one expected to be a winner in a market economy.

The Problem of the Barrier at the Demonstration Stage

It is convenient to classify technologies into those that have a barrier at the demonstration stage and those that do not. The role of government is very different depending upon whether this barrier exists or not. In the more usual case, there is a definite barrier at the demonstration stage because of the high costs and other difficulties associated with extending a new production technology beyond the original bench- or pilot-scale to a larger and frequently continuous scale. This barrier can continue through to the first full- scale pioneering facility. There is thus a sharply defined decision point in the development of a new technology since the earlier costs of classical bench-and small-scale activities are usually sufficiently low to be borne by individual companies or research organizations. These previous costs are often so low that several different lines of approach can be explored, but usually only one can be selected for the next stage. A famous exception was in the development of the atomic bomb when two quite different routes were followed through to completion. Generally a change in management and organization is required when the demonstration stage is reached. Those involved in this later phase are frequently not the same as those who had brought the work forward to this stage. Consultants and engineering firms enter the picture with all the legal complications than can ensue. To demonstrate a technology is to reduce the technical risk sufficiently to allow deployment. A demonstrated technology may be defined as one where the risks in deployment are no longer decisive in the final decision to proceed to industrial-scale application. Market assessments, for example, may be more important. Also, there may be positive and negative barriers at the demonstration stage. The positive case is: Will the process or product work well enough? The negative case is: Prove that the process or its products are safe. It is more difficult to prove a negative than a positive since the question frequently becomes: What is safe enough? This problem is evident in the field of radioactive waste management in the nuclear industry and perhaps the continuing difficulties with the extensive software required for air control systems. But whether the uncertainty is positive or negative, in the market economy, the funding for the commercial-scale facility is ultimately raised in capital markets with the final decision frequently made by non-technical people. It is a commonplace to hear bankers say `we want a proven technology'. This is not a recipe for progress.

 As costs rise collaboration is becoming more necessary to demonstrate new technologies. The role of government when there is a barrier at the demonstration stage may fall under one of four categories: (1) to permit companies to work together who may be otherwise prohibited from doing so under the anti-trust laws (This problem is important in the U.S.A.); (2) to issue the necessary permits for environmental and other reasons that may require deviations or exemptions from current regulations because of the newness of the technology which may not conform to existing rules designed for standard past practices; (3) to help organize consortia which may involve companies from different nations or organizations and thus involve bilateral or even multilateral negotiations; and (4) to provide support in either the negative or positive sense. The more common negative support may be provided under the tax laws to allow favourable treatment of the special costs involved. These rulings frequently apply generically to all proposed demonstration activities meeting pre-specified criteria. In this situation, what is demonstrated is the choice of the company: when the criteria are met, the tax benefits apply to the costs incurred. In the positive case, the government or its agencies contribute to the costs of the demonstration on the grounds that the activity is in the national interest for economic, for health or for other reasons. An important consideration is to ensure the nation is first to apply a successful new technology, especially if the earlier work was done in that country, since the greatest gains come from being ahead of the international competition. International agencies may also organize such projects on the grounds of urgency which may become more important over time especially in the environmental field. When such a project is to be supported in a positive sense, the key decisions before funds are committed are whether the project is in the national interest and who should be the operator.

When the proposal arises in the private sector, the government may choose to endow the project either in a negative (encouragement under the tax laws) or a positive (provision of actual funding) sense. In such a case, there is no need to choose an operator. But questions arise as to the ownership or management of the intellectual property involved, especially the foreground material that may arise in the course of the demonstration. The background intellectual property may be clearly the property of the company arising from its earlier bench- or pilot-scale work but complex issues may result from the foreground material. Generally, the objective of the government is to get the technology introduced as soon as possible in a way that brings maximum benefit to the country. But in a smaller country such as Canada, given success, the company may opt to sell the intellectual property abroad or the company may be taken over by foreign interests as a direct consequence of the development. Unless there are some restrictions placed on the use of the foreground intellectual property arising during in the project, there may be no levers to control the situation. There is still a debate as to whether a general policy concerning these matters can be formulated in advance or whether such questions should be settled on a case-by-case basis as they arise. Often, however, the situation becomes one of urgency in that a demonstration activity of promise may be undertaken by a company or consortia who have insufficient resources to carry the activity through to completion perhaps due to unexpected set-backs. The government may be faced with a decision at the last minute as to whether the activity should be allowed to fail or be rescued. For this reason, case-by- case policies are generally favoured which may, in principle at least, be implemented under some sort of general policy statement. There are many precedents of unexpected problems in the military field. If there were a return to a crisis in the energy field, now more likely to arise from environmental concerns than physical supply difficulties, this whole issue is likely to be re-visited but unfortunately in an atmosphere of emergency conditions not conducive to rational decisions nor orderly administration.

Barriers may also exist at the demonstration stage of losing technologies but normally these may be foreseen when the original decision was made to undertake the research.

The Case When No Barrier Exists at the Demonstration Stage

When there is no barrier at the demonstration stage, the situation becomes very different. In the market system, if the economic gain from the introduction of a new technology is great enough, capital and human resources will be diverted from other, less attractive, investments. In effect, there are only physical and possibly regulatory limits on the maximum possible rate of its deployment. This rate can be explosive with economic and other consequences well beyond the narrow consideration of the technology concerned. One of the more important of these consequences is that the technology may set the de facto standards in its field. In this connection, it is useful to explore an example from the past-the introduction of the typewriter. So great was the advantage of a cheap readable text that took less time to produce than handwriting and included the possibility of preparing a limited number of copies that, almost overnight, a new system for communication was adopted which incidentally had the unexpected and unplanned side effect of opening the white collar work force to many more women than before. The early typewriters used the familiar QWERTY keyboard more-or-less by accident (the objective in designing this keyboard may have been to actually slow the maximum possible typing rate sufficiently to prevent the mechanical keys from fouling each other) which became the standard not only for this early industry but for present day computers as well. It was soon apparent this keyboard layout was inefficient and many proposals have been made since to substitute demonstrably better arrangements such as the Dvorack and the Mansfield boards. These efforts have to date been doomed to failure though ergonomically-improved split boards are gaining acceptance for computer operators. Though only a small increase in efficiency is sufficient to amount to a major overall advantage to the economy as a whole because of the very large number of keyboards in service, it has proved impossible to realize this gain. The superior technology is supposed to prevail in the market system through competitive pressures but this has not happened. The economist may argue that there is a transaction cost which is inhibiting the change to a better layout but this is really a tautology: the real problem is positive feedback control. The more keyboards there are in service, the greater the obstacle to changing despite a major collective (but not individual) economic incentive. (The psychologist may draw a similarity between the problems encountered in the conversion to decimal currency in some countries which was successfully accomplished while attempts to reform the calendar were dismal failures notably during the French and Russian revolutions. It was true, however, in the Russian case, it was possible to change to the western calendar. Similar difficulties have been encountered in the conversion to the metric system.) To take a current example, Windows 95 is becoming the de facto standard operating system for most smaller computers. Nevertheless, there are many who believe other, even existing, operating systems, at least one of which is non-proprietary (UNIX), are superior technically. But it is a characteristic of positive feedback control processes that no matter how great the advantage of other systems, unless they are superlative, the standard is set by the dominant usage. The more it is used, the more it will be used.

 Since technologies that have no barrier at the demonstration stage frequently behave in positive feedback control mode (especially in the information field), many other issues in the field of public policy arise quite apart from the loss of ability to set more efficient standards. Even if the technology is exploding in a desired direction, there may still be a problem with an excessive rate of deployment which may lead to a social dislocation. Too fast a deployment of the Internet may out-run the human ability to adjust though the overall advantage eventually may be positive. Here the problem is control. If the technology is exploding in an undesired direction, the problem becomes one of how to re- direct it. To take the current example of the Internet once again, local legal authority may be undermined with no way found as yet to protect the jurisdiction of the Courts notwithstanding the recent intervention of the German Courts in one American commercial on-line service in a pornography case. The problem may be re-stated in a more general way as the need to find ways of avoiding technological determinism in a market economy.

The problem of control of positive feedback processes is so difficult, it may only be possible to channel such technologies within certain broad proscribed limits. Thus the only hope may be to keep the technology within a wide band of general acceptability. In the case of the life sciences for example, it may be possible to formulate policies to restrict certain modifications to life forms despite the explosive growth of DNA studies.

In the energy system, a positive feedback control mode is arising in the generation of electricity with the combined-cycle technology based upon natural gas-the CCGT Process. The gas turbines used do not have a barrier at the demonstration stage. This is because the high-temperature materials employed were developed originally for the defense industry. These materials were then employed in fuel-efficient gas turbines designed for use in the civil aviation industry. These well-proven engines were then adapted for application to combined-cycle power plants and in some cases the same engines may be used with relatively minor modifications. Where natural gas is available at reasonable prices, the CCGT process offers the following advantages over other systems for the generation of electricity: lower unit capital cost; possibility of incremental expansion to more closely match increasingly unpredictable loads; high efficiencies of energy conversion; shorter lead times for construction; capability of linkage to co- generation of heat and power; and fewer and more manageable environmental problems to overcome (oxides of nitrogen). On the demand side, there is an urgent need for additional generating capacity in many emerging countries and the most expensive electricity is that which is not available when needed. This combination of attributes of the CCGT process is leading to a positive feedback control system. The more this type of capacity is installed, the greater the economic growth, and the more generating capacity is needed in turn. This situation is not necessarily bad: what is important is to understand that this mode of out- of-control growth is starting in some countries. If the price of natural gas were to increase rapidly (or expressed another way, if shortages develop), serious problems would be encountered since the other options for generation (nuclear-and coal-based facilities or renewables such as photovoltaics or wind energy) are much more difficult to deploy. It would be a sensible precaution to plan and test coal gasification modules which could be retrofitted to existing CCNG plants to produce a substitute for the natural gas from coal. Such testing might be done in developing countries will little access to pipeline gas but with coal resources. In this way they could benefit as well from progress in the emerging CCGT technology.

Governments can also harness positive feedback control processes to meet national objectives. In France, a decision was made to deploy the MINITEL device to provide videotext service for telephones. This was done independently of market forces by installing a sufficient minimum number such that the more there were in service, the more were required. In Canada, a technically superior videotext system (Telidon) was developed but all attempts to deploy it were frustrated one way or another including a major effort by the telephone company in Montreal. Too few units were installed initially to provide the base for a positive feedback controlled process because consumers were given a choice and had to pay on installation. In France, the success of the MINITEL system is hindering the widespread adoption of superior but more expensive Internet connections. Elsewhere the Internet is expanding under the same positive feedback control mechanism. It will be interesting to see how two systems governed by this mode of control impact upon each other. It is possible a technology will be found to marry the two systems.

The major role for governments in the field of technologies with no barrier at the demonstration stage is to be aware of the possibility of explosive deployment under the positive feedback control mechanism. There are inherent risks including loss of the power to ensure efficient national standards and the danger of undesirable social consequences. The same forces may be harnessed to deploy technologies declared in the national interest. This mode of expansion does not arise in the losing technologies as there is no economic driving force. Without a good understanding of these blind forces, society is place at the risk of a technological determinism under no one's control.

Strengthening the Links Between Technology and Economics

It is now generally accepted that there is a need to better understand the links between technology and economics in many fields. The problem is at its most critical when new technologies are proposed to meet urgent problems in the market place. An example will be taken from the energy system. If the price of oil is increased by monopoly action of a group of producers as it was once before, some degree of inflation will result. The usual economic response is to apply monetary principles to restrain the general increase in price level. If this policy worked perfectly, then other prices would have to go down to compensate for the imposed increase in the price of oil. Generally, such an approach leads to higher interest rates. Great damage was done to the Canadian economy in the early 1980's from high rates of inflation partly due to increases in the price of oil and the high interest rates imposed to cope with it. Unfortunately, the technological solutions to the problem of an externally imposed increase in the price of oil, with possible exceptions mainly in the field of increasing efficiency in the use of energy, require an increase in unit investment whether they be nuclear or renewable options or even switching to coal. These replacement options are almost always more capital intensive and take longer to deploy than processes based upon oil or natural gas. The same is often true on the demand side as well: adding insulation to houses, for example, raises their first cost. The effect of an increase in interest rates is thus to hinder the deployment of technologies intended to remedy the problem. Thus if it is decided to restrain the inflation resulting from an externally imposed increase in the price of oil, then it is also necessary to provide some relief to those technologies that can be deployed to counter the situation. This can be done in principle in two ways: by subsidizing the prevailing interest rates for specified technologies or by making capital grants (in effect, endowments) to the new technologies as was the case, for example, in the sudden deployment of the synthetic rubber industry during the Second World War.

To implement such measures intelligently requires a knowledge of the characteristics of pioneering technological development. A classification system has been proposed in this paper to aid in the resolution of this problem. While it is unlikely that there will be a sharp increase in the price of oil due to monopoly action at present, no one can say what the future holds with any great confidence. It is possible sudden deployment of new technologies may be needed to deal with global climate change starting in the next decade. It is perhaps sufficient to repeat a statement made by Karl Marx crystallizing one of Hegel's thoughts: when history repeats itself, the second time round it comes as farce.


A simple algorithm has been proposed in this paper as a contribution to the study of technology in a market economy. Technology is first clearly differentiated from science. Deliberately undertaken economically losing technologies are differentiated from those expected to be economic winners, and finally, winning technologies are distinguished between those with a barrier at the demonstration stage from those with none. This method of classification is proposed to aid in a more intelligent discussion between technologists and economists concerning policies and choices for the future.

 There is now interesting work being conducted in this general field at the International Energy Agency in Paris, at the Energy Technology Support Unit (ETSU) in the U.K., and in the U.S.A., notably at Lawrence Berkeley Laboratory in California, directed to determining the factors that limit the deployment of new technologies in market economies. In effect, a truce has been declared in the continuing dispute between (mainly) the economists and (mainly) the technologists concerning the mismatch between the top- down and bottom-up approaches to assessing the possible contribution of the new energy technologies to the economy especially on the demand side but on the supply side as well. We make look forward to important strides in this field in the next few years.

November 1995

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