8/03/2004

Technology - Can we keep up?

I was talking with a friend the other day about how fast technology is advancing and how hard it is to keep up with it all. It seems like today everyone is expected to have a car, an up-to-date computer with internet access and e-mail, a cell-phone, etc. Everything that we could have only dreamed of 10-20 years ago we're expected to have now.

Applying this to businesses today, I found an article from USA Today that is entitled "Technology: Keeping up with Changing Times." It discusses the rapid growth in technology in the business world, and how companies are having a hard time keeping up with the latest innovations. With the internet now a major part of the business world, it is expected for businesses to have a web page that they can use to do business over the internet. Also, we have become such a "Now" society, that if a business can't provide a good or service anytime and do it quickly, then they go out of business. As a result, it has become more and more difficult to start a small business and have it survive amidst the high competition in fighting the larger corporations. Is the advancing technology all a good thing, or are we going to become so competetive that we burn ourselves out?

1 comment:

Dr. Tufte said...

This is all a reflection of a growth theory topic that is a little beyond what is in principles texts (but is in intermediate ones).

The idea is called capital dilution. It is the reason that population growth is bad for economic growth in the Solow model. The basic idea is that if labor grows, but capital does not, we will get poorer - because the new workers are not equipped with as much capital as they had been. The only way to get around this is to invest in new capital, which can get expensive.

Technological improvements have the same effect. Technology allows people to control more capital (think of the capital on the dashboard of your car, and how you can control it all). Well, when there is technological improvement, labor has the ability to use more capital, but you actually have to buy it for them. If the ability of labor (as a whole) to use capital is increasing both from population growth and technological improvements, then you have an expensive proposition to keep up with.

Growth theorists differentiate the amount of technology you have access to from the growth rate of that technology. The former makes you richer, but the latter makes you poorer. Unfortunately, the latter is the only way you can get more of the former.