This week’s reading assignment is heavily technology oriented. You may notice that I tend to repeat myself. With good reason, I assure you.
Let’s start with a bit that is pertinent to session #2: Finite Systems, Infinite Cycles. In there we explore the idea that even if a physical system is finite (the Earth, for example), it can support infinite cycles provided that the system is open.
An open system (as opposed to a closed system) receives material from outside. The Earth receives solar energy and therefore it is capable of supporting life and all the other processes that support life indefinitely.
Because humans have invented (or discovered) technology for harnessing energy, humans are capable of transforming the material found at or near the surface of the earth to make what they find useful.
Technology, developed by the human mind, allows humans to do increasingly more sophisticated tasks. Everything we produce is the product of technology applied to nature provided stuff.
Production and Consumption
Broadly speaking we produce stuff only because we wish to consume the product. Therefore production is downstream of consumption. That seems wrong because we cannot consume before we produce. Therefore consumption should be downstream of production.
However, if you think about it, the production process is driven by consumption even if the production process as it takes place in time precedes the act of consumption. Consumption drives production, and therefore we can say that production is downstream of consumption.
Let’s examine the metal aluminum to make the idea more concrete. Bauxite is the ore from which we get aluminum oxide using the Bayer process invented in 1888. Then using the Hall–Héroult process (discovered independently in 1886 by Hall [American] and Héroult [French] both 22-year olds), the aluminum oxide is transformed into pure aluminum. This uses a huge amount of electricity and produces a lot of CO2 as a biproduct.
Fun fact: The cost of anything is the cost of the energy that goes into producing it. Since the cost of energy has been falling continuously over time, the cost of everything has been falling over time. Therefore the price of everything has been falling. But the relative price of everything cannot fall. Therefore the only thing whose relative price has been continually increasing is that of human labor.
Aluminum is used for making soda cans. We use about 180 billion aluminum cans every year. How those cans are made is a marvel of technology. It’s unbelievable how much technology is involved in the manufacture of something as apparently simple as a soda can. Take a look at these.
And follow that video with this video. It’s very pertinent for us to understand how the world works.
We consumers want to consume soda. That drives the production of soda cans. Therefore soda cans derive their value from the fact that we value soda. To make those soda cans, there have to be machines which are specifically produced to manufacture soda cans. Therefore those machines derive their value from the fact that we need soda cans.
As you can see, the value chain goes backward relative to the forward process of production. Production proceeds in one direction — from the mining of the ore to refining to producing the cans — and the value chain goes in the reverse direction — from the soda you drink to the manufacturing of the cans to the mining of the ore.
How many people are involved in the process that eventually ends in your drinking a can of caramelized sugar water (cola)? If you think about it, practically everyone on earth (with the exception of hermits and people aborigines in isolated places like the Amazonian rainforests) is in some way involved in the production of soda cans.
It’s true that soda cans are not the only thing that humans produce; they produce all sorts of goods and services. But it’s also true that you can trace if you wish the contributions of every human past and present in the long chain of processes that ends with a can of cola in your hands.
This topic of the amazing power of technology is important enough to bear repetition. If there’s one thing I would like you to take away from this little course, it’s the nature of technology. Here’s something I wrote in 2015.
Pondering technology is one of my favorite pastimes. As an economist, I have a professional interest in it. Technology transforms and directly impacts the economy at all levels — from the individual to the global economy. As a user of technology, I am delighted that it gives me enhanced access to the world. I hope to convey some of the thrill I feel about technology in this piece.
A few days ago I visited the Tesla Motors factory in Fremont, CA, a few miles from home. The visit included a sales pitch, a guided tour of the factory and a test drive. The making of a Model S — like all high tech cars these days — is a marvelous testament to technology. It involves either directly or indirectly the use of practically all technologies ever invented by humans.
Tesla car bodies are made of aluminum. That involves mining, and the manufacturing of aluminum which involves modern complex technology. Batteries are another major component that is a product of amazingly sophisticated technology. The robots that build the cars are at the cutting edge of robotic manufacturing technology.
The electronics are a product of another industry; the GPS system that the car uses has as its backbone a system of satellites circling the earth. Satellites are products of . . . wait for it . . . rocket science. To be more accurate, that is about engineering. But real science that is comprehensible only to the highly intelligent and trained is also in the mix: the GPS system is a marvel brought to life by Einstein’s theories of relativity. Wonders will never cease.
Our lives are immersed in technology. More accurately, we are immersed in the products of technology. But what is technology? The simplest broad definition is that technology is “know how.” More precisely, technology is about knowing how to do something. The simplicity of that definition leads to a great many implications which I explore in this piece.
There’s a distinction between learning a subject and learning about the subject. The distinction lies in the level of analysis. When you learn some subject, you are as if within it and have an internal point of view. To learn about the subject, you have to move one level higher where you examine it from an external point of view. From the higher more abstract level, you have a view that is not available when you are immersed in it. It is therefore reasonable to expect that one may know technology but without knowing much about technology.
Even if there is a difference between knowing something and knowing about that something, is that a difference worth distinguishing? I think so. The knowing about allows one to better appreciate the thing’s limitations and capabilities, its potential for human welfare, its relationship with other objects, how it evolved, where it is heading, etc.
Here I am generalizing from personal experience. Having studied engineering and computer science, I was technologically literate but only as an economist did I start learning about technology: what it was and its impact on our society.
Technology is Know How
Let’s examine that definition. When you know how to do something, you have the technology. Knowing how to make a fire and use it to cook something is technology. In that sense, technology has been around nearly as long as humans have been around. It is not what we’d call high tech but it has as much claim to being technology as the how-to of the making of modern turbofan jet engines that power aircrafts and gas turbines that generate electricity. In both cases whether high tech or low tech, you need to know how. That definition is broad enough to encompass both.
But wait, there’s more. That definition includes things that are not objects at all; it includes abstract ideas, processes and procedures. Double entry bookkeeping is technology. So is the idea of writing. Or the decimal number system. Or the idea of a corporation. Each of those, and many others, have had a profound influence on human well-being. Although we need not go into their details here, they are amazing inventions all.
Technology as Magic
We are desensitized to the amazing power of technology, and naturally so because we are immersed in the products of technology in every aspect of our lives. But through an act of imagination, we can appreciate what the remarkably prescient science fiction writer Arthur C. Clarke meant when he said that “any sufficiently advanced technology is indistinguishable from magic.”
Technology brings magic to life. Imagine talking to someone just 100 years ago and telling him that you hold in your hand a little device that can do the following: allow you to talk instantaneously to any of billions of others anywhere on earth; allow you unlimited access to stores of virtually unlimited audio, video, text and graphics information; give you access to maps of every part of the world; buy and sell stuff; play games, listen to music; . . . an endless list of capabilities — and all at a price that billions of people can afford to use it without a second thought.
That person from 100 years ago would not believe you because to him it would be inconceivable magic. We are not given such power of imagination that we can actually conceive of something that is not part of our experience. His experience of a world where information is scarce and expensive to access makes him incapable of imagining a world where information is so cheap that you get it for practically nothing.
Information technology — IT — has seen the most incredible growth among all technologies and has had an inescapable impact on all aspect of our lives. But it is only one of the dozens of many other technologies: medical, transportation, manufacturing, weapons, etc., to name a few. All the major advances in technology push the frontiers of human capacity in ways that are indistinguishable from magic to any person of just a few generation ago.
I would even go one step beyond Clarke in my amazement of technology. Any sufficiently advanced technology is unimaginable for anyone. That is so because of two facts: first, by definition “sufficiently advanced technology” does not currently exist, and second, we cannot imagine what does not exist.
One may object to the the claim that “we cannot imagine what does not exist.” The objection may proceed thus: “Winged horses do not exist. But we can imagine them. Therefore, we can imagine non-existent things.” The fact however is that we do not imagine anything really novel when we imagine winged horses since it is just a synthesis of two things we are familiar with: wings and horses.
The most we can say about sufficiently advanced future technology is that it will be something we cannot perceive today. Aldous Huxley wrote, “There are things that are known and there are things unknown, and in between are the doors of perception.” Those doors will only open in due course of history.
This raises a question: how is true novelty ever possible if it cannot be ever imagined? The fact is that everything that technology creates (with the help of science and engineering) has to be imagined before it can be made into a reality. Therefore if we cannot imagine anything that is truly novel, how do we get true novelty? The answer is: Step by step by a process of gradual evolution in which each step is a small hop to a neighboring, imaginable change. Aggregating a large number of these small hops eventually leads to a change that could not have been imagined at the start.
Small differences in quantity accumulated over time can result in qualitative change. The makers of the jacquard loom (first demonstrated in 1801) certainly could not have imagined the internet. Yet the idea behind that loom, through a large number of small steps (and together with other ideas with their own large number of small steps) made the internet possible in less than 200 years.
Ideas resemble their “parents” and their “children” but are not identical to them. After a few hundred generations, the changes accumulate to the point that the distant descendants of an idea are distinctly different from it.
We use technology. By that we mean, we use the products of technology. Since technology is “know how”, and “know how” is essentially ideas, the products of technology are “embodied ideas.” Technology products are ideas given a physical form, or made incarnate.
When we hold a smartphone, we are holding a physical object which has embodied in it a very large number of ideas. At least somebody has the know-how for every bit that went into the phone. There are hundreds of discrete components — touchscreen, battery, processor, memory, etc. — in it and they are the results of thousands of ideas.
Technology gets transmitted from from person to person through the transmission of ideas. Ideas are what in economics are known as “non-rival goods”, as opposed to “private goods.”
Non-rival goods can be shared without reducing the quantity available. We both can’t eat the same apple: which makes apples a private good. But if I have an idea and I share it with you, we both will have the idea. If there are 10 people each of whom has one idea, and they share the ideas among themselves, then each person will have 10 ideas.
Science and Technology
Science is also about ideas. Then what’s the relationship between the two? Science is knowledge about the natural world. Science investigates, while technology creates. Science answers the questions “what” and “why,” while technology answers the question “how.” What is an atom? Why is the sky blue? Science investigates questions like those.
Science discovers, technology invents. Science discovers the nature of atoms and technology invents machines that manipulate atoms, split them, etc. The atomic theory of matter is science. Manipulating atoms, building nuclear reactors and bombs, etc., are examples of technology.
A word closely related to technology is engineering. Engineering is the process that builds or creates. Thus science discovers, technology invents, and engineering creates. Engineering is required to create technology products. Engineering is what embodies ideas into products.
Which comes first — the science or the technology? Much of the time, technology comes first. Then science figures out the why things work the way they do. People invented steam engines long before science discovered the principles of thermodynamics. For the progress of science, technology is indispensable. The microscope is a technological tool which aids science.
In general, human knowledge advances on two legs: science and technology. Each leg gives a little support to the other leg, so to speak, step by small step. Building more efficient heat engines depended on advances in the science of thermodynamics.
(Astronomy is science in that investigates the large scale nature of the universe. Astrology, in contrast, is technology: how to make predictions based on some observations. It does not concern us whether or not those predictions are accurate or not.
Philosophy is science; religion is technology.)
Tools Expand Production Possibilities
It is useful to distinguish between two kinds of products of technology: tools and final products. The tools are those bits that we use to make something that we value which are the final products. The average person does not own tools that help make cars; he or she is only interested in having a car.
All tools are products of technology. They are embodied technology. To repeat the mantra, technology is “know how.” Know how is simply ideas. The tools we use are embodied ideas. Tools help us to do things that we could not have done without them.
Tools are very useful things. If you had only your bare hands, there’s only so much you can do. But if you had a tool, you could do so much more. Digging and moving earth with a shovel is so much easier to do than with your bare hands; using a steam shovel makes it even more easy. Examples of tools abound: the simple lever, the screw (which is an inclined plane), the wheel, the lathe, and so on.
Tools help us do more. You can do arithmetic in your head. But the task is much easier if you use paper and pencil (tools.) It becomes even easier if you have a spreadsheet program (tool) running on a computer (tool).
You produce more for the same amount of input (time and effort) when you use tools. An hour of your time (an input), a computer with a spreadsheet program (tools), and you could do 40 billion arithmetic operations as opposed to only 100 operations unaided. The tools you use expand your “production possibilities.”
Technology is Cumulative
An important aspect of technology is that it is cumulative. That is, the set of ideas keeps getting larger, and the products of technology keep getting more sophisticated as more and better ideas are embodied into them.
Naturally tools also help in the making of other tools. You could say that there are generations of tools — the progression is from the simple, handheld tools such as hammers and saws that have existed for centuries to the most advanced tools that help make things that are impossible to do by hand such as a modern semiconductor manufacturing facility that churns out those silicon chips which are inside every electronic gizmo we use.
Simple tools help create more sophisticated tools. A lathe that can turn wood can be used to make a lathe that turns metal, for example. A modern integrated circuit factory has tools that is generations removed from those tools that human hands alone could fashion. None of the tools in any modern factory can be made by anyone without tools.
Ultimately, a modern factory which manufactures high technology products such as computers represents an amazing collection of ideas that have been embodied in tools through sophisticated engineering over several technology generations. Computers are used to design and build more advanced computers, which then build more advanced computers, and so on.
Technology and Productivity
Another way to look at this is to say that “productivity” goes up when you use tools. How’s productivity defined? It is the ratio of the quantity of production to the quantity of inputs. The higher the output for the same input, the higher the productivity.
Humanity’s material progress has been due to higher productivity that was made possible by technology. Advancing technology provides more sophisticated tools, which make more stuff available. Technology expands the “production possibilities frontier.” That is, using the same stuff, more can be produced. One easy way to understand this concept is to think about what we have today as opposed to say 10 million years ago.
Consider the world around you today. The total amount of material in the world today is no different than what was around 10 million years ago, or at any arbitrary distant past. (Let’s neglect for the moment the material that got deposited on the earth from meteorites and the material lost to space from atmospheric losses.) What has changed is how the material is organized.
People have built farms and factories, cities and nations. Human action has transformed the earth. The most salient transformation is the increase in the carrying capacity of the earth.
Carrying Capacity of the Earth
One way of defining the “carrying capacity” of the earth is the number of people it can sustain at a certain given level of material well-being. Carrying capacity is not a fixed number: it depends on available technology. Carrying capacity is a positive function of technology: more technology, more the carrying capacity. The carrying capacity of the earth has increased with increasing technology.
Given today’s technology, the carrying capacity is — let’s say — around 7 billion. But given the technology of, say, 100 years hence, the carrying capacity of the earth could be 70 billion at present levels of material well-being. This does not mean that there will be 70 billion people on earth in 100 years. It only means that if in 100 years there are only 3 billion people, they could enjoy a level of material prosperity that is 20 times that of today.
Go back a hundred years and you would find the total population of the earth to be around one billion with average material prosperity about a twentieth of today’s average material prosperity. That means, the earth today produces about 150 times the amount of stuff it used to produce 100 years ago. Remember that the amount of material on the earth has not increased. What has changed is the technology that humans have to transform the basic material available into usable stuff.
The making of a car (like all the thousands of technological marvels such as a commercial jetliner, computers, medical diagnostic devices, complex manufacturing machines, etc.) involves hundreds of thousands of recipes. It would be hard to enumerate them all. And the most amazing thing is that no one knows all of them — and no one needs to know them all. Someone somewhere knows some of the recipes, and collectively humanity knows the entire set of recipes. But how do all these dispersed recipes come together? That itself is perhaps the most important technology (or recipe) that humanity has invented. It’s called the market.
We will discuss the market as a technology later. Suffice it to say that every high technology product you use without exception involves the market technology. There is no efficient substitute for the market. (Efficiency can be defined by the notion of waste — a more efficient process is less wasteful than another.)
Instead of aluminum, you could use carbon fiber or steel to make a Tesla Model S. Instead of lithium-ion batteries, you could use some other kind of batteries. Indeed, when better batteries become available, they would replace what is being used now. But the one recipe, the one technology — the market — will always be key. It is the god’s honest truth that without the technology that is called the market, nothing of any sophistication can ever be manufactured by mere humans.
Technology buys Time
It is obvious that technology allows you to do more in less time. Take communications, the most evident use of technology in our increasingly connected world. One hundred years ago, you had telegraph. It was expensive and slow.
There’s another more serious way that technology buys you time. Technology extends life. The average life expectancy of humans has increased over the recent century, thanks to technology. Before the invention of modern antibiotics, life was much more precarious. That’s technology. But let’s remember that knowing that germs transmit disease is also technology. Or that vitamin C is important to prevent scurvy and citrus fruits are a source of vitamin C — that’s technology for you.
Bringing Good Things to Life
Technology brings good things to life. That echoes the line from General Electric advertisements: “We Bring Good Things to Life.” The double meaning is clear. Technology brings good things to your life. And technology gives life to (meaning brought into existence) good things.
Consider this for a moment. An infected toe could kill a person before the availability of antibiotics. Even the richest person on earth did not have the riches to buy antibiotics when no one knew what antibiotics were. Now no one has to die of simple infections if they have access to antibiotics.
We know that one of the richest persons on earth (Steve Jobs) died a few years ago of a disease (cancer). He could have spent multiple billions on extending his life a few healthy years — but the technology to cure cancer just did not exist. In the not too distant future, curing that cancer would cost perhaps a few thousand dollars. Technology, had it existed, would have bought him time but since that technology did not exist, additional time had an infinite cost — a cost even a multi-billionaire could not pay.
Technology Creates Wealth
Talking of wealth, the most important aspect of technology is that it creates wealth. Wealth is anything that is of value to someone. We can only talk about wealth in relation to humans because value is intrinsically human.
Consider Robinson Crusoe’s island. Only after his arrival can one meaningfully talk about the island’s wealth because only with reference to Crusoe does whatever is present on the island can be said to be of some value. True, there were things there before Crusoe got there but only after his arrival do those things acquire value that he could use. Furthermore, what he could use depends on the technology he had.
Let’s imagine that he did not have the technology to make a fire. The firewood lying around would not be wealth for him. But if he were to discover a book of instructions (in the chest that washed up a day later) on how to make a fire, suddenly all the firewood would become wealth.
Only the know-how, the technology, gives value to things and transforms them into wealth. You could have fine, arable land but if you don’t how to grow food (that is, you don’t have agricultural technology), that land is not wealth.
Before humans had nuclear fission technology, uranium was just another kind of useless rock; after nuclear fission technology, uranium became one of the most potent sources of energy. Before internal combustion engine technology, crude oil was just a pollutant; after IC engines, it became “black gold.”
From a certain point of view, there are no “natural” resources. All resources are artificial because they become resources as a consequence of human technology. Take the radio spectrum, a resource that is so immensely valuable today that it is licensed for use at hundreds of billions of dollars. Yet, if you had tried to sell the use of spectrum a century ago, you would be a prime candidate for the loony bin.
Radio spectrum is a limited resource in the sense that there is only so much of it. Technology not only makes it useful but as technologies improve, more can be done with a given bit of radio spectrum. Broadly, technology improves the efficiency of use of any resource. On a bit of silicon wafer, the number of transistors has grown from an order of 1000 in 1971 to an order of a billion currently.
Before IC technology, computation was done by vacuum tube technology, which in turn replaced mechanical relays. The big story is that technology finds substitutes.
We noted that technology creates resources. The most disruptive thing about technology is that it discovers substitutes for every kind of resource. A few examples are sufficient to illustrate this fantastic feature of technology.
Consider energy sources. Each newly discovered energy source changes primary source of energy and expands the use of energy in scale and scope. In the beginning the only source was animal (including human) muscle energy. To that was added wind and water energy. Water and wind energy were augmented by coal during the Industrial Revolution that began in the mid-1700s. Coal, in turn, was displaced by petroleum oil and natural gas (to a large extent). The sequence continues with nuclear energy.
(Just by the way, it is useful to distinguish between energy and power. Energy is the capacity to do work; power is the rate at which work gets done or energy gets used.
Also worth distinguishing is the source of the energy and the form in which the energy is used. Electricity is quite frequently the form in which the energy is used. Electricity can be generated by a variety of energy sources: muscle, kinetic (wind, waves, water, etc), chemical (coal, oil, etc) and nuclear (fission, fusion). Thus what is used to generate electricity depends on the economics of the transformation of the energy source into useful electrical energy.)
The ability of humans to create substitutes through technology has had profoundly shaped human societies. Substitutes and alternatives discovered by technology have powerful transformative effects, positive or negative, on human welfare and the distribution of wealth.
Large reserves of crude oil made some countries immensely wealthy. But if tomorrow someone figures out fusion technology, those countries with crude oil will find themselves struggling to make a living, while the country that has the fusion technology will be fabulously wealthy. Fortunes can change quite rapidly in a technologically dynamic world.
We are living through the initial stages of the revolution in computational and communications technology, or the IT revolution. The pace of change will only accelerate and there are no limits in sight. There’s another technological revolution that rivals the IT revolution: energy technology. The two together will propel humanity from being a Type I civilization on the Kardashev scale (one that uses all energy resources of the home planet) to a Type II civilization (one that uses all the energy of its local star.)
I am firm in my belief in the power of technology. No doubt that power can be misused and could destroy civilization entirely but that fate is not inevitable. I believe that humanity is capable of using technology wisely. And if it does, all our present problems and concerns will be solved. I am a card-carrying technology optimist.
What are our most pressing problems that humanity is facing? Poverty, disease, avoidable pain and suffering, environmental pollution, and energy scarcity. All of those will be gone.
So will humanity be living in a veritable paradise then? No. It just means that every problem we face today will be gone and done with. There will be other problems, and there will be other solutions.