There’s been a lot of recent discussion about whether new technology is contributing to our economic problems. It’s a fascinating question, but one that academics are not well prepared to address. Mainstream neoclassical economics generally ignores the question of structural change in the economy and treats technology as a random “black box” variable that is outside of the model (see this book, for example). Historians of technology have written many insightful case studies of certain technologies or certain industries, but as a rule they are loathe to make generalizations. This leaves us without a well-established framework for discussing how technology develops over time and interacts with the economy. Recently, a number of authors have stepped up to address the question using the old idea of “long wave” cycles in economic history (1, 2), and the new field of complexity economics (3).
One particularly interesting book is “The Nature of Technology” by Brian Arthur. Arthur draws from a broad reading of case studies from the History of Technology to argue that the common view of technology is too monolithic, and misses its structure. The book lays out several terms and definitions to clarify the issue. The word technology is split into three terms: individual technologies, domains of technology, and the “Technium”, and Arthur describes the development processes for each category. Below, I lay out a heavily paraphrased and re-organized summary of the argument. Refer to the book for a wealth of concrete examples from history as well as an insightful analysis of the process of invention, that I do not cover in this post.
First, let’s distinguish three different terms whose meaning is usually rolled into the single word “technology”.
The term “individual technologies” refers to devices such as the diesel engine, the smartphone, and the light bulb. It includes complex assemblies such as the passenger jet as well as very simple objects like the ball bearing or the capacitor. It includes hardware as well as software, such as a word processing application. The main distinction to be made is between these individual technologies, and “domains of technology” like electronics or genetic engineering. Domains of technology are collections of related individual technologies and the knowledge around them — whole industries or fields of study — whereas individual technologies supply a specific functionality: a computer processes information, a circular saw cuts, a bridge carries traffic.
An individual technology is defined as an arrangement that uses one or several natural phenomena as a means to provide a functionality. The natural phenomena can be simple and based on common sense: “wheels roll easily”, “pieces of wood in certain arrangements can support the weight of a seated person”. Or, the phenomena can be more complicated and based on scientific knowledge: “permanent magnets that are mechanically rotated next to a coil of wire will induce an electric current”, the principle behind electric generators.
There are two generalizations that expand this category further. The first is to include not only devices such as the sewing machine, but also processes such as oil refining, or the Haber-Bosch process that is used in chemical factories to produce ammonia. The second generalization is to include “social technologies” such as the joint-stock company or a legal contract. These social technologies use behavioral or organizational phenomena rather than physical phenomena to supply a functionality.
Domains of technology
A domain of technology is a group of individual technologies that are based around a set of related phenomena. For example, the domain of electronics includes components such as resistors, capacitors and transistors that are all used to transmit and modify electric currents. But the domain is more than just a group of individual technologies, it also includes the surrounding knowledge and techniques used to design, build, and use the individual technologies. As such, the domain of civil engineering includes not only heavy-duty cables and bolts for constructing bridges, but also design principles for choosing materials and tolerances.
“The Technium” is a term coined by the author Kevin Kelly to refer to technology in the broadest sense. It is the total of all individual technologies and domains of technology: devices, processes, legal systems, infrastructure, etc.
Individual technologies vary widely in form, but they share a common architecture. The architecture is abstract, but it is useful for understanding how technology develops over time. At the center of any technology is the main operating principle, the basic scheme for how to achieve the desired functionality. This operating principle forms the backbone of the technology, and it is made up of an arrangement of sub-technologies. The main operating principle is then augmented by a collection of supporting technologies that improve the main technology’s performance or make it more convenient to use. The architecture is depicted in Figure 1.
Figure 1: Individual technologies are made up of a main operating principle built from several sub-technologies, as well as a set of supporting technologies that enhance and expand its performance. Each sub-technology and supporting technology is a technology in its own right so the structure is recursive.
For a concrete example of this architecture, consider the automobile. The main operating principle of a car is to use an internal combustion engine to transform chemical energy into mechanical motion of the wheels, which then move a load across a surface. The sub-technologies that form the main operating principle are the engine that converts the chemical energy into mechanical energy, the wheels that transform the mechanical energy into linear motion, and the car chassis that holds everything together and supports the load. Notice the recursive structure here: the main technology (a car) is made up of sub-technologies (wheels, engine, chassis), and each sub technology is in turn made up of sub-sub-technologies (for the wheel: axles, bolts, rubber tubes).
Figure 2: The main operating principle of the car is built out of the sub-technologies of the engine, wheels, and chassis.
The car is then augmented by numerous supporting technologies. The most important supporting technologies set up the proper conditions needed for the operating principle to function: the fuel tank that supplies the car engine, the cooling system that keeps it from overheating. Additional supporting technologies are added over time to enhance performance and ease of use. These supporting technologies make up the difference between the earliest automobile prototypes and modern cars. The early prototypes are not much more than the engine, wheels, and chassis; but the modern car is bristling with supporting technology. Computer chips and sensors monitor the car engine and improve its performance, a cabin and climate control system provide comfort and safety for the passengers, headlights allow the driver to operate the car at night.
Figure 3: Henry Ford’s first car, the Ford Quadricycle (top) and the 2013 Ford focus. The two cars share the same operating principle, but the modern car has many more supporting technologies. [images via Wikimedia commons (top) and Ford Motor Company (bottom)]
Domains of Technology
Recall that a domain of technology is akin to an industry or field of study like genetic engineering or electronics. A domain of technology is a toolbox of components and practices. It includes a group of individual technologies as well as the surrounding knowledge of how to build and use them. This knowledge includes both formal knowledge, the kind that is written up in textbooks, as well as the “cookery” of the field. This cookery consists of rules of thumb and techniques that practitioners in the field learn through experience, but are not easily written down as formal knowledge.
An individual technology is designed within a certain domain, using its components and rules of combination (although many technologies are combinations of sub-technologies from different domains). We can get a feel for how this works by considering a functionality that switched domains over the years. The F-1 rocket engine was a huge machine that powered the Saturn V moon rocket. In order to start firing the rocket, a complicated sequence had to be followed that involved opening certain valves to let propellant flow to different parts of the engine, but only once pressures in other parts of the engine had risen to sufficiently high levels. In modern rockets this type of if-then logic for deciding when to open valves is built within the domain of computer chips and digital sensors. However, the Saturn V was designed in the 1960’s when electronic computers were still bulky and unreliable, so the control system was built in a different domain, it used “fluid mechanic logic”: a series of tubes and valves arranged to perform logical operations based on the fluid pressure (4,5).
Different but interrelated processes govern the development of individual technologies, domains of technology, and the interaction between technology and the economy.
Individual technologies develop over time in three different ways: internal replacement, structural deepening, and invention.
Internal replacement happens when a sub-technology or supporting technology is replaced by a better version of the sub-technology, without otherwise changing the architecture. For example, as computer chips advanced over the years everything from washing machines to airplanes swapped out their electronics for increasingly powerful microchips. Internal replacement also occurs when new materials are developed. For example, the Boeing 787 uses composite materials for many structural components that were built out of aluminum in older aircraft.
Structural deepening is the process of accumulating supporting technologies over the years. Initial prototypes of a new technology are built under time and budget constraints and are usually bare-bones, unrefined versions of the basic operating principle. Over the years people and companies refine the original technology by adding supporting technologies. The supporting technologies are added in order to improve performance, get around part limitations, adapt to a wider range of tasks, handle exceptional circumstances, and enhance safety and reliability.
Finally there is invention. Invention occurs when someone develops a new operating principle for a technology. This can happen when an old functionality is provided by a technology designed in a new domain (for example, the electric light bulb replacing oil lamps for room lighting), or when demand for a new functionality arises and is satisfied by an invention.
Domains of Technology
Domains of technology are based around phenomena that are naturally clustered into related families: optical phenomena, chemical phenomena, quantum phenomena. New domains are created when people learn to work with and understand a new cluster of phenomena. This new understanding leads to a train of new technologies that are designed within the new domain. For example, the investigation of electrical phenomena in the early 1800’s lead to the invention of electric lighting (light bulb), electric communication (telegraph and telephone) and electric transportation (electric locomotive) in the mid to late 1800’s.
Understanding of a new domain is built out gradually, piece by piece with later developments depending on earlier ones. The domains are built out through a combination of tinkering as well as science. The earliest domains were investigated with tinkering alone; for example, ancient buildings were designed based on rules of thumb gleaned from experience, because a theoretical basis for structural engineering did not yet exist (6). For later domains such as quantum and genetic phenomena, formal scientific knowledge supplemented tinkering.
The development of a domain requires the buildup of new technologies from the same domain (the investigation of electric phenomena depended on the invention and improvement of voltage and current meters) and it also depends on the technologies that have been built up from older domains (the structure of DNA was determined with the aid of X-ray diffraction images — technology from the domain of wave physics).
Technology and the Economy
New technologies come in waves as new domains are built out, and are then adopted into the economy. But the adoption process is not simple or rapid, it plays out over decades as the new domain and established industries in the economy mutually adapt to each other.
Any given industry uses a set of existing technologies to perform its basic operation: spreadsheets for accounting, canals and barges for transporting goods, a system of paper and filing cabinets for storing medical records. When a new domain comes along, it offers a new design space that can be used to solve the old problems of an industry in a new way. Some initial technologies from the new domain can simply be swapped into the old industry, but often it is more complicated and plays out over decades. This is because industries have specialized needs, and new technologies need to be modified to to address these niches. Furthermore, the industries often need to re-organize how they do business in order to take advantage of the new technology. The text provides a concrete example:
Before factories were electrified a century or so ago, they were powered by steam engines. Each factory had a single engine, a giant hissing and cranking contraption with pistons and a flywheel and a system of belts and pulleys that turned shafts on several floors of a building. These in turn powered all the factory’s machinery. Then electric motors— component technologies of the new electrical domain— became available in the 1880s. They were cheaper in energy use and could be installed as multiple small single units, each next to the machine it powered. And they could be controlled separately, switched on and off as needed. They were a superior technology. Why then did it take American factories close to 40 years to adopt them? [Paul] David found that the effective use of the new technology required a different physical construction of the factory than the old steam-engine layout. It required literally that the factory be re-architected. Not only was this expensive, as we saw in the Frankel case, but just how the factory should be constructed was not obvious. The electricians who understood the new domain were not architects, and factory architects were not electricians. So it took considerable time— in this case four decades or more— to accumulate knowledge of how to accommodate factory design to the new technology and for this knowledge to spread.
The mutual adaptation of domains and industries described here is similar to “long wave” descriptions of economic history such as the ones promoted by Carlotta Perez and Michael Lind. In the long wave picture, new domains of technology drive cycles in the economy that play out over 40-60 years. The effects of the new domain spread in waves, gradually being adopted by different industries and ultimately modifying government and institutions. This whole process is mediated by finance, government policy, and the availability of workers skilled in the new domain.
These new terms and definitions set up a framework for understanding how technology evolves and is adopted into the economy. The framework takes what was a vast and inscrutable process and delineates it into a set of more manageable sub-phenomena. The list below summarizes the main processes that drive the development of technology and its integration into the economy.