Tech Changes

• Technological change has been happening at a rapid pace over recent periods of time
• Knowledge has been improving and capabilities have increased to engage in greater R&D in new technology improvements
• There has been a greater source of funding for investment in technological change and R&D expenditure
• There has been greater access to patents, copyrights, and licenses to incentivize technological change and R&D
• Invention


  The creation of a new idea without that idea necessarily becoming a commercial reality
• Innovation


  Taking invention and making that into a commercial reality, making a business out of ideas
• Innovation


  • Can be small-scale (production process improvements) or large-scale (new products/services invented)
  • Can be quite destructive, the idea of 'creative destruction'
• Examples of creative destruction from innovation

  • Mobile phone industry
  • Cars vs public transport
  • Taxis vs Uber
  • Hotels vs Airbnb
  • Music listening (Walkman to streaming)
  • TV/film watching (videos to online)
• Technological change and production methods

  • Can lead to more capital-intensive production (e.g. car industry robots)
  • Can lead to more labor-intensive production (e.g. medical services)
• Over recent time (last 40-50 years), technological change has created more jobs than it has destroyed, but this trend may not continue in the future
• How technological change reduces cost of production

  1. Reduces long-run average cost

  2. Allows for technical economies of scale (specialist capital, division of labor)

  3. Increases minimum efficient scale of production
• Effects of technological change

  • Increases productive efficiency
  • May or may not increase allocative efficiency (depends if cost savings are passed on to consumers)
  • Increases dynamic efficiency (new products/services)
• Impact of technological change on market structure

  • Reduces barriers to entry (e.g. less need for physical premises, easier to meet regulations)
  • Can also increase barriers to entry (e.g. greater patents/copyrights)
  • Increases number of firms and competition
  • Increases product/service variety
  • Improves knowledge for consumers and producers
• Generally, technological change has made markets more competitive and contestable