Four main types of process-oriented technological change (Blecker and Setterfield 2004)

Question 1

What does the Harrod-neutral model loke like and what defines it?

Answer 1

Question 2

What does the Hicks-neutral model look like and what defines it?

Answer 2

Question 3

What does the Marx-biased model look like and what defines it?

Answer 3

Question 4

What does the Solow-neutral model look like and what defines it?

Answer 4

Question 5

How is the Harrod-neutral model described?

Answer 5

Harrod-neutral: Pure labor-saving (or labor-augmenting) technological change, which raises labor productivity 1/a₀ but leaves capital productivity 1/a₁ unchanged (thus, capital intensity k = a₁/a₀ rises). One can think of this as the adoption of new and improved machines that don’t produce more output per machine, but which can be operated by less workers. Named for 20^th-century British economist Roy Harrod of Cambridge (Blecker & Setterfield, Book Manuscript, Draft of July 20, 2015: 21)

Question 6

How is the Hicks-neutral model described?

Answer 6

Hicks-neutral: Factor-saving (augmenting) technological change, which raises the productivity of both labor and capital proportionately, so that 1/a₀ and 1/a₁ both rise by the same percentage and capital intensity k = a₁/a₀ remains unchanged. One can think of this as the adoption of new machines that are intrinsically more efficient (produce more out- put per machine) and also require less labor to operate them, in the same proportions. Named for another 20_th-century British economist, John (J.R.) Hicks of Oxford (Blecker & Setterfield, Book Manuscript, Draft of July 20, 2015: 21)

Question 7

How is the Marx-biased model described?

Answer 7

Marx-biased: Technological change that is labor-saving but capital-using, so that the productivity of labor 1/a₀ rises but the productivity of capital 1/a₁ actually falls and capital-intensity k = a₁/a₀ increases sharply. This refers to the replacement of labor by large-scale machinery that make labor more productive, but which raises capital costs even while reducing labor costs. This type of change is named for Marx (1867 [1976]), but was earlier anticipated by Ricardo (1821 [1951], chap. 31).¹⁵ (Blecker & Setterfield, Book Manuscript, Draft of July 20, 2015: 21)

¹⁵ (footnote adds) “Marx (1867 [1976]) referred to this as an increase in what he called the “organic composition of capital” …”

Question 8

How is the Solow-neutral model described?

Answer 8

Solow-neutral: Pure capital-saving technological change, which raises the productivity of capital 1/a₁ but leaves the productivity of labor 1/a₀ unchanged so that capital-intensity k = a₁/a₀ falls. A contemporary example is the adoption of newer, cheaper and more efficient computers, which lower capital equipment costs for employers, but still require the same number of workers to operate them. Although this is named for U.S. economist Robert M. Solow of MIT, the concept was anticipated by Marx in his recognition of capital-saving technological change as a “counteracting tendency” to his FTRP (Blecker & Setterfield, Book Manuscript, Draft of July 20, 2015: 21)