Technology evolution is as old as human history. For most of this time, however, the pace of change remained quite gradual. Until the late eighteenth century, rising productivity supported a growing population but produced little long-run advance in living standards. In the short-run episodes of below average population growth correlated with rising living standards, and periods of more rapid population growth coincided with falling living standards. But in the long-run there was little discernable trend in living standards.
Beginning in Britain sometime between 1760 and 1800, however, the pace of technological change began to accelerate. The introduction of the steam engine, new metallurgical techniques, and advances in mechanization combined with the introduction of factory methods of production fueled a rapid increase in productivity in the manufacture of cotton textiles and other products. As a result incomes began to rise at the same time that population growth accelerated.
The technologies of the British Industrial Revolution spread relatively quickly to other countries in Western Europe, the United States and Canada. Meanwhile a stream of new innovations—railroads, electricity, synthetic dyes, better machine tools—contributed
to an acceleration in the pace of economic change. By the early twentieth century sustained growth had become the norm in these economies rather than stasis. The remarkable nature of this transformation is emphasized by the divergence between the West and the rest of the world. Although Japan, South Korea, Taiwan, Singapore, and Hong Kong, have by now joined the ranks of modern, developed economies, the gulf in economic performance today is far wider than it was 250 years ago.
The Nature of Technological Creativity
The technological creativity on which the modern era’s sustained economic growth is based derives from the interaction of two distinct but complementary processes that Joseph Schumpeter called: invention and innovation. Schumpeterian invention is the discovery of new knowledge about natural phenomena. It is, primarily, the consequence of a “struggle between mind and matter” to gain insight about how the world works (Mokyr 1990, p. 10). Innovation in Schumpeter’s terminology is the application of the existing stock of knowledge in new combinations and new ways to meet some human need. Schumpeter placed relatively little emphasis on invention, arguing that innovation was the primary source of economic advance. “Innovation is quite possible,” he wrote, “without anything we should identify as invention and invention does not necessarily induce innovation, but produces of itself no economically relevant effect at all” (Schumpeter 1939, p. 84).
The distinction Schumpeter drew between invention and innovation is conceptually important, since the factors that influence invention are likely to be
somewhat different from those that affect innovation. But we should not relegate invention to secondary status. It is true that in the short run, most economic progress derives from the application of existing knowledge in new ways, but without additions to the stock of basic knowledge, opportunities for innovation would eventually run into diminishing returns, and the pace of change would slow.