As technology continues to expand and to envelop the everyday lives of Westerners, it is important that analysts continue to question the direction in which technology is leading us. One specific set of problems concerns the significance of technology in economic life. It has become clear in recent years that technological change is the major source of growth in per capita income. Less clear, but no less important, is the role of technology in determining the distribution of income and unemployment, the strength of a country's position in the growth of organizational efficiency. Finally, behind the material gains lie the imponderable problems of the destructive forces unleased by technological progress. Many of these questions have been discussed, but much remains to be learned from further analysis.
The present work explores some of the problems raised in connection with the economics of technology. The author is careful to keep his approach elementary, his feeling being that it is more useful to prepare a good foundation than to put together hastily an elaborate theoretical edifice that stands on uncertain grounds. Where possible the presentation is non-technical, and most of the mathematical intricacies have been put in separate appendixes at the end of the book. To further simplify the reader's task, a uniform notation has been used throughout, with a key to notation given in a separate section at the beginning.
The book is divided into two general subjects. Part I considers the problem of invention in the firm, with special attention to the microeconomic problems which technological change raises for economic analysis. This part includes a presentation of a simple model of invention with various applications and a discussion of the economics of patents. Part II broadens the study by turning to problems of invention in an economy-wide or general equilibrium framework, with special emphasis on technological change in the process of economic growth. The author examines the Kennedy-Samuelson model of induced invention and applies the model to analyze both the optimal rate and direction of technological change in a planned economy and the applicability of the results to a competitive economy. The effect of invention on prices and wages is also examined, by means of a multisector model. Some surprising results are obtained when this model is applied to economics with unlimited supplies of labor.
William D. Nordhaus, recipient of the 2016 Nobel Prize for Economic Sciences, is Sterling Professor of Economics at Yale University.