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We have seen that both embodied and disembodied technical change increase labor
productivity.
It is not always easy to decide whether a particular technical innovation is emb
odied or disembodied,
and in many discussions this distinction is not made. In the rest of this sectio
n we will not
make the distinction, but just talk in general about technical innovations. The
main point to keep
in mind is that technical change, regardless of how it is categorized, increases
labor productivity.
The Industrial Revolution was in part sparked by new technological developments.
New techniques
of spinning and weaving the invention of the machines known as the mule and the sp
inning
jenny, for example were critical. The high-tech boom that swept the United States
in the early 1980s
was driven by the rapid development and dissemination of semiconductor technolog
y. The hightech
boom in the 1990s was driven by the rise of the Internet and the technology asso
ciated with it. In
India in the 1960s, new high-yielding seeds helped to create a green revolution in
agriculture.
Technical change generally takes place in two stages. First, there is an advance
in knowledge, or an
invention.However, knowledge by itself does nothing unless it is used.When new k
nowledge is used
to produce a new product or to produce an existing product more efficiently, the
re is innovation.
Given the centrality of innovation to growth, it is interesting to look at what
has been happening
to research in the United States over time. A commonly used measure of inputs in
to research is
the fraction of GDP spent. In 2007, the United States spent 2.6 percent of it GD
P on R&D, down
from a high of 2.9 percent in the early 1960s.Moreover, over time, the balance o
f research funding
has shifted away from government toward industry. Since industry research tends
to be more
applied, some observers are concerned that the United States will lose some of i
ts edge in technology
unless more funding is provided. In 2007, the National Academies of Science argu
ed as follows:
Although many people assume that the United States will always be a world leader
in
science and technology, this may not continue to be the case inasmuch as great m
inds