Technological change has been an important element of the global economy and much of it has been characterized by the development of microprocessors, microcomputers, and automated production processes.
Technological revolution specifically started during the industrial revolution, through the transformation of the traditional workplaces, leading to the creation of new types of work environments. The industrial revolution can be best analyzed through dramatic changes that happened in nearly all aspects of the British society (Cipolla 1994, p. 2).
A great portion of these changes were however felt in aspects such as social structures/institutions, demographics and politics but the growth of factories was the major manifestation of the technological revolution (Cipolla 1994, p. 2). As a result, population was skewed on development grounds, with major British cities experiencing population growths of nearly 100% while the number of cities grew even more (Cipolla 1994, p. 2).
For example, the cities of England and Wales only had about 20 cities in the 1800s but by the close of the century, there were about 200 cities registered in the countries (Cipolla 1994, p. 4). Just to sample the impact technological changes had on the general demographical patterns of England and Wales, a technological invention to improve the smelting of Coke saw the shift in population growth from the South and East to the West and the North (Cipolla 1994, p. 7).
Technological change can also be termed as the root of the capitalistic system of operation we witness today because the people who were in a position to control the means of production, back in the day, got very wealthy while those who did not; became subjects of the rich.
Also, from the improvement of the technological landscape, the total income per household more than doubled and consequently, the national Gross domestic product (GDP)increased by a great margin, within a 10 decade period (Cipolla 1994, p. 3). This shift in wealth also brought a change on the world’s political landscape because industrial capitalists took over positions previously held by agrarian capitalists (Cipolla 1994, p. 2).
However, even amid the wealth creation (brought about by the technological change), there were numerous concerns of workers’ safety in the factories because, often, there was congestion in the factories and all manner of people including children and women were allowed to work with minimal or no safety measures taken to guarantee their safety in the workplaces.
At the same time, the workers were normally paid minimal wages which also brought about devastation to the people because most workers could only afford basic needs, thereby leading to the emergence of slums. This kind of “crazy” factory life became the topic of most literature writers then, because textile factories, mines and factories were marred with the worst industrial human working conditions probably seen in the history of mankind (Cipolla 1994, p. 12).
However, later on, conditions improved with the passing of laws to protect workers and more especially, the women and children from adverse working conditions. This progression also saw the development of the first trade unions to advocate for the rights of workers. Comprehensively, the technological change in the world led to the development of more global industries and the establishment of Britain as the world’s super power, for more than a century.
This study seeks to establish how technological change affected the production function in the industrial revolution; with a special emphasis on aspects such as the overall production output, and the resultant influence on capital and labor employed. In addition, this study will categorize the impact of technological development both at the firm level and the macroeconomic level. Lastly, this analysis will be done through Solow analysis alongside the comprehension of firms’ economic behavior.
Technological revolution greatly changed the way production was normally undertaken in the industrial period. Specifically, technology increased the efficiency of production, made the final goods cheaper, and reduced the time taken to make goods.
In this regard, technological developments had an impact on the short run curves of production, thereby increasing the units which could have otherwise been produced solely from human labor. With the increase in production units, variable costs (costs which vary with the level of production) are likely to reduce whereas fixed costs are bound to have better utility in the production process because they will be spread over the increased production units. Consequently, average fixed costs are also likely to reduce.
The decreased average costs of production is often characterized by the displacement of human labor for machinery but modern day representation of the phenomenon is best illustrated through the displacement of human labor in the assembly of motor units by robots.
With regards to human labor input, the introduction of new technology in production processes segmented the otherwise uniform labor force into skilled and unskilled labor whereas the old economy relied on both unskilled and skilled labor; however, the introduction of new technology and innovative initiatives in production processes only required skilled labor; rendering unskilled laborers jobless.
Also, the technological development brought forth an argument against unskilled labor on the basis that skilled laborers could easily furnish both skilled and unskilled labor, thereby rendering unskilled laborers redundant (Musson 1969, p. 27). This therefore meant that skilled laborers could move between two types of employment while unskilled laborers were stagnant in their economic sectors.
This model of analysis also exposes the income disparities brought about by the introduction of new technology because skilled laborers were paid highly while unskilled laborers got minimal pay. This also set forth the capitalistic movement in the society. The same industrial revolution example can also be compared to the mechanization of agricultural activities in the US during the 1920s period.
Initially, unskilled workers were directly employed by the agricultural economy but since the advent of mechanized farming, most unskilled workers were eliminated from farming and the resultant situation saw only a dismal 2% of the initial workers employed in the industry (Cipolla 1994, p. 278). Conventionally, during the industrial revolution, the shift of the economy into technological advancement saw the destabilization of families due to a loss of livelihoods.
Comprehensively, it can be said that there was a sense of asymmetry in the substitution of both skilled and unskilled labor, brought about by technological change.
However, the advent of new technology was highly favorable to skilled labor and the market equilibrium shifted at the expense of unskilled laborers because unskilled laborers experienced a lower marginal product of labor when compared to their skilled counterparts. This development brought about the decline in social welfare even though production levels improved. However, Musson (1969) notes that
“the Utility of both groups is equal; however, there is a critical threshold level productivity of the skilled workers in the new technology beyond which unskilled workers became redundant as the sector that was in favor of them was eliminated in favor of the sector using skilled workers, and it is socially optimal to eliminate the industry employing the unskilled laborers who will not be employed” (27).
With regards to the capital input needed to acquire new technology in the factories, it was quite cheap to run machineries than human labor.
The financial costs were therefore relatively affordable and most industries preferred to engage in more technological explorations to improve efficiency in the industries. Initially, most of the industrial processes were done by hand and many people had to be employed before any meaningful industrial process commenced (Cipolla 1994, p. 278). However, with the advent of technological development, machinery became important capital assets for industrial process.
Many industries were therefore economically socialized to set up new plants to do most of the industrial processes and consequently, this led to the increase in demand for energy to power these machines. This was the sole reason why the use of coal, firewood and water increased during the industrial revolution period and all of them became a significant part of the capital input in the industry.
However, this development should not be confused to mean that the cost of doing business increased with the advent of technology because the use of technology only signified a change in the production process; meaning there was little reliance on human labor and more reliance on machinery. When compared to the overall productivity of the industries, a relatively low cost of capital was needed to produce the same output of products when compared to situations where technology was not incorporated.
This therefore means that instead of using human energy to produce goods, alternative energy sources like coal were used to power machines, to do the same type of work that humans did. This marked the significant shift in capital from human capital to asset (machinery) capital accumulation. Moreover, the operational costs associated with human labor and machinery was incomparable because the cost of operating machinery was much lower than maintaining human labor.
Technology therefore made human capital less economically viable as compared to machinery because human capital involved a lot of business risks like death in the workplace, injury, burnouts and costs such like wages and salaries. At the same time, machinery or plant assets only required maintenance or replacements, which meant cheaper costs of operation, increased efficiency and more output.
The revolution into technology and industrialization at one time became very widespread that a revolt started among workers to protest against the widespread replacement of human capital for machines. This period saw the destruction of machines and several plants in industries as workers tried to phase out the new technological changes and restore back the traditional human capital reliance.
However, this failed to work out and many industries were forced to seek the services of the police in keeping away angry workers. Many protestors were arrested, tried and hanged upon declaration of guilt. Such was the level of human capital displacement evident in the industrial revolution period.
One of the most significant technological innovations of the industrial revolution happened in the cotton industry where the cotton gin was invented to speed up the process of cotton weaving (Hooker 1996, p. 5). This invention saw an otherwise small industry bust into a robust industry throughout much of the 18th century. Cotton was majorly produced in America and India but a large chunk of the production process happened in Britain, and this saw the huge traffic of African salves to work in cotton factories (Hooker 1996, p. 5).
The process of shredding out the cotton to make pieces of threads for clothing was also improved by technological innovation because the spinning jenny machine was used to hasten the process; from making one thread at a time to making multiple threads at the same time. This progression also reduced the number of laborers working in the cotton industry and quite frankly, subsequent employees in other industries suffered the same fate from the progress of technological innovation (Hooker 1996, p. 6).
These technological innovations greatly reduced the prices of cotton and made their use very expansive. In the same regard, the quality of production improved because cotton was stronger than wool, thereby making the production of cotton shoot through the roofs.
In fact, by the close of the 18th century a majority of the cotton production process was no longer being done in small scale industries because it moved to large factories, thereby changing the nature of the domestic economy; however, greater effects of this transition were realized in the middle of the 19th century (Hooker 1996, p. 7).
Even though the spinning engine made a lot of developments in the cotton industry, a great portion of technological change in the industrial revolution happened with the development of the steam engine. From this technological development, important sectors of the economy improved.
The most notable development which happened alongside the cotton industry was in the steel industry. A quirk in English geography especially made the industry develop in leaps and bounds because England was endowed with huge deposits of coal and carbon based minerals.
The development of steam engine was facilitated by the fact that coal burned much better and longer than wood and since England had huge deposits of it, it become infinitely cheaper to run steam engines from it (Hooker 1996, p. 5). In the same regard, the English used this discovery to substitute the use of coal for iron smelting while other manufacturers were quickly warming up to the idea as well.
However, extracting the coal from the ground was not such an easy task because miners had to dig deep into the ground and the more they dug, the more the mines filled up with water.
At this point, the steam engine came in handy because it was used to pump water from the mines, but since it used only one piston, it was highly inefficient and used vast amounts of energy and so, no other use was appropriate except for the extraction of water (Hooker 1996, p. 5). However, with a few modifications to the structure of the steam engine, the machine could now be applied to many other industries of the time.
In reality, the invention of the steam engine changed the entire landscape of the English manufacturing industry after its adoption replaced the use of water as the major source of power in the industry. This development saw the explosion of factory based technology driven manufacture and the inception of the age of absolutism in the English manufacturing industry (Hooker 1996, 19).
Since much of the increase in labor productivity during the industrial revolution was attributed to technological change and innovation, an alternative form of growth accounting was needed to measure economic growth.
This entailed calculating the effective stock of capital, based on the assumption that technological development was to be sourced from new vintages associated with capital injection; for example, if technological change was 5% per annum and the elasticity of output based in the capital injection would be 0.36; it meant that technological growth would be contributing approximately 1.8% per year (CGU 2010, p. 5).
When analyzing the capital input in economic growth during the industrial revolution, Solow notes that the capital share in the production process is constant over the period of technological development (CGU 2010, p. 1). The increase in capital per man-hour is not directly proportional to labor productivity because capital productivity only accounts for about an eighth of the total productive labor (CGU 2010, p. 2).
Solow observes that the difference is brought about by technological change. In this regard, Solow notes that the productivity of labor doubled over the industrial revolution period but it did not only come about from a change in capital but also a change in technology. This development was specifically derived from Solow’s initiative to dissect the total Gross Domestic Product (GDP) growth in terms of the elements which led to its increase during the industrial revolution.
This therefore means that an analysis into the production function encompassing all the major production elements has to be done. This is in contrast to the widely held belief by many economists across the globe that social development during the industrial period was preceded by economic growth (CGU 2010, p. 8).
In close relation, the same economists also believe that labor productivity also led to the same observations; in oblivion of other macro economic factors which may have led to the same observation. According to Solow, these neglected economic factors included technological development, innovative initiatives and a change in the managerial system (CGU 2010, p. 1).
From an empirical point of view, assuming the aggregate production function is Q = A (t) f (K, L); where Q is the aggregate output, A (t) is a function of the time taken for technological changes to take effect and f (K, L) is a function of capital and labor, the aggregate production function should be treated as its own separate entity while the other constituents of the equation should also be treated differently but with regards to time (CGU 2010, p. 2).
This development has made many economists differ on Solow’s approach; in an attempt to decompose growth with the use of more complex formulations like human capital, technological development and innovative practices; however, many other economists disagree about the fraction of economic growth which can be explained by the effect of change in technology over production (all parties however agree that this element is important).
Solow’s analysis therefore provides a simple concept in which output can be analyzed through the consideration of technological and innovative inputs (CGU, 2010, p. 7)
Denison 1962 (cited in CGU 2010, p. 8) however brought another perspective to analyzing the impact of technological development on industrial revolution by identifying the fact that economies of scale were responsible for about half of the residual created by economic developments.
The sources for the residual in his point of view came from either the economies of scale or the improvement in resource allocation; meaning that the trajectory of his work was more inclined towards downsizing the contribution of technological change in the industrial revolution.
Impact of Technology and Innovation on Lifestyle
Technological changes greatly improved the type of human lifestyle characteristic of the industrial revolution and indeed even today. In the first place, technological changes brought with it the triumph of industrial economists who greatly improved the prospects of employment for the general population through the development of new mills and factories.
The living conditions also changed in the same respect because industrialists lived in splendor while lower level citizens lived in small houses, in cramped up streets or in the emerging slums, created by the population explosion in the cities.
This development led to increased awareness of the importance of safety regulations especially in highly dense areas because, before laws to improve human living conditions were implemented, the slums used to be characterized by open sewers, poor drainage and poor sewage facilities, among other deplorable human conditions.
Chronic diseases especially affected those living in cramped up places while hunger and malnutrition greatly hit those who were not in a position to afford basic needs. This situation came to a point where diseases such as cholera, small pox typhoid and the likes were common because water sources were contaminated and there were not enough sanitation services to curb the pandemics.
This situation became quite unfortunate especially for women and children because most of them died even before they reached the age of 25; from chest diseases and other diseases brought about by the poor working conditions in the factories they worked in.
When the industrial revolution spread from Britain and England into other countries, the life expectancy of the general population was very low; with countries such as France recording a life expectancy of 35 years; slightly above England’s but America had a life expectancy age of between 45 -50 (Musson 1969, p. 78).
However, the population was not only characterized by two extremes because, there was an existent emerging middle class society which was largely dominated by lawyers, doctors and such like professionals. This middle-income population was majorly created by the emergence of the working class population who had a relatively good relationship with the factors of production as compared to low-income workers.
The increase in technology and innovation also rendered many people unemployed; especially those who did not have the skills to compete with skilled workers, because employment was more confined to people who could operate machines, as opposed to people who could do the work machines did. In fact, the machines could do the same amount of work hundreds of workers combined together would.
Even amid all the negative effects of technological development and industrial revolution on human lifestyle, there was an improved sense of literacy among the population, especially with the development of paper mills, which also led to the production of more resource materials like books, newspapers and the likes.
Political participation of the general population also consequently increased. The deplorable living conditions exhibited at the start of the industrial revolution were also improved and the life expectancy of children below the age of five, dramatically increased.
For instance, London reduced child mortality rates by more than half (Musson 1969, p. 78). The standards of living also greatly improved with the advent of technological development; in that, laws were passed to check humanitarian hazards in the sprawling slums and so diseases were checked and treated; sewage systems were improved and sanitation services availed. Also, as mentioned earlier, the factory working conditions were improved to match the new order.
The growth of modern cities was also facilitated by the technological growth, evident in the industrial revolution because many people migrated from rural areas to live in cities, while searching for employment openings.
This led to massive urbanization which created a huge shift in the number of people living in cities and rural areas since it was estimated that only about 3% of people lived in rural areas in 1800 but by the start of the 21st century, more than 50% of the population lived in urban centers (Musson 1969, p. 78). Comparatively, Manchester which only had a small population of close to ten thousand people by the year 1717 dramatically saw an increase in population to record 2.3 million people by the year 1911.
During the industrial revolution, technology and innovative practices had a profound impact on the economic landscape of the United Kingdom and subsequently other countries across the globe. This period still stands as a major hallmark in human history and it was characterized by a technological touch in almost every basic level of human life.
Some of the major socioeconomic developments could be evidenced through the tremendous increase in income and population; specifically major industrial cities experienced population explosions but the overall household incomes of those engaged in industrial sectors increased ten-fold.
Technological development also saw the immense shift in economic makeup from an agrarian based economy to an industrial based economy characterized by machine based manufacturing industries. Initially, the textile industry was the first to experience such changes, then the iron smelting industries followed, and later huge deposits of coal started to be extracted to power the machines.
The level of output production in most industrial processes was also incomparable to any other period in human history because as Solow notes, labor production increased two-fold, with a significant percentage of the production attributed to technological development and capital investments.
These developments had a huge impact on the society because not only did the population increase as well as the level of income, technological developments segregated the once heterogeneous human labor into skilled and unskilled; leading to the phenomenal migration of people from rural to urban settlements and the emergence of landmark cities with a significant sprawl of urban slums and widespread joblessness (because of the displacement of human labor for machines).
Nonetheless, technology brought about efficiency in production because human labor which was prone to human errors was avoided and the speed of operation improved, the start of the capitalistic system in the society also took root. Collectively, the technological change marked the change in production function.
CGU. (2010) Technological Change and the Aggregate Production Function. (Online).
Available at: www.cgu.edu/include/Econ%20173%203.%20Solow%20 (1957).ppt
[Accessed 23 November 2010].
Cipolla, C. (1994) Before the Industrial Revolution: European Society and Economy, 1000-1700. New York: Norton. Hooker, R. (1996) The European Enlightment. (Online).
Available at: http://www.wsu.edu/~dee/enlight/industry.htm
[Accessed 23 November 2010].
Musson, A. (1969) Science and Technology in the Industrial Revolution. Manchester: Manchester University Press ND.