Just to make it clear. Yes, something as basic as making fire is also a form of technology.
Think of our world as one gigantic pie, which we all love and share. Think of that pie as the only sustenance we have. This is what today’s world is like. The earth has limited resources available for human consumption, and this is an undeniabe truth. There are, of course, renewable and non-renewable resources; nevertheless, from one generation to the next, we are continuously draining, sucking away the riches off our planet. While the available resources are not getting any bigger, the demand grows ceaselessly due to the increasing population size. How many years more till we exhaust all the resources from our mother earth? This is a question that we need to ponder, a matter that needs attention from everyone. We need to understand what is going on. What will the future look like for us, humans? Where are we going next? How do we resolve or ease the resource constraint challenges in this resource constrained world?
I’ll give you a bit of the background first, so we all can get on the same page. You see, even renewable resources like fish, timber, water, etc., are suffering from ongoing threats of dying out. Overfishing is endangering the longevity of many species of aqua-creatures. Overlogging is putting many parts of the world’s forest in jeopardy. Water is being polluted. If you think there is too much water on earth, think again. Though 2/3 of our planet is covered with water, only 2% (of the 2/3) is fresh water, not to mention a huge portion of this is locked up in ice caps and glaciers. Another portion is underground water, leaving only about 0.03% of the toal fresh water supply readily available in lakes and rivers. So, though water does go through water cycle, statistically speaking, we don’t have that much of water to begin with. Thus, direct pollutions (like dumping waste in water) and indirect pollutions (air polluion causing acid rain) do make a significant impact by lessening the amount of clean water supply for humans, animals, and plants. Hence, the grave repercussions that follows can spell doom for all life forms on earth.
Now, I am not an environmentalist, and that is why I will stop here. I will not focus on stuffs like global warming, deterioration of ecological system, and the likes. What I am trying to convey to you here is simple. Resources, both renewable and non-renewable, are depleting. The rate at which we are consuming and destroying (unintentionally, I guess) outruns the rate at which resources regenerate. Then, why and how are we still here? Why haven’t we ceased to exist yet? Why are we still increasing in number? Now, this is to me, much more interesting questions, and by asking such questions, we are gaining a whole new perspective from a different corner of view.
As shown in An Introductory to Demography (2012) video in BigThink youtube channel, Prof. Joel Cohen made a very interesting remark (and I quoted here):
“Since the invention of Agriculture, between 6,000 and 14,000 years ago, the population of the earth, the human population has grown 1,000 fold from approximately 7 millions, maybe 14,000 years ago, to nearly 7 billions this year.”
This growth spurt, per se, is not what caught my attention. Don’t get me wrong. It is interesting, but I mean, it seems to make a lot of sense with no elements of surprise. You know, we kinda have about 14 thousand years to make it happen…. Well, wrong! What really is fascinating is what Prof. Joel Cohen said a bit later in the video:
“About 2,000 years ago, there were roughly 1/4 billion people on the planet. Today, there are almost 7 billion. More than 6/7 ( or 85.7%) of that growth – in fact, more than 6/7 of the growth, since the beginning of human, 50,000 years ago – has occurred in the last 200 years! To go from 1/4 billion to 1/2 billion took 16 centuries. So, we reached about 1/2 billion of humans at about 1600s, more or less… What actually happened was that the human population of the earth reached a billion around 1800s…
… in 1800s, the industrial revolution began, and the population doubled from 1 billion to 2 billion by 1930… the next doubling from 2 billion to 4 billion took only 44 years (1974)!”
If this doesn’t sound crazy enough to you, I don’t know what is. The graph below will further illustrate this craziness:
Image source: http://www.swinburne.edu.au/ncs/efshub/sustainabilityPopulation.html
As you can see, most of the growth actually occurred in the modern age. Starting from around the 16th century, we were growing faster than exponential growth as exhibited by the steep increase in the graph. Like Prof. Joel Cohen remarked:
“The human population of the earth, if it were growing exponentially would go from 1/4 billion to half in 16 centuries, and from half to 1 in another 16 centuries.”
However, the time required for our population to double continues to shrink. The doubling time shortened from 16 centuries to 200 years to 130 years to 44 years.
How? What accounted for this astronomical increase in the size of human population?
Is it because of biological adaptation like how camels can adapt to the desert environment? Well, we do share, even a little, that natural ability to adapt, that resiliency necessary for survival in the long-run. However, the greatest feature of mankind that allows us to persist and thrive, to win in natural selection, is not our physical capabilities. Humans are fragile beings. We don’t have claws and we don’t have sharp teeth to catch preys. We don’t have innate defensive or offensive features like what we see in snake, chameleon, porcupine, and countless other animals. We cannot run as fast as jaguars, and we don’t have wings and keen eyes like hawks.
My friends, by now, I am sure you know at what I am pointing. Yes, inside your head, the human brain, the brain that thirsts for knowledge, for answers, for new discoveries and inventions. It leads to the creation of culture and society, but best of them all, technology, the birth of technology-driven revolutions, like the great industrial revolution that took place from the second half of the 18th century to the first of half of the 19th centry. I guess you have also observed that the population size started to double at a faster rate right after the birth of the industrial revolution. This revolution also paved the way for us as we cruised to the modern age with ever-expanding advanced technology frontiers.
Such revolutions have allowed human race to prevail over hundreds, even millions, of obstacles. Again, this huge leap for mankind manifested itself in the form of population surge (aka, population explosion) at an unprecendented rate causing the human race to outnumber all other species (except insects… I guess). How? How can technolgical advancement elevate our survival chance? How can it bring perpetual growth and prosperity?
This is because technological innovations have profoundly contributed to development in all aspects, especially economic development which has changed for the better the way we live, interact and grow. From here on out, we will discuss the effects of techonology, a product of brain, on 5 of the primary elements that drive the economy: Resource, Labour, Capital, Ease of Transaction, and Information.
1. Resource
Modern machinery employed to extract and store oil
We need to understand that long-run survival heavily relies on resource security (i.e. having plentiful resources for present and future consumption). So, the question is how can technology achieve this goal?
Answering such a question requires us to first separate resources into 3 groups, namely, accessible resources, inaccessible resources and alternative resources. It is true that people tend to think of resources as renewable and non-renewable out of environmental concerns, and it is a commendable way of approaching the challenge. While it is true that available resource is finite, that alone does not tell us anything about its scarcity, about whether or not shortage is imminent. Yes, it is going to dry up one day, but not at the moment, not anytime soon. Why? You see, people tend to associate shortage of resources, like oil, with its availability. For example, there are those who think that oil shortage is nigh because humans are abusing their power, and out of greed, they are relentlessly sucking away resources with no prudence, no concern for the future welfare of mankind. While this statement is not a false statement, it causes misconception. How?
This is exactly when we need to think of resources in terms of their accessibility and alternatives. While it is true that the available resources remain unchanged, the amount of accessible resources always contract or expand depending on new technology and market force. You see, available resources are not coming into shortage anytime soon, but that “was” true for accessible resources. There have been periods when we suffered from shortage, but the same can be said for resource abundance. Think about it. Imagine a scenario where we solely rely on wood as our main source of heat production. We chop down more and more trees, but at the same time, we would start to move around to find good spots near forest where this resource is readily accessible. There are times when we see a huge forest in front of us, but we cannot access it due to the presence of wild beasts. This is called available but inaccessible resources. Suddenly, someone found a way to produce a more effective weapon against wild animals. This allows us to finally access the once impassable forest for wood. the once inaccessible resource. Things go well for a while, but at one point, as our population grows, we begin to need more and more wood. However, by then, the ongoing actions of reckless deforestation have made it much harder to find wood. What will happen after there is no more accessible source of wood? No more heat. This spells doom because everyone will soon die out of extreme cold during the harsh winter season. Fortunately, someone made a groundbreaking discovery by accident that we can also burn dry animal dung to produce heat. Phew. Human race is saved. This dry animal dung is called alternative resource, something used instead of wood for the same purpose, heat production.
Likewise, in the real world, things are no different. Sometimes, it is not a matter of availability, but accessibility. Sometimes, it is also about finding the alternatives. Availibility for the currently most-used resources (like oil, coal and natural gas), though finite, is not at a level that threatens our survival. The challenges are that some are inaccessible or too expensive to access and process at the current price point. This is when technology comes into play. It grants people more access to the once inaccessible, and it provides us the means to continue our endeavor in creating or searching for new types of more abundant and cleaner resources that can be use as substitutes for the current ones, for example, bio-fuel. This is how technology secures resources for human survival in the long run.
2. Labour
Labour or human capital is one of the primary inputs in any production of goods or services. I have yet to hear a factory operated solely by robots, and even if this was true, we still need people to first make the robots. Kinda obvious.
When it comes to labour, technology has achieved a lot.
First, technology allows for more efficient production of goods and services by increasing the yield per unit of labour. In other words, technology has improved the practice of mass production. With heavy and modern machinery, a person is able to produce more and more. A factory that once required thousands of workers can now operate with just a few hundreds. Compared to before, when a specialized workforce of 10 people could only produce 10 pens per day, a better equipped workforce of the same number of people nowadays can produce 1000 pens or more in a single day (just an example). This is true for all industries, if compared to their past performance. In agricultural production, especially, compared to the past when a pair of hands grew crops and could only feed one family, in our modern era however, a pair of hands can operate advanced farming tractors to plant and harvest tonnes of crop to feed thousands of people all at once.
Once the need for food is taken care off, it leaves more labour for the production of other goods and services, for research and development, for exploration, etc. This further accelerates the rate of technological growth, and well, you can see how it forms a positive feedback loop.
Second, technology also improves healthcare, and this significantly has increased the life expectancy (reducing mortality rate) of people across the globe. A healthy workforce is a happy workforce, and a happy workforce is a productive one. Simple enough.
Third, technology increases labour mobility and shrinks physical distance, allowing offshore outsourcing (hiring cheaper labour at far away countries) and exchange of labours between countries with labour surplus and countries with shortage of labour. This also increases the chance of knowledge spillovers from one country to another. Furthermore, it expands the job market for everyone, and presents people with new opportunities and better options to choose from to promote their living standard. It also shrinks the communication gap; thus, enable us to get in touch faster and easier, leaving more time for other undertakings.
Fourth, technology improves our productivity by allowing us to outsource certain tasks to computer, and thus, eliminate a number of time-consuming actions. For example, we now don’t need to spend as much time trying to remember all the items in our grocery list; we can simply let our smartphone handle the hard work. Also, we can now shop online, even for products that are not available in our vicinity. All these make it easier for both producers and consumers to get to one another, and for employees to focus more on things that matter in their company instead of focusing on trivial tasks like trying to find a certain note or arrange documents alphabetically. Things have never been more convenient.
Let’s say there are many more, but these 4 points, I believe, suffice to explain to you how technology has contributed to a better workforce, and thus, stronger growth.
3. Capital
Capital is essential in converting inputs into outputs, and by that, I am not only referring to the manufacturing process, but also the extraction of raw meterials and delivery of final products. More advanced technology results in better functioning capital like tractors, construction materials, etc. Better capital does not only lead to higher return per unit of labour, but also higher quality products and services that improve the overall human welfare.
Think about it. In public transportation, better designed and equipped buses can accommodate more pepole, be more energy efficient, less polluting, and safer. While its main function, to get people from point A to point B, remains, it does the job better by incurring lower cost, not just for the providers of the service, but for everyone. It now requires less maintainance, less repair. This means that if 1 maintenance worker was responsible for 1 bus before, now he/she can be put in charge of, say, 3 buses. As a result, that worker’s wage should therefore rise as well because he/she now is more productive and is performing the job that would have required 3 people.
To further illustrate the concept, let’s look at the case of Japan. Japan has been struck with what many countires would consider as great misfortunes. After World War II, Japan suffered from immense loss, and as a nation, Japan has been attacked by natural disasters again and again. Regardless, Japan was able to attain its position as the 2nd largest world economy by the 1980s. It was so unexpected, unheard of, that this miraculous growth has since been referred to as “economic miracle”, and I think technology played a huge role in making this possible (of course, there are other reasons, but let’s focus on tech for now).
Japan, reduced to nothing and grew back even stronger. A miracle or a tech-driven growth?
For Japan, what wars and natural disasters destroyed were houses, factories, machinery, roads, rails, and well, a large portion of the workforce. However, technology and knowledge survived. The restoration of the country tagged along new physical and soft infrastructure like high-speed rails, stronger buildings and roads, ports and dams, telecom, and others that were constructed with the latest technology ensuring both higher quality, efficiency while some had even more versatility than the previous ones. Old machinery was replaced with newer one that performed better. Old factories were replaced with ones that were more advanced and cost-efficient. The utilization of new technology in the reconstruction process also allowed the people to learn more from trials and errors and granted them new experience and lesson learnt. This greatly improved their speed and efficiency as well as the quality of their final products. Furthermore, as the new infrastructure was used by everyone, better quality of roads, rails, ports, machinery, equipments, etc., contributed to better performance of various other jobs and functions in other economic areas. The effect rippled, and this is how technology expands the pie for everyone via capital improvement.
4. Ease of Transaction
This is probably a bit tricky. Recall what we learnt from previous articles about income and expense. We talked about how 1 income, remember? In other words, when you spend
1. By this logic, the more transactions, the better the economy. How? Because transaction is the process of exchanging one thing for another, and most of the time, it involves exchange money for goods and services in the form of sale or purchase made (whatever you prefer to call it). So, more transactions are equivalent to more spending and more income subsequently. This leads to economic growth.
My point is even after you have produced thousands of goods and services, they will amount to nothing if you are the only one in possession, and this will be the case if transaction does not happen. Your wealth is largely determined by how liquid your assets and inventories are (i.e. how easy it is to convert them into cash). Imagine you cannot sell the 1,000 underwears you spent days producing. Are you 1,000 underwears rich? No. Why? Because you cannot use them all and you cannot eat them or turn them into TV, internet, car, house, etc. You can only obtain these amenities of life by first converting the goods you produced into cash and then use the cash to purchase other goods and services you desire. See how it works?
What technology does is creating new, more conventient, faster, and more secured platforms for transaction. Credit/debit card, PayPal, Western Union, eBay, Amazon, FedEx, DHL… these are companies that heavily employ and rely on tech, and though varied in the types of services offered, they do share one common mission; they exist to ease the transaction process. They make it more convenient and safer to store and use your money. They make it easier for you to find the things you want and connect you to merchants that can provide you the goods. Sometimes, they also suggest what you might want/need and convince you to spend money on things you would never have guesssed you need and that you still don’t need after having purchased them. I, myself, never knew that I need an electric toothbrush, but somehow, Amazon convinced me that I need one. Bought one. Still don’t need it.
Moreover, credit card also allows people to spend more than they earn (i.e increase money supply). Of course, reckless spending will only bankrupt yourself, but having the ability to do so once in a while allows you to never miss a single special discount sale, and this means better investment for you, the consumer. From the producer perspective, it translates into better business because they are able to sell more of their goods and services.
Joke aside, you can see the point. This ease of transaction allows people to purchase more, to spend more at faster rate. This rapid spending results in higher growth as a consequence.
5. Information
What does this have to do with anything? Well, information is actually super important in free market economies. Information plays a crucial role in ensuring smooth, undisrupted economic progress. Why? Because when people have sufficient information at hands, they are more likely to purchase and invest; otherwise, asymmetric information can obstruct the circulation of resources within an economy. Think of it this way. If you have not enough information about a company, about a product, you are less likely to buy it. Think about what you do when you want to buy a smartphone. You don’t just go and grap one, pay and leave, do you? Of course not. Rational people would ask their peers for more information of the phone model they plan to buy. But, imagine no one in your circle know anything about the phone you want; imagine when you cannot trust the gibberish coming out of the sellers. As a result, you buying that phone is less likely to happen, or it will eventually, but at greater cost of time and energy.
That will not happen though, not with the current technology. Now, buyers can search for hundreds of reviews of a certain product before making the final decision. I can go read many articles online about a product while looking for customer reviews as supplments to ensure the validity and reliability of the information. This probably takes me like 30 mins without having to depend on the more subjective and opinionated views of my friends.
Believe it or not, this is true at every level of purchase and investment. Investors, just like buyers, employ technology in similar manners.
Also, the better information flow can keep price uniform because sellers find it harder to inflate price of their products or services without suffering from the loss of customer confidence (thus, loss of sales). Why? Because now, the information about price of identical products or services offerred by their competitors are almost always readily available online.
Better information flow also helps people overcome millions more of challenges. You can now avoid traffic jam by looking at your GPS. You can now know beforehand, to an extent, when disasters like tornado strikes. Criminals now find it harder to escape, not with all the security cams and how information about them travels inside and outside of the country. People can now get news about, say, civil war in other countries within hours (even minutes) close to real-time of the occurrence. This makes it possible to provide aids and assistance promptly.
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You see, though I might not have made it clear at some points, note that all the improvements in these 5 constituents of growth contribute greatly to our well-being and long-term survival by expanding the pie for everyone. What is the pie? It is the amount of outputs that can be produced with a certain amount of inputs. With unchaged technology, we would have already been death due to the lack of fertile land to grow crop, to disease, to wild beast, to war, to late response to things like natural disasters. With the perpetual technological advancement, however, we can now feed millions with 1% of the total land which, in the past, would have been enough to feed only a few thousands. In medical field, likewise, we have come up with various new types of treatments that can save even more lives from the once fatal disease. We can also better monitor and solve crimes that would have otherwise made your neighborhood hell on earth.
Technology has brought us a long way since the birth of humanity. That is why investments in technology, in research and development, in scientific fields, and in exchange of knowledge and information via education and spillovers are indispensable for the overall growth of a country. I believe that as a nation, it is of our best interest to begin as early in the process as possible to integrate new technologies into the development of our country. At the same time, note that great power requires great knowledge and great responsibility. It also demands a culture, a society that values new ideas, not the one that suppresses and resists changes.
With the current rate technology is advancing, the time will come when we all go to live on Mars. Let’s just hope there is wifi.
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Disclaimer: Economind does not own any of the pictures. I simply plucked them from here and there.
Reference:
http://bigthink.com/experts/joelcohen