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Technology
OpinionComment
Dani Rodrik
Dani Rodrik

The View | Technology is not enough to ensure the productivity that matters

  • Scientific and technological innovation might be necessary for the productivity growth that enriches societies, but it is not sufficient
  • Without the right kind of complementary policies, technological progress might not lead to sustainably rising living standards and could even set a country back

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Students observe a robotic device at a training facility at the Tennessee College of Applied Technology campus in Smyrna, Tennessee, on June 8. The focus on innovation via science and technology while overlooking productivity risks creating gains that are captured by small groups of elites rather than benefiting the whole of society. Photo: Bloomberg
Dani Rodrik
Economists have long argued that productivity is the foundation of prosperity. The only way a country can increase its standard of living sustainably is to produce more goods and services with fewer resources. Since the Industrial Revolution, this has been achieved through innovation, which is why productivity has become synonymous, in the public imagination, with technological progress and research and development.
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Our intuition about how innovation promotes productivity is shaped by everyday experience in business. Firms that adopt new technologies tend to become more productive, allowing them to outcompete technological laggards.

But a productive society is not the same as a productive firm. Something that promotes productivity in a business might not work, or might even backfire, at the level of a whole country or economy. Whereas firms have the luxury of focusing on the productivity of only those resources they choose to employ, a society needs to enhance the productivity of all of its people.
But many economists (and others) have failed to appreciate this distinction, owing to the assumption that technological progress will eventually trickle down to everyone, even if its immediate benefits accrue only to a small group of firms and investors. As economists Daron Acemoglu and Simon Johnson remind us in their useful new book, this belief has not been true historically. The Industrial Revolution might have inaugurated the period of modern economic growth, but it did not produce advances in well-being for most ordinary workers for the better part of a century.

Worse, the conventional narrative might have become even less true with the most recent wave of technological advances. New technologies can fail to lift all boats because their benefits can be overwhelmingly captured by a small group of players, be it a few firms or narrow segments of the workforce.

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One culprit is inappropriate institutions and regulations, which skew bargaining power in the economy or restrict entry by outsiders to modern sectors. Another is the nature of technology itself: innovation often empowers only specific groups, such as highly skilled workers and professionals.

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