Eduardo Pol

Classification of Industries by Level of Technology: An Appraisal and some Implications

Modern growth theory acknowledges that a countrys economic prosperity depends in large part on its capacity for technological innovation. Empirical evidence, however, supports the view that not all sectors are equally innovative. As a result, it seems desirable from a public policy perspective to identify and promote sectors displaying both a high innovation rate and, in an increasingly competitive international economy, a high degree of international competitiveness. It is frequently argued that the high-tech industry sectors, in contrast to low-tech sectors, satisfy both conditions, with the clear implication that public policy should be directed to enhancing the performance of high-tech sectors. This approach raises at least two important issues. The first is whether such classifications can be meaningfully constructed given both the intractability of the concepts involved and the difficulties in data collection. A second issue is the basic assumption that policy emphasis should be placed on technology-intensive industries because they have a greater impact on growth. In this paper, we argue that while it may be possible to construct indices of technological intensity that are useful for some purposes, the ones that are currently proposed do not, in fact, address questions of economic growth and firm performance very well. In part, this is a reflection of the technicalities involved in formulating and operationalising the indices, but it also reflects problems in the underlying premise, namely technology-intensive sectors are more growth-inducing than low-tech sectors. We call, therefore, for the adoption of a more sophisticated and detailed approach that would provide a sensible classification of industries and new policy insights.

On regulating financial innovations

This paper views the housing and credit bubble 2001–2008 as a sequence starting with a financial innovation in 2001 followed by the superimposition of other financial innovations leading to the prevalence of uncertainty in Knights sense and ending in the last quarter of 2008 with both market failure and regulation failure. To the extent that financial innovations were an important factor in the development of the bubble, the most obvious question is whether anything can be done to prevent destabilizing innovations from entering the market. The paper outlines a policy proposal to keep pace with financial innovation and strike a balance between innovation and financial stability.

The Short Run Impact of Penalty Rate Cuts on Employment Outcomes in Retail and Hospitality Sectors in Australia

The issue of weekend penalty rates has been a contentious political issue in recent times. In its recent review of Modern Awards, the Fair Work Commission determined a reduction in Sunday penalty rates, arguing that this would result in increased employment and hours in Retail and Hospitality sectors. In this paper, we present a critique of the evidence before the Commission relating to employment creation. We also present survey findings of workers’ employment before and after the penalty rate reform. In the short run we find that there was no discernible positive impact on affected workers’ employment outcomes.

Robot induced technological unemployment: towards a youth-focused coping strategy

As an agent of economic and social change, robotization has elicited considerable concern about technological unemployment. Focusing on youth, this paper makes four contributions to the debate over this labour-displacing technological changes effects. First, to clarify the magnitude of the job threat to young people, the paper accentuates the conceptual distinction between technological unemployment and frictional unemployment. Second, the possibility of persistent technological unemployment, which the young are currently facing, is linked to strong uncertainty stemming from the rapidity of invention in robotics and artificial intelligence. Third, the paper advances a plausibility-based argument about the inevitability of technological unemployment. Fourth, coping behaviour is shown to be logically compatible with rationality and well-suited to dealing with fear of joblessness. Fifth, to the extent that robotization threatens future jobs, we maintain that coping strategies are needed to help members of the younger generation. A resilience-based strategy is suggested but we believe that there may be other coping strategies complementary to our proposal.

A theorem on the methodology of positive economics

Abstract It has long been recognized that the Milton Friedman’s 1953 essay on economic methodology (or F53, for short) displays open-ended unclarities. For example, the notion of “unrealistic assumption” plays a role of absolutely fundamental importance in his methodological framework, but the term itself was never unambiguously defined in any of the Friedman’s contributions to the economics discipline. As a result, F53 is appealing and liberating because the choice of premises in economic theorizing is not subject to any constraints concerning the degree of realisticness (or unrealisticness) of the assumptions. The question: “Does the methodology of positive economics prevent the overlapping between economics and science fiction?” comes very naturally, indeed. In this paper, we show the following theorem: the Friedman’s methodology of positive economics does not exclude science fiction. This theorem is a positive statement, and consequently, it does not involve value judgements. However, it throws a wrench on the formulation of economic policy based on surreal models.

Causality in Economics: A Menu of Approaches

Causality is a notion that occurs often in economics. In using the words ‘cause’ and ‘effect,’ economists seek to distinguish causation from association, recognizing that causes are responsible for producing effects, whereas noncausal associations are not. The identification of causes is accorded a high priority because it is viewed as the basis for understanding economic phenomena and developing policy implications. In this survey we look at different approaches to causality in economics and set out the general principles of each approach, so as to assist in the communication and teaching role. Specifically, we confine attention to five approaches to causality in economics (narrative, comparative statics, theoretical, structural, and experimentalist) and elucidate their distinctive characteristics without entering into philosophical discussions. In particular, we pay close attention to the debate between the structuralist and experimentalist schools because this controversy has been extremely useful to clarify a number of fundamental points concerning causality in economics

Reconciling the Invisible Hand and innovation

It is generally agreed that Adam Smith invoked the Invisible Hand to send the message to posterity that a free-market economy is the best form of economic organization. Strictly speaking, the Invisible Hand of Adam Smith is a conjecture about the virtues of a free-market economy. There are three claims in this paper concerning the interpretation of the Invisible Hand conjecture. First, the neoclassical interpretation engenders a conceptual confusion – identified here as the ‘double paradox’ of the Invisible Hand. Second, the interpretation of Adam Smiths conjecture on the beneficial effects of the free-market economy cannot – and should not – be confined to the production and consumption of existing products. Failure to distinguish the Invisible Hand Theorem from the Invisible Hand Doctrine distorts thinking about Adam Smiths message, creating the misconception that the Invisible Hand passage excludes business innovation. Third, the central message conveyed by Invisible Hand is to be read in the context of modern evolutionary economics.

Teaching and Learning Business Innovation by Successive Approximations

This paper describes a strategy for teaching and learning business innovation by successive approximations. This strategy has two major sources: the book by Pol and Carroll (2007) An Introduction to the Creative Economy, and intense observation of how novices learn the discipline. I use an analogy between the study of business innovation and the observation of an unknown planet as a tool in helping readers to connect with the suggested pedagogical approach. In essence, the approach consists of three approximations: first, identification of the dimensions or areas that are of absolutely fundamental importance for teaching and learning business innovation; second, development of the interpretative tools necessary to understand these dimensions; and finally, identification of conceptual understandings that have a powerful transformative effect on novices.