John Metcalfe

A theoretical approach to the construction of technological output indicators

Abstract In this paper a framework potentially useful for the development of indicators of the output of technological innovation is described. The approach is based on a characteristics description of product technology. A product is considered a combination of three sets of characteristics, one describing the technical features of the product, one describing the services performed by the product, and one describing the methods of its production. These sets of characteristics are related by patterns of mapping. The potential applications of the framework to the development of indicators of the output of technological innovation and to the analysis of diffusion and technological substitution are outlined. Also, the relationship of this framework to the concepts of technological regimes, technological guide posts and dominant design is described.

Evolutionary Economics and Technology Policy

In this brief paper I propose to explore the economics of technology policy from an evolutionary perspective. As with any evolutionary argument the central concern is with the mechanisms of economic change, in this case in relation to the development of new technologies and patterns of organisation, and their spread into the wider economic system. In this sense we build upon one of the major stylized facts of modern growth, structural change at all levels from the microeconomic to the macroeconomic. To any observer of the policy making process let alone a practitioner, the contrast between the theory which underpins policy and the implementation of policy will seem acute. As Nelson and Winter (I982) have rightly insisted, research into policy is shaped by policy questions not by an agenda relating to how economic theory can be developed to deal with innovation. Setting priorities, designing instruments and evaluating outcomes do not link easily with the general ideas dealt with below. Among the general points we will stress, two will be of critical importance. First that the innovation activities of firms involve a wider range of other institutions supplying the knowledge and skills which underpin the efforts of individual firms. We term this the systems perspective on innovation (Nelson, I993). Secondly, it is not helpful to treat innovation and the diffusion of innovation as separate categories, in fact they are inseparable, with feedback from diffusion being one of the critical elements shaping how a technology is developed. We begin with a brief review of the familiar market failure perspective on policy and build from this into a brief overview of the evolutionary approach. The paper concludes with an outline of the systems perspective on technology policy. It is taken as read that virtually any economic policy can have implications in principle for the process of innovation. However, we treat technology policy in a narrow sense even though it spills over into questions of education policy, science policy and competition policy.

Competition, Fisher's Principle and increasing returns in the selection process

This paper explores the relationship between increasing returns and structural change in the context of an explicitly evolutionary model. The central theme concerns the behaviour of a population of competing firms which is elaborated in terms of Fishers Principle, the rate of change of the moments of this population distribution are functionally related to higher order moments of the. distribution. Different kinds of increasing returns are distinguished and it is shown how they influence the dynamics of selection. The basic principles here are those of replicator dynamic, systems, and it is shown how the Fisher Principle interacts with the more familiar Kaldor/Verdoorn principles of endogenous growth.

Consumption, preferences, and the evolutionary agenda

Abstract. The purpose of this paper is to provide a preliminary evolutionary account of preferences, consumption and demand. This is particularly relevant for the study of innovation which offers consumers the opportunity to develop new behaviours. The paper approaches this question in two stages. First it recognises the importance of time as well as income constraints on consumer behaviour. Secondly, it develops a behavioural approach to consumption routines in terms of Herrnsteins concept of meloriation. In this account the focus is upon activities for which commodities and time are inputs and, with innovation, time is rescheduled on many fronts. Consumer learning is related to a replicator dynamic process. It is shown how changes in wages, prices and the time required to consume influence the demand for activities.

Standards, selection and variety: an evolutionary approach

Abstract The purpose of this paper is to explore the development of standards as an evolutionary problem involving a balance between the generation and the limitation of economic variety. It is argued that standards act as exemplars to guide the pattern of technical change in fruitful directions, thus overcoming the tyranny of combinatorial explosion. The paper is illustrated by examples drawn from the personal computer industry. Standards; Technology paradigms; Economic evolution; Personal computers and software

Reswitching and Primary Input Use

The object of this essay is to explain the consequences of the existence of a positive rate of profit in the neoclassical model of long-run general equilibrium,1 in which two commodities are produced by means of land, labour and produced commodities

Ed Mansfield and the Diffusion of Innovation: An Evolutionary Connection

The analysis of the diffusion of innovation was a central theme in Ed Mansfields work over many years. In this essay I summarise his analysis of logistic diffusion processes and relate his work to earlier studies of industrial retardation and subsequent work on evolutionary economic processes. A distinction has to be drawn between the logistic law and the logistic curve, the latter being only one instantiation of the more general law which is itself a signature of evolutionary selection processes within a population of rival innovations.

On the Optimality of the Competitive Process: Kimura's Theorem and Market Dynamics

This paper considers the optimality properties of a market economy in terms of three propositions that evaluate the outcomes of and the process of competition between a population of firms working within a given economic environment. We show that when firms differ in more than one competitive characteristic then competition does not select in general the most efficient firm nor does it always result in increases in the average efficiency with which resources are utilized. Drawing upon a theorem of Kimura, however, we show that competition has the property of maximizing the rate of change of the average selective characteristics in the population. We conclude that a more nuanced appraisal of the institutions of the competitive process is surely necessary. From an evolutionary standpoint, the outcomes of competition are always contingent on the nature of the selection environment and the characteristics of the whole population of firms that are being selected.

On the transformation of theorems

Abstract Professor W. Ethier (1979) has argued that replacing land by capital in the familiar 2×2 trade model leaves the four basic theorems unaffected, with time-phasing and a positive interest rate. In fact, Ethiers HOS and FPE theorems are different in kind from the traditional ones. The traditional theorems predict certain results in terms of trade-independent data: Ethiers theorems describe equilibrium in terms of factor endowments and intensities defined by equilibrium prices. Hence his theorems do not support his central message that nothing is lost in trade theory by treating capital as if it were homogeneous land.

Chance, necessity and competitive dynamics in the Italian Steel Industry

This paper reports on the first stages of an empirical investigation into the evolutionary dynamics of the competitive process in the Italian Steel Industry. Central to this investigation is that the mode and tempo of change within well-defined populations of firms are driven by the evolutionary competitive processes of development and selection. The purpose of the paper is to assess the relative importance of these different evolutionary processes to the pattern of change in the Italian Steel Industry. To provide for this, first, a discrete time selection model is introduced. Second, this model is confronted with the empirical data. It is shown that in a mature sector — as the Italian Steel industry — the development term is the major factor driving the decrease in the average unit costs in the population, whilst the selection factor seems to play a major role.