Technological Revolutions

created by James Caton |

By the time you finish reading this post, I hope to convince you that ‘technology’ refers to an especially broad range of phenomenon.

In Mises Meets Wittgenstein, we discussed the development of the exchange game. The development of this game represents the mutual creation of social technology by the two castaways in our story, Robinson Crusoe and Friday.

Robinson Crusoe and Friday each learn how to implicitly and explicitly bargain with the other. From this bargaining emerges prices that reflect the preferences of each trader in light of the costs of supplying their desired goods. Prices help both parties form expectations about the value their goods will fetch in the marketplace. Through the process of bargaining and emerging prices, production and exchange become more efficient, thereby producing value.

More generally, we can think of technology as organizing the social and material resources that influence the value generated from an activity. Often, we think of technology in terms of physical technologies.

Consider the development and implementation of rail transportation during the 19th century, which substantially reduced transportation costs. Railroads were much safer than water transit. They also operate during the winter, allowing suppliers to economize on storage costs. Further developments in shipping technologies included the creation and distribution of standardized shipping containers in the 20th century.

The adoption of one cost-reducing technology begets the creation and adoption of another. Railroads enabled the adoption of standardized time zones, an element critical to the coordination of train routes and time-sensitive projects that cover large regions. In both Great Britain and the United States, the new standard for keeping time was adopted long before central governments legally recognized these innovations.

In 1883, American railroad companies adopted standardized time and the system of time zones recommended by William F. Allen. Within a year, most large cities had adopted this standard. Only in 1918 was this system finally recognized by the central government with the Standard Time Act.

Innovations realized during the Industrial Revolution greatly improved productive efficiency, but such improvements would not have been possible without the development of more efficient social technology. Investors needed the confidence that their large fortunes would not be re-possessed by other individuals or the state responsible for enforcing the law.

By bringing an end to the government policies that inhibited exchange through restrictions on trade, such as high tariffs, import quotas, and a general lack of permission for individuals to engage in market activity, governments created an environment that fostered the innovations of the Industrial Revolution.

The development of superior governance technology occurred in Britain in the late 17th century. With the Glorious Revolution of 1688, William and Mary established a government that empowered parliament and tended to respect the rights of merchants more than the previous regime. The government became less dependent on one person and, therefore, more perfectly exhibited the rule of law. The new system was better defined and more predictable. Together, these changes incentivized businessmen to expand commerce.

Only by this expansion of commerce was the Industrial Revolution able to attract the funds necessary to takeoff in Great Britain and, later, the United States. Improvements in the predictability of human interaction through securement of the rule of law enabled the adoption, spread, and development of new inventions – physical technologies.

The maintenance and adaptation of technology—physical and social—is essential for continued economic development. Social technology that promotes economic growth enables a broad scope of action for all individuals. Without this freedom, economic growth cannot be maintained.

In an age where political tumult within and between governments shows potential to degrade the rule of law, we must be vigilant to maintain the integrity of our institutions of governance and their limited, predictable scope of action.


Meet the Author

James Caton is a fellow at the Center for the Study of Public Choice and Private Enterprise (PCPE) and an assistant professor in the NDSU Department of Agribusiness and Applied Economics. Read his bio.

james.caton@ndsu.edu


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