Saturday, April 14, 2012

More Technology Means Two Things

Having more technology means you can do two things:

  • As an individual, you can control more capital, but this matters most near the steady state.
  • As an individual, you may also get by using less capital, and this matters the most when you are away from the steady state.

Here’s some evidence:

Another study, by Andrew Batson and Janet Zhang at GK Dragonomics, a Beijing-based research firm, finds that China still has less than one-quarter as much capital per person as America had achieved in 1930, when it was at roughly the same level of development as China today.

How can this be so? Consider today’s Chinese steel plant. It’s more labor intensive than one in the U.S., and no doubt uses less technology. But, it is not a copy of the very labor intensive U.S. steel plant of 1930.

Via Marginal Revolution via The Economist.

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