Technological Progress: A Proposed Measure

Abstract The article suggests a direct measure of technological progress that can be quantified with reasonable confidence on the basis of historical data. The proposed measure is the efficiency with which resources (mainly energy sources) are converted into final services. It decomposes into two components, namely the thermodynamic efficiency of converting an energy source into mechanical work and the efficiency with which mechanical work is used to produce final services. The first part of this can be estimated, by sector, with fair accuracy. The second part can only be estimated with reasonable accuracy in a few cases (such as transportation and illumination), but the results are sufficient to permit some plausible extrapolation. The proposed measure is hopefully of interest in itself. But perhaps it is more important insofar as it suggests a way to construct an economic production function that explicitly reflects technological change, rather than treating “technical progress” as an unexplained residual.

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