The Political Economy of Technological Change: Resistance and Innovation in Economic History

1 Introduction If technology is one of the prime movers of economic growth, how exactly are technological decisions made? A technological decision is taken whenever a new technique is proffered, and firms have to decide whether to adopt it or not. It might seem that in the vast majority of cases this decision is trivial: if the new technique increases efficiency and profits it will be adopted, otherwise it will not. But historically speaking, few economies have ever left these decisions entirely to the decentralized decision-making processes of competitive firms. There usually is, at some level, an non-market institution that has to approve, license, or provide some other imprimatur without which firms cannot change their production method. The market test by itself is not always enough. In the past, it almost never was. Much as economists might perhaps deplore the fact, therefore, the acceptance of innovation is more than an economic phenomenon, and certainly far more than a pure advance in productive knowledge. The concept of competition remains central here, but it is not so much the neoclassical concept of price competition of firms in the marketplace as much as Schumpeter's concept of competition between different techniques struggling to be adopted by existing firms or between different final products slugging it out over the consumer's preferences. At times individual techniques may be identified with a firm, but often techniques struggle for adoption within a single organization. How are these decisions made? Could it be that even when a new and superior technology is made available at zero marginal costs, the economy to which it is proposed may choose to reject it? New technologies have failed and opportunities have been missed despite their ostensible economic superiority. The idea that seemingly superior inventions are spurned or rejected is hardly new. In 1679, William Petty wrote that Although the inventor often times drunk with the opinion of his own merit, thinks all the world will invade and incroach upon him, yet I have observed that the generality of men will scarce be hired to make use of new practices, which themselves have not been thoroughly tried... for as when a new invention is first propounded, in the beginning every man objects, and the poor inventor runs the gantloop of all petulent wits...not one [inventor] of a hundred outlives this torture... and moreover, this commonly is so long a doing that the poor inventor …