A technical change is a term used in
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
to describe a change in the amount of
output
Output may refer to:
* The information produced by a computer, see Input/output
* An output state of a system, see state (computer science)
* Output (economics), the amount of goods and services produced
** Gross output in economics, the valu ...
produced from the same amount of inputs. A technical change is not necessarily
technological
Technology is the application of conceptual knowledge to achieve practical goals, especially in a reproducible way. The word ''technology'' can also mean the products resulting from such efforts, including both tangible tools such as ute ...
as it might be organizational, or due to a change in a constraint such as
regulation
Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. Fo ...
, input prices, or quantities of inputs. Some scholars note the paradox that technical change is considered to be the most important source of economic dynamism, the rate of change in capitalist economies, but it is ignored in mainstream media.
[ ]
It is possible to measure technical change as the change in output per unit of factor input.
In free-market economies, technological advances lead to increases in productivity, but at the expense of older, less-efficient
means of production
In political philosophy, the means of production refers to the generally necessary assets and resources that enable a society to engage in production. While the exact resources encompassed in the term may vary, it is widely agreed to include the ...
, creating a level of subjective risk for which the compensation (in theory) is the return on capital. This rate or return is a reflection of all of the perceived risks associated with the capital financing of the means of production, including technology risks. From a capital finance point of view, advances in technology are the classic definition of
systemic market risk. The outflow of this condition is the "
creative destruction" of a portion of the means of production as evidenced by businesses discontinuing the production of obsolete products and/or the cessation of business activities that are no longer profitable. In its purest form, capitalism entails a constant level of creative destruction of a portion of the means of production and the increase in
Gross Domestic Product
Gross domestic product (GDP) is a monetary measure of the total market value of all the final goods and services produced and rendered in a specific time period by a country or countries. GDP is often used to measure the economic performanc ...
(GDP) of the subject economy reflects the growth after the losses due to economic obsolescence have been reconciled. Accordingly, increases in GDP provides a substantive measurement that demonstrates that capitalism does not in effect create an economic construct where one party can only make a gain at the expense of the other party (i.e.: if one party could only profit at the expense of another party, then it would be impossible to achieve any nominal growth in GDP).
The "natural process" of capitalism (including creative destruction) is the subject of great contention by adherents of other systems of macroeconomic organization who see the end-result of obsolescence as the creation of a permanent underclass that has an unequal level of access to capital investment, educational resources that are not necessarily of their own making, while others seek to create an equal outcome for disproportionate labor or capital inputs that have not as yet been able to demonstrate a viable model that can compete against free-market economies on a near-term or long-term basis.
References
*
Management cybernetics
{{Econ-stub