Technical Progress

The Technical Progress Theory of Economic Development focuses on the role of technological advancement and innovation in fostering economic growth and development. It emphasizes that the key to sustained economic development lies in the continuous improvement of technology, which leads to increased productivity, more efficient resource allocation, and the creation of new markets and industries.

Key Elements of the Technical Progress Theory:

1. Technological Innovation as the Driver of Growth:
   • The theory posits that technological progress is the primary driver of economic growth. Innovations in production techniques, machinery, and technology improve efficiency and lead to higher output with the same or fewer inputs.
   • For example, the advent of the steam engine during the Industrial Revolution drastically increased industrial productivity and opened up new avenues for economic growth.
2. Increasing Productivity:
   • Technical progress leads to a rise in productivity, allowing businesses to produce more with less. As new technologies are adopted, workers can use advanced tools and machinery, which helps to increase production efficiency.
   • For instance, the development of automated machinery in manufacturing reduces labor costs and production time, leading to higher productivity.
3. New Goods and Services:
   • The theory highlights that technical progress does not only improve existing products but also leads to the creation of entirely new goods and services. This process opens up new markets and opportunities for economic expansion.
   • For example, the development of smartphones has created an entirely new market and industries related to app development, mobile accessories, and online services.
4. Capital Deepening:
   • Technical progress often results in capital deepening, where economies increase the amount of capital (machinery, technology, etc.) available per worker. This enables workers to be more productive and results in economic growth.
   • For instance, the use of more advanced agricultural machinery has enabled farmers to cultivate larger areas of land more efficiently, leading to increased agricultural output.
5. Skill Development and Human Capital:
   • As technology advances, the demand for more skilled workers rises. This leads to the enhancement of human capital, where workers acquire new skills to adapt to technological changes.
   • For example, the growth of the IT sector has led to an increased demand for skilled professionals in fields like software engineering, data analysis, and cybersecurity.
6. Technological Diffusion:
   • The spread or diffusion of new technologies is critical for the widespread impact of technical progress. As new technologies are adopted by firms and countries, their productivity improves, leading to overall economic growth.
   • For example, the global spread of the internet has transformed communication, commerce, and education, boosting productivity and economic development across many sectors.
7. Role of Innovation in Industrialization:
   • Technical progress fosters industrialization, a key aspect of economic development. As new technologies improve production methods, they enable the growth of industries and the transition from an agrarian economy to an industrial one.
   • For example, the introduction of electricity and mechanized tools during the Industrial Revolution in Europe allowed mass production, leading to urbanization and large-scale industrial growth.