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Productivity, Innovation and Social Savings

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An Economist’s Guide to Economic History

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Abstract

Since the late 1930s, economists have noted an increase in economic efficiency, leading to higher welfare levels and social savings. Key to understand this development is the quantification of the impact of innovations and new technologies. This chapter discusses growth accounting and allied methodologies and how they may help to quantify innovation-led increases in efficiency and welfare benefits.

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Notes

  1. 1.

    I thank Chris Colvin, Matthias Blum and Pieter Woltjer for comments and suggestions. The usual disclaimer applies.

  2. 2.

    The latter can be seen as the objective function to which growth accounting provides the supply-side constraints (Hulten 2001).

  3. 3.

    Comparative residuals reported from Griliches (1996) and Kendrick (1956). Stigler (1947) reports a residual of 89 per cent for 1904–1937 for the output per person-hour in selected manufacturing industries , which includes the effect of the increasing capital-labour ratio.

  4. 4.

    For a historiography of growth accounting, see Griliches (1996), Hulten (2001) and Crafts (2009).

  5. 5.

    For simplicity, expression (47.6) assumes a linear downward sloping demand curve and a horizontal supply curve. With a compensated demand curve and an upward sloping supply curve, social savings would likely have been even larger. Derivation available from the author.

  6. 6.

    New goods can, of course, also have welfare costs, sometimes unmeasured. Prime examples are negative externalities such as the health effects of tobacco, traffic congestion and pollution.

  7. 7.

    A concept that includes broader welfare increases is the Human Development Index (HDI), which averages indicators for education, income and life expectancy per capita. On the HDI in economic history, and related indices , such as the Dasgupta and Weale index, see Crafts (1997).

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Authors and Affiliations

  1. London School of Economics and Political Science, London, UK

    Gerben Bakker

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  1. Queen’s University Belfast, Belfast, UK

    Matthias Blum

  2. Queen’s University Belfast, Belfast, UK

    Christopher L. Colvin

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Bakker, G. (2018). Productivity, Innovation and Social Savings. In: Blum, M., Colvin, C. (eds) An Economist’s Guide to Economic History. Palgrave Studies in Economic History. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-96568-0_47

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