What should countries do to catch up? The challenge of technology diffusion - Ricardo Hausmann

 

Rapid technology-driven displacement of massive amounts of human labour is not new. Optimism and pessimism about where the changes are leading are not new either. But for a complex system such as the world economy, understanding the past is already hard enough. We can however establish the causal links that might determine the outcome. Fundamentally, technology is a way to transform “the world as I found it” into “the world as I want it to be”. It depends on embedded knowledge in tools; codified knowledge in recipes, manuals, and protocols; and tacit knowledge in brains. Most of the time, these three forms of knowledge complement one another, but technological progress occasionally substitutes one for another. While each new technology displaces one form of knowhow, it creates others. The great uncertainty is the diffusion capacity of new technologies. This depends on everything from its cost to how many previous technologies are needed to use it, to how hard it is to use. There’s no point in trying to predict all this. A country’s future is more likely to be bright if it focuses on ensuring it can master every new technology and exploit every new opportunity that comes along.