BA LLB Economics notes 1 semester

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BA LLB Economics notes 1 semester


Q. 4. Explain the meaning and forms of Technological Progress. Examine the forms on Technology Transfer.

Ans. Technological progress implies. the application of improved technology in the production activity. What constitutes technology? One usual idea about technology is that it is some sort of machine, a way of making things. No doubt, it is machines that constitute the visible reality of technology that embody’ a technology. But recent approaches to technology emphasize that these visible phenomena are only the ‘technoware’ of a technology, which finds also expression in its ‘humanware’, the human skills necessary for dealing with that technology, the ‘orgaware’ or organizational system implied in that technology and ‘infoware’ or accompanying information of that technology. These expressions indicate the usefulness of searching for technology in wider dimensions of phenomena than just machines and products.

Forms of Technological Progress

Technological progress can take three forms :

(i) Neutral technological progress occurs when higher output levels are achieved with the same quantity and combinations of factor inputs. Simple innovations like those that arise from the division of labor can result in higher total output levels and greater consumption for all individuals.

(ii) Labour-saving technological progress implies higher levels of output with the same quantity of labor inputs. Electronic computers, automatic looms, high-speed electric drills, tractors, and mechanical ploughs-these and many other kinds of modern machinery and equipment can be classified as labor-saving.

(iii) Capital-saving technological progress occurs ‘when higher output levels are achieved with the same quantity of capital inputs. Such progress results in more efficient (lower-cost) labor-intensive methods of production -for example, hand-or rotary-powered weeders and threshers, foot-operated pumps, and back-mounted mechanical sprayers for small-scale agriculture.
Technological progress can also be labor-augmenting and capital-augmenting.(a) Labour-augmenting technological progress occurs when the quality of skills of the labor force are upgraded for example, by the use of videotapes, televisions, and other electronic communications media for classroom instruction.(b) Capital-augmenting technological progress results in the more productive use of existing capital goods, for example, the substitution of steel for wooden ploughs in agricultural production.

Conditions Necessary for Technological Progress

For technological progress to take place, three conditions are necessary :

(i) Technological progress requires large capital investment in research as well as in industries.

(ii) It needs entrepreneurs who have the ability to understand the possibilities of using scientific inventions for commercial purposes.

(iii) There must be an expanding market for the product.
All these conditions are fulfilled in a developed economy only, hence the rate of technological progress is very fast in these countries. In a UDC, these conditions do not obtain and, hence, the technological progress is retarded. To overcome this obstacle, many UDCs have been tempted to import technology from abroad (i.e., transfer of technology).

Forms of Technology Transfer

There are varied forms in which technology can be transferred to a UDC. At one end of the range is a multinational investment, in which ownership and control remain with the technology seller. This was the dominant model until the 1960s. In recent years, less packaged forms of technology transfer have developed, like joint ventures (shared ownership and control); licensing (ownership and management responsibilities lie with the host country, but the detailed conditions associated with the technology license often introduce constraints on decision-making), franchising (sale of the use of a brand name and technical and managerial Support); management contracts (supplying management and routine technical assistance); marketing and technical service contracts; turnkey contracts (supplying a ‘finished’ factory which is then handed over to the buyer); and sub-contracting (where the sub-contractor provides technical information to the sub-contractee).

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