"Need" is a loaded word.

The key point in economic terms is that each actualization of a desire--that is, each new service or product--forms a platform from which other possible activities can be imagined and desired. Once technology satisfies the opportunity to fly, for instance, flying produces new desires: to eat while flying, to fly by oneself to work each day, to fly faster than sound, to fly to the moon, to watch TV while flying. Once technology satisfies the desire to watch TV while flying, our insatiable imagination hungers to be able to watch a video of our own choosing, and to not see what others watch. That dream, too, can be actualized by technical knowledge. Each actualization of an idea supplies room for more technology, and each new technology supplies room for more ideas. They feed on each other, rounding faster and faster.

This ever-extending loop whereby technology generates demand, and then supplies the technology to meet those demands is the origin of progress. But it is only now being viewed as such. In classical economics--based on the workings of the brick and smokestack--technology was a leftover. To explain economic growth, economists tallied up the effects of the traditional economic ingredients such as labor, capital, and inventory. This aggregate became the equation of growth. Whatever growth was not explained by those was attributed to a residual category: technology. Technology was thus defined as outside the economic engine. It was also assumed to be a fixed quantity--something that didn't really change itself. Then in 1957 Robert Solow, an economist working at MIT, calculated that technology is responsible for about 80% of growth.

We see now, particularly with the advent of the network economy, that technology is not the residual, but the dynamo. In the new order, technology is the Prime Mover.



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This is a blog version of a book of mine first published in 1998. I am re-issuing it (two posts per week) unaltered on its 10th anniversary. Comments welcomed. More details here.
-- KK