ECONOMICS 4910/8916

SPECIAL TOPICS IN ECONOMICS:

SEMINAR ON THE ECONOMICS OF TECHNOLOGY

Spring 1998

(revised: April 8, 1998)

Arthur Diamond

Office: CBA 512E

Office phone: 554-3657

Office Hours: Mon. from 10:30-11:30 AM; Weds. from 4:30-6:00 PM; and by appointment.

Internet address: adiamond@unomaha.edu

World Wide Web home page: http://unicron.unomaha.edu/faculty/adiamond/web/diahompg.htm

Seminar Description:

The three credit-hour seminar meets on Wednesdays from 6-8:40 PM. The course will be conducted as a seminar with ample student participation, including a research paper. Among the possible questions for consideration will be: What are the sources of technological innovation? What is the optimal speed of adoption of new technologies? What are the effects on labor and consumers of new technology? Has the government been successful in supporting new technologies? How does scientific research influence technology and economic growth? Can the government, as part of an "industrial policy" pick promising science projects and technologies of the future?

Approximately the first nine weeks of the seminar will focus on instructor-led discussion of important topics in the economics of technology. Readings for this section of the course will consist of chapters from the texts, as well as important, usually recent, academic papers on the topics under discussion.

Part of one session (to be held in the library) will focus on the characteristics of good writing style in economics and on effective research techniques. Under the latter heading we will learn how to perform literature searches using a powerful, but initially confusing, research tool: the Social Science Citation Index.

During the last five weeks, or so, of the seminar, instructor-led discussions will be significantly supplemented by student presentations on topics related to their term papers.

Prerequisite:

ECON 2200 or permission of the instructor.

Texts:

Mansfield, Edwin. Technological Change. New York: W.W. Norton & Co., Inc., 1971.

Rosenberg, Nathan. Inside the Black Box: Technology and Economics. Cambridge: Cambridge University Press, 1982.

Resource Materials:

Additional journal articles and chapters from monographs will be assigned on a weekly basis related to the topics that are to be discussed. These readings will be made available at the reserve desk of the library. Another useful book for this course is: Rosenberg, Nathan. Exploring the Black Box. Cambridge: Cambridge University Press, 1994.

491 Course Requirements:

Course grades will depend on the grades received on a midterm (100 points), a final exam (130 points), and a medium-length paper (100 points) on a topic drawn from those covered on the reading list. The midterm will consist of a combination of multiple choice questions and essay questions. The paper should be 10-15 pages of double-spaced, typewritten text (not including any footnotes and references).

Undergraduates are not required to give presentations, but may earn "extra credit" points by doing so. The number of points earned will depend on the quality of the presentation, but will have a maximum value of 10% of the total points otherwise possible for the course.

891 Course Requirements:

Course grades will depend on the grades received on a midterm (100 points), a class presentation (30 points), an extended research paper (130 points) on a thesis related to one of the topics covered on the reading list, and a final exam (70 points).

In the second half of the course, each graduate student will be expected to give a summary presentation, and then lead discussion on one of the topics listed in the syllabus. The paper should be 20-25 pages of double-spaced, typewritten text (not including any footnotes and references).

“Honors Contract” for Undergraduate Honors Students:

Undergraduate students enrolled in the Honors Program, may receive honors credit for the course by completing an honors contract and fulfilling the terms of the contract. The contract will specify conditions identical to the graduate requirements for the course (viz., a presentation and a longer term paper).

Cheating:

Exams will be attentively monitored. The result of academic dishonesty will be a grade of F for the seminar and a recommendation for expulsion from the university.

Course Grade Reporting:

In a memo dated January 21, 1991, Vice Chancellor Otto Bauer advised faculty that posting grades may be a violation of the "Privacy Rights of Parents and Students Act" of 1974. Grades will not be posted. A student who needs early reporting of the course grade may obtain the grade through BRUNO or on the Registrar’s World Wide Web home page.

Presentations:

The presenter will assign readings to fellow students two weeks prior to the seminar presentation. The presenter should either (1) provide two photocopies to me to place on reserve or (2) provide sufficient photocopies for each student to have her own copy. Photocopies should have full bibliographic information on the top of the first page of each separate source. Full bibliographic information means: author(s), article or book title, volume number (where applicable), journal title (where applicable), publication date and pages. A presenter will be expected to give a summary presentation, and then lead discussion on one of the topics listed in the annotated reading list. The presentation should be on the same topic as the research paper, but the presentation should be more self-consciously designed so that all reasonable positions on the topic are given a credible defense.

OUTLINE OF COURSE:

The Technological Change text will be abbreviated TECH. The Inside the Black Box text will be abbreviated IN. Some of the special value of a special topics seminar is that we can be especially responsive to the special interests of the students and can include the latest breaking research on the topics studied. As a result, the following schedule is very tentative and will be modified and expanded as the semester progresses.

1. 1/14/98 Description of course.

2. 1/21/98 The Initial Context: Economists’ Past Understanding of Technology

IN, Chs. 1 & 2

TECH, Chs. 1, 2, & 3

3. 1/28/98 What are the sources of technological innovation? Also: CWIS, Internet, Uncover and the use of computers in research.

IN, Chs. 10, 8, & 9 (yes, in that order);

4. 2/4/98 Research tools and clear writing in the economics of technology. Bibliographic search using Genisys and Uncover. Grammatik and writing style. Meet in library (in Room 301); Library resources: journals; SSCI; ABI-Inform on CD-ROM; journals. Writing style in economics; discuss McCloskey. (Tentative term paper topics due.)

McCloskey, Donald. "Economical Writing." Economic Inquiry 23 (April 1985): 187-222.

5. 2/11/98 Bill Gates, Microsoft and the Economics of Technology (initial bibliography due)

Gates, Bill. Thc Road Ahead. Chs. 1, 3 and 8.

6. 2/18/98 What is the optimal speed of adoption of new technologies?

TECH, Ch. 4

IN, Ch. 5;

Fairchild, Loretta G. and Kim Sosin. “Evaluating Differences in Technological Activity Between Transnational and Domestic Firms in Latin America.” The Journal of Development Studies. 22, no. 4 (July 1986): 697-708.

7. 2/25/98 Has the government been successful in supporting new technologies?

TECH, pp. 116-128 & 135-154

Squires, Arthur M. “The Vasa . . . the R100 . . . the R101.” The Tender Ship: Government Management of Technological Change. Boston, Massachusetts: Birkhauser, 1986, pp. 1-10.

Feynman, Richard P. What Do You Care What Other People Think? Boston, Massachusetts: G.K. Hall & Co., 1990, pp. 1-10.

8. 3/4/98 What are the effects on labor and consumers of new technology?

view “The Man in the White Suit”

TECH, pp. 103-116

Blanchflower, David G. and Simon M. Burgess. “New Technology and Jobs: Comparative Evidence from a Two Country Study, working draft Dec. 1995.

9. 3/11/98 Midterm exam. (Exam will cover assignments through 3/4/98.)

10. 3/18/98 Does science promote technological innovation?

IN, Ch. 7

Nelson, Richard R. "The Simple Economics of Basic Scientific Research." Journal of Political Economy 67 (1959): 297-306.

Adams, James D. "Fundamental Stocks of Knowledge and Productivity Growth." Journal of Political Economy 98, no. 4 (August 1990): 673-702.

11. 3/25/98 Spring Break (no class).

12. 4/1/98 Arthur Diamond, “Was the Decline in Victorian England Due to a Failure to Invest Enough in New Technology?”

Arthur Diamond, “How Should Technology be Measured?”

13. 4/8/98 Gary Hawkins, “How, When, and Why Do Companies Switch to Newer Technologies in Lieu of Older Technologies?”

Matt Lundt, “The Solow Paradox: Why Can We See the Computer Age Everywhere Except in the Productivity Statistics?”

Wenhong Wang, “Why has technological progress been so much greater in the West than the East? Why, for instance, were there so many dead-end inventions in China?

14. 4/15/98 Germán Vargas, “What Does the Economics Literature have to Say on the Importance of Science in the Development of Technology.”

Derrick Brannan, “Has the Investment in “Space” (NASA) Been More Beneficial to Technical Innovation, than if the Expenditures had Remained in the Private Sector?”

Arthur Diamond, “Telecommunications Deregulation in Nebraska”

15. 4/22/98 Shane Yockey, “The Threatening of War’s Impact on Technology and Innovation.”

Kristy Bear, “Are Big Firms or Small Firms More Likely to Innovate?”

Robert Watson, “Are the Number of Patents Filed Per Year a Good Measure of the Rate of Technological Progress?

16. 4/29/98 Papers due.

Kenneth Grobeck, “Transportation and Technological Utilization.”

Apisit Amka, “Does the Extent of Protection of Intellectual Rights in a Country Influence the Country’s Rate of Technological Progress?”

William Acuff, “Does the High Rate of Productivity Growth in the Electric Utility Sector (1899-1953) Reflect Rapid Technological Change: A Look Behind the Numbers.”

17. 5/6/98 Final Exam. (Exam is comprehensive and may cover anything covered in course.)

For information purposes, here are the topics for those not doing presentations:

Akinori Ichikawa, “Technological Unemployment in Developing Countries.”

Scott Ostronic, “The World Wide Web’s Effect on the Economy.”

GUIDELINES FOR PRESENTATIONS

Most presentations should consist of a 15-25 minute presentation, in which you state your thesis, hypothesis, or research question. Why is your topic important? What about it is controversial, or unresolved? What method or type of evidence will you bring to bear to try to resolve the controversy? In addition to discussing your topic and your plans for your paper, you should also briefly discuss the readings that you assigned for the evening. You should have some questions prepared for your fellow students on the readings that focus their attention on the central message of each assigned reading and on the reading’s importance.

Some specific suggestions:

· Make sure your photocopies are legible.

· Make sure you have all reference information on the first page of your reading, including the author, title, year and, where applicable, volume, number, month, etc.

· If you find a reading that is relevant, but dated, be sure to use the Social Science Citation Index to try to find an equally relevant, but more recent, reading.

· Begin your search early enough to be able to acquire items through interlibrary loan, if necessary.

· Make sure to include in the copy of your reading, all footnotes and references that are referred to internally in the body of your reading.

GUIDELINES FOR TERM PAPERS

The research paper should argue for a particular thesis related to one of the topic areas and should reflect critical thought instead of a mere summary of the positions of the published authorities. (With permission, the student may select a relevant topic that is not included on the reading list). The paper should be a double-spaced word-processed text with a font size of either 10 or 12 points. For undergraduates, the paper should be 10-15 pages in length and for graduate students, the paper should be 20-25 pages in length (in both cases, not including any footnotes and references).

Late papers will be accepted, but will have 5% of the possible paper points deducted initially and an additional 1% deducted for each day the paper is late beyond the first day. Late papers may result in a grade of I (incomplete) for the course on the initial grade report.

The paper should be written at a consistent level of difficulty. In most cases, the paper should be written to be understandable by a conscientious undergraduate economics major. That means you should assume that you are writing for someone who is intelligent, interested, short on time, and does not have a deep knowledge of science or the higher level technical details of economics.

The "core" sections of the paper should sum to approximately 10-15 pages for undergraduates and 20-25 pages graduate students. A few pages extra will not be penalized if the extra pages are truly needed (i.e., not "padding").

The paper should have a title page including the title, your name, the name of the course, the course number and the date on which the paper is turned in. Following the title page, on a separate page should be a 100 word abstract. Neither the title page nor the abstract page counts toward the page limit of the paper. Pages in the body of the text (beginning with the Introduction) should be consecutively numbered. The whole paper should be double-spaced and should have inch and a half margins on the top, bottom, right and left. The font size should either be 10 point or 12 point in size. Any quotations longer than one sentence should be presented in “block indent” form (meaning that the whole quote is indented 5 spaces from the left edge of the text). Please do not put your paper in a special binder that would limit the space for my comments. Instead, staple or clip it together.

Use endnotes rather than footnotes. (But endnotes should be used only if really necessary.) When a source is used in the text, internal references should be given in the text that consist of a parenthetical mention of the author's last name, the date of the publication and a specific page number (if appropriate). For each brief parenthetical reference, a complete bibliographic reference should be provided in the Bibliography (that is not counted in the page limit). The ultimate arbiter for reference format is style “A” described in the latest edition of The Chicago Manual of Style.

Before you turn in your final draft, be sure to submit it to a spell-checking program (available with all major word-processing programs).

As you work on the text of your paper, be sure to periodically backup your latest draft onto a floppy disk. Also be sure to keep a clean copy of your paper for your files---the copy you turn in to me will be marked-up in red ink.

In your introduction, you should describe your problem and your thesis. This might be a good place to mention the contents of any broadly relevant articles that you turned up in your UNCOVER, EconLit and other literature searches. If there is no relevant material on UNCOVER or EconLit for your topic, mention the absence of relevant material (and include in the appendix, a list of the keywords that you used to search under and the articles that resulted). (That is, it would be very unusual to have no relevant articles appear, so if you claim that there are none, the burden of proof is on you.) Briefly (in a few sentences) summarize what you will be doing in the rest of the paper.

a. The paper should have inch and a half margins on the left hand side, top and bottom. (Ample margins make it easier for me to jot down comments.)

b. The style for references should follow the sample form provided on p. 12 of this syllabus. It should be consistent and should provide enough information for the reader to track down a reference, if necessary. Perhaps the most widely used style format in economics is that found in: The Chicago Manual of Style, latest edition, The University of Chicago Press.) Of the two “basic” styles the Manual discusses, the one used in economics is a variant of what is called style “A.”

c. Attempt to write as McCloskey suggests in "Economical Writing".

d. Do not place your paper in a plastic cover or other binder.

e. Make a photocopy of your paper before turning it in.

f. The paper is due at the beginning of class on the last day of classes (4/25/96).

TERM PAPER TOPICS FROM PREVIOUS YEAR:

"The Impact of Technological Innovation on Consumers in the Automobile Industry."

"Luddites in Economics."

"Financial Innovation and Its Consequences on Consumers."

"Is Microsoft Too Big?"

"The Age of Technology and Its Impact on Employee Wages."

"Was the Decline in Victorian England Due to a Failure to Invest Enough in New Technology?”

"The Changing Role of Technology in Agriculture."

"Does International Technology Transfer Hurt the Country Exporting the Technology?"

"How Successful has the Japanese Agency MITI been at Implementing an Industrial Policy to Focus Resources toward Promising Technological Advance?"

"Why has Technological Progress Been so Much Greater in the West than the East?" (Why for instance were there so many dead-end inventions in China?)

"The Role of Market Research in the Development of a New Technology---With Special focus on the Camcorder."

SOME POSSIBLE TERM PAPER TOPICS:

Should government take a greater role in picking the winners and losers in science and technology (as the supporters of "industrial policy" suggest)? (This topic might be more manageable if you focus on one or two particular cases: e.g., the government support of railroads, Japan's support for high definition TV, Al Gore's information superhighway.) [non-required reference: Tyson, Laura D'Andrea. Who's Bashing Whom? Trade Conflict in High-Technology Industries. Washington, D.C.: Institute for International Economics, Nov. 1992.]

Was the DARPA government agency a success in funding innovative new technology? If so, what were the reasons for the success (able people?, luck?, mission?)

Are there important technology "spin-offs" from government science projects such as NASA's Apollo program? Is this an effective way to advance technology, as opposed to investing directly in the area where technological advance is sought?

If government funding of science is cut, what does the economics literature say about the extent to which private funding would fill the gap? (reference the "crowding out" literature here).

What does the economics literature have to say on the importance of science in the development of technology?

How successful has the Japanese agency MITI been at implementing an industrial policy to focus resources toward promising technological advance?

Is innovation supply-driven or demand-driven?

Are the number of patents filed per year a good measure of the rate of technological progress?

Can there be increasing returns due to investment in technology?

Does international technology transfer hurt the country exporting the technology?

What role (if any) does marketing research play in identifying promising new technologies? It might be useful here to focus on a particular case study, e.g., Sony in its heyday, perhaps especially focusing on the Sony walkman. Rosenberg (EX, p. 5) suggests that what was most important was an “imaginative leap.”

Why has technological progress been so much greater in America than in other countries?

Why has technological progress been so much greater in the West than the East? Why, for instance, were there so many dead-end inventions in China?

What were the views of the Luddites? Did they make use of any economics (or refer to any economists) in their arguments? Do any contemporary economists defend them?

Have innovations in the development of the pencil been demand driven, supply driven, or both? (Read Petroski’s book as one primary source.)

Does the extent of protection of intellectual property rights in a country influence the country’s rate of technological progress?

Do technological innovations increase the proportion of smaller firms in the economy? (For the important, recent, case of information technology, see: Bynjolfsson, Eric, Thomas W. Malone, Vijay Gurbaxani, and Ajit Kambil. “Does Information Technology Lead to Smaller Firms?” Management Science 40, no. 12 (Dec. 1994): 1628-1644.)

It has been argued that Victorian England fell behind the U.S. in innovation and technological progress. Is this true? Were Victorian companies and entrepreneurs acting irrationally? (Read McCloskey here.)

Should cities and states provide greater incentives for high-tech firms to locate in their jurisdictions than low-tech firms?

Analyze the social costs and benefits of a major controversial technology such as the automobile, the computer, or nuclear power.

Have most technological advances had the ‘factor bias’ of being labor-saving? E.g., is the PC more a labor-saving or more a capital-saving advance?

Is incremental improvement or discontinuous advance, more characteristic of technological progress?

Have government electric car mandates proven successful in calling forth new technologies (as with sufficiently advanced new batteries) as Rosenberg (I, p. 176) suggests will be the case. In the electric car case, has the government in fact done what Rosenberg suggests--e.g., has it guaranteed a high level of demand at a high price?

How has the government supported shale oil? ethanol? a cure for aids?

Are big firms or small firms more likely to innovate in process and product? What are the theoretical considerations and what does the evidence show? On the one hand, big firms would have more resources for diversifying against the risks of innovation. On the other hand, smaller firms are often viewed as more flexible, with less bureaucratic structure. (One reference favoring smaller firms would be Fairchild and Sosin 1986, p. 706)

What are the range of predictions that futurists make about future technology? What is the past track-record of technological predictions? Does a good knowledge of economics help you evaluate the prospects of technological prediction?

How important is the development of standards in promoting the advance and acceptance of new technology? If standards are important, are they most efficiently set by: a government agency, an industry consortium, or market competition between competing standards? One interesting topic would be simply to provide a descriptive catalog of important standards over a period of time, classifying them by how the standardization had been achieved.

Has the World Bank been successful in encouraging technological progress in developing countries? Rumor has it that there may have been a relevant article in Business History Review (Summer 1995). I also once heard a talk where they said that the World Bank was totally ineffective because of pressure exerted by donor nations leading to irrational decisions. If memory serves, the concrete example is that at any given time, a large percent of the World Bank installed pumps in Indian villages are broken. The reason is the large number of different brands of pumps in use for which parts are not readily available. Why the large variety of pumps used? ---the answer suggested was that each of the donor nations required that some of their country’s pumps be used. (Lou Galambos has also been rumored to have written useful articles on the history of the World Bank.)

Create some project that tests some economic hypothesis using the newly created IBM FREE database of 2 million patents (from 1971) available on the WWW at: http://www.ibm.com/patents/

Summarize and evaluate the role of technological progress in the “new growth” models associated with Romer, Lucas and Barro. (Most of these models tend to be fairly mathematical, so those with some comfort in mathematical economics might have a comparative advantage with this topic.)

Attempt to replicate Nordhaus’s objective measure of the increases in productivity of lighting, using some other product or service. A list of potential products appears in his table 7 and includes, e.g., aeronautics, air conditioning, pesticides, insulin, automobile, radio, TV, radar, rockets, telephone, computer.

Analyze and evaluate alternative solutions to the Solow paradox: that we can see the computer age everywhere except in the productivity statistics.

Analyze and evaluate the economic justification (or lack of justification) for the Justice Department’s antitrust actions against Microsoft.

Will the “year 2000” problem cause a recession or any other significant problems for the economy?

Will the World Wide Web have a significant effect on the economy? (One important reference here would be bill Gates, The Road Ahead.)

Follow up on Stigler’s claim that “. . . if we go back to the Principles and to Industry and Trade to learn about technological progress or economic growth, our interest need not be exclusively historical, for here Marshall may supply new ideas and suggestions even if not theories.” (p. 217 in: “Does Economics Have a Useful Past?” History of Political Economy 7, no. 2 (Fall 1969): 217-230.) What is Alfred Marshall’s contribution to the economics of technology? Does he write anything that is of interest to us today?
The following sample bibliography is intended to illustrate the mandated reference format for several different kinds of publications.

SAMPLE FORM FOR BIBLIOGRAPHIC REFERENCES

Ackermann, Robert John. Data, Instruments and Theory. Princeton, N.J.: Princeton University Press, 1985.

Acs, Zoltan J., David B. Audretsch and Maryann P. Feldman. "Real Effects of Academic Research: Comment." The American Economic Review 82, no. 1 (March 1992): 363-367.

Adams, James D. "Fundamental Stocks of Knowledge and Productivity Growth." Journal of Political Economy 98, no. 4 (August 1990): 673-702.

Alchian, Armen A. "Private Property and the Relative Cost of Tenure." In Economic Forces at Work. Indianapolis: Liberty Press, 1977 (essay originally published in 1958).

American Chemical Society. Directory of Graduate Research 1989. Washington, D.C.: American Chemical Society, 1989.

Becker, William E., Jr. "Maintaining Faculty Vitality through Collective Bargaining." In Clark, Shirley M. and Lewis, Darrell R., eds. Faculty Vitality and Institutional Productivity: Critical Perspectives for Higher Education. New York: Columbia University, Teachers College Press, 1985, pp. 198-223.

Davis, Elizabeth. "Compensation Gains of Faculty Unions and the Unemployment Effect of Extending Unemployment Insurance Coverage." (PhD Dissertation, University of Michigan, 1988).

Diamond, Arthur M., Jr. "Age and the Acceptance of Cliometrics." The Journal of Economic History 40, no. 4 (December 1980): 838-841.

. "The Career Consequences of Accepting a Scientific Mistake." working paper, 1992.

Friedman, Milton. "An Open Letter for Grants." Newsweek (May 18, 1981): 99.

Garfield, Eugene, (chairman). Science Citation Index. Philadelphia: Institute for Scientific Information, Inc., 1961-present.

Lucas, Robert E., Jr. "Incentives for Ideas." New York Times (April 13, 1981): 23.

Important Dates:

March 11: midterm exam (tentative date).

March 23-27: Spring vacation; no classes.

April 3: Last day until 5:00 p.m. to drop course with a grade of "W".

April 29: Papers due (last day of class).

May 6: Final exam.