Jan Priewe (HTW Berlin – University of Applied Sciences, Germany)

Shortcomings of the measurement of ‘technical progress’ and ‘innovations’ – can they be overcome?

Abstract. The common understanding of technical progress is the measurement by total factor productivity (TFP), or strongly simplified by labour productivity. Challenges emerge from the Cambridge-Cambridge controversy on capital theory, and the theory of external effects in the tradition of Pigou, in particular from the neglect of nature as emphasised in ecological economics. Could the notion of TFP be rescued if land/nature were seperated from capital and added as an independent factor of production? This includes the issue of possibly finite substitutability of nature, capital and labour. With false measurement based on theoretical shortcomings technical progress in economic history and in the foreseeable future may be grossly overestimated. Other challenges of TFP: can product innovations be captured adequately, similarly environmentally-friendly innovations, innovations in healthcare? How about innovations that increase costs? How to assess intangible innovations or intangible technical progress? The term innovation seems too broad to be properly measurable. The lecture will present a special focus on the notion of technical progress in ecological economics. If the theoretical category of technical progress might fade away a cornerstone of traditional growth theories is at risk to tumble with far reaching consequences.