The Accelerating Rate of Technological Advancement
The other day I was talking to an individual who is a business owner in the healthcare industry about the future of Healthcare and what we could do to get our economy out of the doldrums it’s been in lately. He indicated that he believed there would be a significant increase in the growth rate of the economy due to technological advances being created. In fact, he forecasted that there would be a forty percent increase in manufacturing due to the improvements in manufacturing processes that would be enabled by the technological advances. Indeed, I thought about this for a while and then asked him if he thought it was possible to use the Internet to track the progress of these technological advancements.
His answer to my question was that he did not believe there could ever be a way to put a time frame on the technological improvements. Indeed, he indicated that he didn’t see how anyone could even come up with a list of what technologies were currently being utilized in our country in terms of how quickly they were being produced, manufactured, invented, and built. And, he was absolutely correct, all of these items are exponentially advancing every two years! Now that makes sense, doesn’t it?
In other words, according to this person, technological progress is so fast no one can keep up with it. I asked him why he believed that and the answer he provided to me made me think about it for a moment and then it hit me like a bolt of lightning. That is when the technological progress is so far ahead of where we are today, then anyone who believes the logarithmic vertical axis chosen to show the linearity of the growth rate cannot possibly make such a claim. It simply wouldn’t make sense.
But let’s take a closer look at his idea. According to him, when you log the historical data, you see that the technological improvements have been very rapid and very significant over the last 100 years. He goes on to say that to understand this rapid growth rate, you need to view it as a function of exponential growth rates. In other words, if we look back in the history of humankind and look at what it took to get from the stone age to the steam engine, and then to the telephone and computer, we see the exponential increase of those things. Logically then, if we continue to speed up the development of the various technological advancements in this time period, then we will see the same exponential growth rate occurring in human evolutionary time as well.
Well then, I ask you, if the exponential increase of the price of consumer durables is caused by increases in the growth rate of the Consumer Electronics sector, as he indicates, then why hasn’t the consumer price index gone up? If the Consumer durables sector is responsible for the price increase, then shouldn’t the cost of personal electronic goods go up? If the growth of the Consumer durables sector drives up the price of consumer goods, then where is the economy coming from? It doesn’t make sense, it simply doesn’t add up.
However, Mr. Clayton also mentions that we might be seeing the beginnings of a plateau in the Consumer durables sector with the Computers and Electronics industry. If so, then the Computers and Electronics industry will be adding to the overall exponential increase in the price of consumer products. With the slowing down in the growth rate of the Computers and Electronics Industry there may be room for the price of Computers and Electronics to go up, but not as much as they are now. So, for me to use the exponential increase in the price of the Consumer durables to determine when the Consumer goods ceiling will be reached, I must admit that I cannot make the mathematical calculations per se, but I believe that Mr. Clayton may be correct in some of his statements in his article.