On the Nature of Technical Change : Original Endowment Theory

While understood as the essence of long-run economic growth, existing conceptions of technical change nonetheless tend to be “unbelievable” and antiquated in relation to our present state of scientific knowledge. This paper views technical change as the remixing of the most fundamental building blocks of nature that can both be observed and manipulated in order to augment the creativity and productivity of the human condition and the physical world. With on-going advances in nanotechnology and neuroscience, such building blocks now consist of the elements that comprised the original endowment of the Earth, having been remixed into countless successive physical and life forms. These elements or “natural units” that comprise nature's tool kit conform with three essential properties of a workable, baseline unit of technical change. Natural units are immutable and non-decomposable, thus providing an enduring baseline measure of change; they are recombinable, meaning that they can be continuously repurposed; and they are transferable across a wide range of new vintages, including as between physical capital and labor. Once we acknowledge the fixity of our physical endowment and the fact that all new ideas and objects entail a remix of natural units or atoms, far-ranging implications ensue. Among these are that our interpretation of technical change transforms from “purely labor augmenting” to invention neutrality, thus altering our understanding of long-run growth. This interpretation also forges bridges between economics and other disciplines, including the physical sciences and moral philosophy