GENERAL-PURPOSE TECHNOLOGIES - ENGINES OF GROWTH

Whole eras of technical progress and growth appear to be driven by a few 'General Purpose Technologies' (GPT's), such as the steam engine, the electric motor, and semiconductors. GPT's are characterized by pervasiveness, inherent potential for technical improvements, and 'innovational complementarities', giving rise to increasing returns-to-scale. However, a decentralized economy will have difficulty in fully exploiting the growth opportunities of GPT's: arms-length market transactions between the GPT and its users may result in 'too little, too late' innovation. Likewise, difficulties in forecasting the technological developments of the other side can lower the rate of technical advance of all sectors.