Notes from the Economic History Association Meeting

25 September 2008 at 12:55 pm 1 comment

| Dick Langlois |

I am only now (slowly and partially) emerging from a crush of administrative and teaching responsibilities at the beginning of the semester. But I did manage to drive down to New Haven last weekend for some of the Economic History Association meeting. It was an eventful meeting in many respects, including a fire at the hotel Thursday night that sent conference-goers into the street in their pajamas as well as an apparent outbreak of food poisoning from the Saturday night banquet. Happily, I was spared both of those experiences.

For at least two of the three sessions I managed to attend, there emerged a theme: that a lot of interesting work in economic history today is rediscovering and reinventing ideas that Nate Rosenberg, Paul David, and others were discussing in the 1970s and earlier: learning by doing and factor prices, technological and economic complementarities, and general-purpose technologies. (I have been known to talk about the Stanford School in this respect.)

In his keynote address on Saturday — evidently similar to his Clarendon Lectures last year and probably dating back at least to this paper — Daron Acemoglu talked about the issue of skill bias in technological change. In the 1970s, labor economists were arguing that Americans were investing too much in education, since rising wage rates should lead to labor-saving technical change, which would reduce the supply of skilled jobs. Of course, just the opposite happened: skilled jobs grew even faster than skilled workers, creating a skill premium in the U.S. Acemoglu presented a clever general-equilibrium model in which the bias of technological change is endogenous. Under certain assumptions, supply of a factor of production (like skilled labor) can create its own demand. The intuition is that a larger supply of a factor (like skilled labor) can increase the market for complementary innovations to an extent that offsets other effects. (For my own Rosenbergian take on why technical change should be biased toward higher skill levels, see here.) Interestingly, Joel Mokyr discussed Acemoglu’s presentation using a 1975 Paul David paper as a framework.

One of the Sunday morning sessions was focused explicitly on the theme of innovation. Alex Field presented a brief against the concept of general-purpose technologies, or rather against the often over-broad and amorphous way the term is used in the literature. Shane Greenstein presented a paper he is working on with Tim Bresnahan and Rebecca Henderson called “Schumpeterian Competition within Computing Markets and Organizational Diseconomies of Scope.” Schumpeter famously argued that (at least in early capitalism) radical innovations do not take place within existing firms but call forth new firms. It was clone-makers not IBM who took the lead in the personal computer, and it was the likes of Yahoo and Google not Microsoft who best exploited the Internet. Shane and his coauthors explain the “failure” of these two large firms in terms of “organizational diseconomies of scope.” I pressed him on the meaning of this term; what they seem to have in mind is neither (A) rent-seeking problems within the organization attendant on a new technology nor (B) rigidities in capabilities à la Dorothy Leonard but rather (C) the costs of existing complex webs of contractual and other complementarities (notably involving investments in shared assets) developed for an older product line. This struck me as Williamson meets Paul David. Of course, (C) is arguably related to (A) and (B), and all would fall under the heading of what I call dynamic governance costs. But definitely an interesting take. (Another interesting aspect of the paper is that the authors were able to interview William Lowe, the man responsible for setting up the Boca Raton operation in 1980 that created the IBM PC.) The third presentation was an absolutely terrific (and very Rosenbergian) paper by Jim Bessen on cotton weaving in the nineteenth century. He examines the sources of productivity growth using a detailed engineering model and finds that labor-saving change did account for productivity growth — but that change involved not innovation in the machinery itself but rather improvements in the skills of the workers. Because of a change in relative prices, factory owners forced workers to tend a larger number of looms. But this labor-saving shift decreased productivity until the workers learned how to keep pace with the larger number of looms. As Rosenberg (1976) pointed out, moving along the production possibilities frontier requires learning and innovation just as much as moving to a new frontier.

Entry filed under: - Langlois -, Business/Economic History, Conferences, Innovation.

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