The Right and Wrong Definitions of Technology

The Monetary Wars, Part II

Before we jump into the topic of technology, let us consider the level importance of the topic. You may already understand the immense power of technology in many levels, but we cannot overstate the importance of a good definition. A bad definition is like tunnel vision or blurry eyesight. It can leave us half-blind to the ways in which technology shapes the world.

What is technology?

Go to Wikipedia for the answer and you get a terrible definition---something like the one you were probably taught during your schooling indoctrination years:

Technology is the sum of techniques, skill, methods, and processes used in the production of goods or services or in the accomplishment of objectives, such as scientific investigation. Technology can be the knowledge of...embedded in machines…

To be sure, the Wikipedia answer explores a broad subset of the terrain of technology, pushing visions of academic research and silicon chips. But this terrain falls short. The definition is incomplete. The fundamental quality of technology is entirely missing---perhaps intentionally so?

In order to understand technology, let us dive into a piece of economic history. Don't worry---we dodge the mathy stuff as it doesn't pertain much to our story (but study that if you're interested!). During the mid-twentieth century, one of the chief pursuits of economists was to describe an aggregate growth model, considered by some necessary for the completeness of neoclassical economic theory. In 1956, economists Robert Solow (MIT) and Travor Swan (Australian National University) simultaneously published what has become known as the Solow-Swan growth model. For this achievement and others, Solow received the 1987 Nobel Prize in Economics, though Swan was never acknowledged by the committee. Their model will be the source of our definition of technology.

Source: krugermagazine.com

Let us keep the Solow-Swan model (SSM) as simple as possible. We can certainly build an intuitive understanding of the model without learning how to read differential equations. Simply put, the SSM describes economic output is the result several inputs:

• Capital: the stuff used in production that can be bought with money.

• Labor: bodies that do stuff with capital that results in output products/services.

• Technology: Wizard magic? We'll get to that.

Here are the first basic observations we make:

1. Capital and labor scale the output linearly. If we double the number of workers and the amount of capital they have to work with, we then double the output of the economy. If we triple those inputs, we triple the output.

2. We live in a world of exponential rates of wealth and production growth. Who would invest their resources (capital) in production if the output wasn't expected to be larger than the input?! Economic feedback loops result in the multiplication of capital repeatedly, resulting in an exponential output function. (linear in read, exponential in green)

Source: Wikipedia

So, given that labor and capital only result in linear scaling of outputs, and technology is the only other system input, that means that technology is the sole source of exponential growth! In fact, this gives us the best definition of technology---one based implicitly on results, and casts aside our biases of what qualifies as "academic" or "process of silicon machines".

Technology is anything that grows resources.

So simple. So perfect. This will be a foundation on which we rebuild a lot of the terrible ideas that have led us into the era of The Monetary Wars.

Now, by defining technology implicitly (as opposed to relying on some narrower explicit definition), we might seek to at least describe some areas of technology in order to bring focus to the landscape. Ultimately any of the following might or might not be technology---we only know by evaluating the results of any action!

• Machines (including computers)

• Culture! We might even categorize religion here. (I consider culture the most underrated technology.)

• Education

• Law

• Medicine

• Weapons?

• Agriculture

• Business organization

• Human relations (think international relations)

• Literature

We'll stop here---not because we cannot think of other good sources of technology, but because those sources are truly limitless. Anything practical or productive you have ever thought---any creative energy---is a source of technology. Technology is all those things that are worth investing ourselves (time, energy, capital...all of it) in doing because by definition they make us better off.

Thank you for reading. We hope you think hard on this topic and we plan to come back to this definition in future articles for the purpose of digging deep into challenging topics. As a teaser, we plan to add another twist: technology is in the eye of the beholder. Just as aggregating utility is difficult, the game theory of technology can get interesting when we realize that some actions and products may be technology for some, but not for others. Check back again in the future.