Introduction: the “Schumpeterian” hypothesis, 167. — I. Oxygen steelmaking: the history of its invention and innovation, 169. — II. Some cost and profit implications of innovative lethargy, 184. — III. Conclusion, 188

John Bossons, William F. Sharpe, Jacob B. Michaelsen, William Beranek, Business Finance: Innovations in Analysis: Discussion, The Journal of Finance, Vol. 21, No. 2, Papers and Proceedings of the Twenty-Fourth Annual Meeting of the American Finance Association, New York, New York, December 28-30, 1965 (May, 1966), pp. 245-252

1) Like a too-powerful headlamp, Professor Samuelson's brilliant article on induced innovation illuminates much but casts other matters into greater obscurity.' In this short note, I am hoping to make the illumination a bit more evenly-diffused. On the whole I shall argue that where there is a differentiation of the Samuelson from the WeizsackerKennedy product, Samuelson himself has tended to exaggerate the quality difference involved. Before coming to this, however, I should like first to allude to one aspect of the matter about which Samuelson has scarcely commented. 2) I think there is a rather fundamental difference in what might be called the methodological intention of our two approaches. Following Kaldor,2 and recognizing the very great difficulty in principle and impossibility in practice of distinguishing factor substitution from bias in innovation. I had hoped that the innovation-possibility frontier might be able, so to speak, to swallow up the traditional production function and replace it altogether. Samuelson, on the other hand, by adopting the factor-augmenting form for the production function has allowed the production function to do the swallowing up. Each of these two approaches has its weakness and its strength. The strength of the one is the weakness of the other, and vice versa. The weakness of the Samuelson approach is the great reliance still placed on the tenuous concept of the production function, a reliance that the KaldorKennedy approach successfully avoids. The weakness of the Kaldor-Kennedy approach is that it fails to provide an explanation of the determination of prices in the short run, while the Samuelson approach is admirably suited to doing just that. While I still have hopes of the Kaldor-Kennedy approach, I do not think it can be taken much farther until some reasonably convincing alternative explanation of the determination of prices in the short run can be built into it.3 Without beconming a confirmed factor augmenter, for the purpose of the rest of this note I am prepared to go along with the factoraugmenting form of the production function.4 Let me at the same time accept everything that Samuelson wrote concerning stability conditions together with the implied criticism that my own piece was weak on stability questions. 3) Having conceded this much, I am going to put up much more resistance on most other points. The core of Samuelson's own analysis is in his section II. Stability questions aside, the reason and the only reason why he obtains a different result from mine in my own discussion of the one-pr-oduct model is that he has replaced one of my assumptions by one of his own.5 In the place of my assumption that the rate of interest is constant, Samuelson has assumed that capital, in natural units, is accumulati g relative to in natural units. The reason why I have not utilized the Hicksian insight that capital tends to grow relative to labor is that I have no need of it. Since a determinate rate of capital-deepening comes out as one of the results of my analysis of the one-product model, it would obviously be worse than superfluous to incorporate it also as an assumption. 4) I do not see any particular reason why a model which assumes an exogenous rate of growth of capital relative to should be regarded as superior or inferior to one which assumes a constant rate of interest. The most one might say is that the former is more appropriate for relatively short-run analysis and the latter for relatively long-run analysis. Both models fail to explain the fact that the interest or profit rates show no clear trend upward or downward. For this reason, I would agree that my own theory is not a complete theory of the constancy of distributive shares. but rather a theorv contingent ' A Theory of Innovation Along KennedyWeizsacker Lines, this REVIEW, XLVII (Nov. 1965). See also my own Induced Bias in Innovation and the Theory of Distribution, Economic Journal (Sept. 1964). Since Samuelson is kind enough to mention the seminar held at M.I.T. on May 28, 1964, may I take this opportunity of acknowledging the very great courtesy shown by himself and his colleagues at M.I.T. in giving me a hearing on a date and at a time that for them could hardly have been more inconvenient. May I also take this opportunity of mentioning again my indebtedness to Professor Ahmad, of the University of Khartoum. Regrettably, his name was misspelled in the acknowledgement in the Economic Journal. I have not had the advantage of seeing Weizsacker's unpublished paper. 2Essays on Economic Stability and Growth (Duckworth, 1960), 264 et seq. 3 I suspect Kaldor might claim that he had provided an alternative explanation -but I am not sure that it is convincing as yet. 4 With the reservation that augmenting can be negative as well as positive. See below, section 5. 5 See Samuelson, op. cit., 348, footnote 3. With reference to that footnote, please observe that, in Kennedy's case, the Harrod-neutral result is not supposed to come about, it does come about

Paul A. Samuelson, Samuelson on Induced Innovation: Rejoinder: Agreements, Disagreements, Doubts, and the Case of Induced Harrod-Neutral Technical Change, The Review of Economics and Statistics, Vol. 48, No. 4 (Nov., 1966), pp. 444-448

unique between levels of educational development and years of school completed. The relationship may differ from individual to individual, from country to country, and even from region to region within the United States. That is certainly a weakness of national calculations such as I made. It does not follow, however, that there are no averages of school years which are reasonably good predictors of levels of general educational development. The common practice of describing job qualifications in terms of education completed is, at least in part I believe, recognition of such an average relationship. Rather than describing my approach as circular as Ross does, I would call it partial. In calculating requirements I did not take into account the interdependence among types and levels of education and skills, either the complementarities or the substitution possibilities. I would agree with Ross that the requirements for, say, medical orderlies depend on the number of M.D.s and nurses available and the proportions in which it is decided, somehow, that they should work together. All I could claim to have done is to have estimated in some detail the situation for the United States at a certain time. I wouldn't recommend it for any other country nor would I even claim that it is an optimal situation for the United States. In this respect I might go even further than Ross and say, for example, that the . . skills, abilities, etc., required in a first-grade teacher . . . , are not similar everywhere, but depend on the educational objectives of the first grade and the educational system as a whole, the social structure, the resources available, and a lot of other things. All such factors should be taken into account when considering skill requirements for first-grade teachers or other personnel. I don't really believe in fixed proportions in the inputs of educated personnel into an economy and did not intend the percentages which I calculated to be taken as such. Partly for this reason I have refrained from making projections of future educational requirements for the United States with the percentages which I calculated. If this is done, the calculations should be made taking into account the changes which are desired and which are likely to occur. Economic criteria are not the only, nor perhaps even the most important criteria for education, but they were what I was concerned with.

Новаторская статья, в которой автор предлагает рассматривать потребление как производство, в котором отдельные товары рассматриваются как ресурсы, представляющие наборы определенных свойств или характеристик. Эти объективные свойства благ и являются объектом спроса со стороны потребителей.

T HE theoretical role of technology in economic growth is no mystery. It provides new machines and processes (improved capital quality) that raise output relative to input, or productivity. Yet for several reasons, once it comes to pursuing this truth by observation, hypothesis, and testing, every manner of obstacle seems to appear. One may be told that technology per se is rarely susceptible of measurement, that productivity increases can be attributed to many causes, impossible to untangle, or that the precise link between embodied technological change and productivity is too hazy. Such doubts are often justified. At times, however, they may unduly discourage those whose curiosity is not satisfied by aggregate production functions, and who would prefer to investigate more closely some particular reasons for productivity increases. To be clear on this point, technological innovation frequently is difficult to represent quantitatively. Output per unit of input often does rise for non-technological reasons (economies of scale, changes in rates of utilization of capacity, or optimal factor combinations), but there must be important cases where the reverse is true. One such case seems to be electrification of manufacturing industries. Here the rate of technical change can be reasonably well measured in terms of horsepower capacity of power equipment and consumption of power (work output). Furthermore, this revolution in the application of power can be viewed against the background of clear, known changes in manufacturing productivity changes which remain mostly unexplained. Specifically, it might be expected that there would be a relationship between electrification and reduced costs of production.' More broadly, the case of electrification might illustrate how the quantitative link between technological change and productivity can be developed. To this end, what follows (section I) traces some suggestive findings regarding the rise of electric power and changes in productivity in American manufacturing, and (section II) attempts to construct a theoretical framework for measuring the impact of electrical technology on factor costs. It is hoped that section II will help shed more light upon the broader question mentioned above, by providing procedures that could be adapted to a wide range of technologyproductivity cases