Technical Progress Function

While we humans are pretty amazing in terms of productivity, we can only be pushed so far (after all, we are animals). The technical progress function tries to isolate the level of economic output that’s thanks to increases in technological progress and innovation.

Technology goes waaaaay back. You could argue that simple tools, like hammers and the wheel, are some of the first technologies that made humans more productive. Fast forward to today, and we have things like the internet, machine learning, AI, and big data enabling us to do more with less (less work, less friction).

The technical progress function is kind of the opposite as the production function introduced in economics. The production function holds technical progress at a certain level, focusing on efficiency of labor and capital as the variables that change economic output. The technical progress function uses technical progress as a variable that changes the dependent variable of economic output instead. It implies that the more we invest in technology, the greater economic output possible. Sounds about right, eh?