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Will technological improvements themselves run into diminishing returns over time? That is, will it become continually harder and more costly to discover new technological improvements? Perhaps someday, but, at least over the last two centuries since the Industrial Revolution, improvements in technology have not run into diminishing marginal returns. Modern inventions, like the Internet or discoveries in genetics or materials science, do not seem to provide smaller gains to output than earlier inventions like the steam engine or the railroad. One reason that technological ideas do not seem to run into diminishing returns is that the ideas of new technology can often be widely applied at a marginal cost that is very low or even zero. A specific additional machine, or an additional year of education, must be used by a specific worker or group of workers. A new technology or invention can be used by many workers across the economy at very low marginal cost.

The argument that it is easier for a low-income country to copy and adapt existing technology than it is for a high-income country to invent new technology is not necessarily true, either. When it comes to adapting and using new technology, a society’s performance is not necessarily guaranteed, but is the result of whether the economic, educational, and public policy institutions of the country are supportive. In theory, perhaps, low-income countries have many opportunities to copy and adapt technology, but if they lack the appropriate supportive economic infrastructure and institutions, the theoretical possibility that backwardness might have certain advantages is of little practical relevance.

Visit this website to read more about economic growth in India.

The slowness of convergence

Although economic convergence between the high-income countries and the rest of the world seems possible and even likely, it will proceed slowly. Consider, for example, a country that starts off with a GDP per capita of $40,000, which would roughly represent a typical high-income country today, and another country that starts out at $4,000, which is roughly the level in low-income but not impoverished countries like Indonesia, Guatemala, or Egypt. Say that the rich country chugs along at a 2% annual growth rate of GDP per capita, while the poorer country grows at the aggressive rate of 7% per year. After 30 years, GDP per capita in the rich country will be $72,450 (that is, $40,000 (1 + 0.02) 30 ) while in the poor country it will be $30,450 (that is, $4,000 (1 + 0.07) 30 ). Convergence has occurred; the rich country used to be 10 times as wealthy as the poor one, and now it is only about 2.4 times as wealthy. Even after 30 consecutive years of very rapid growth, however, people in the low-income country are still likely to feel quite poor compared to people in the rich country. Moreover, as the poor country catches up, its opportunities for catch-up growth are reduced, and its growth rate may slow down somewhat.

The slowness of convergence illustrates again that small differences in annual rates of economic growth become huge differences over time. The high-income countries have been building up their advantage in standard of living over decades—more than a century in some cases. Even in an optimistic scenario, it will take decades for the low-income countries of the world to catch up significantly.

Calories and economic growth

The story of modern economic growth can be told by looking at calorie consumption over time. The dramatic rise in incomes allowed the average person to eat better and consume more calories. How did these incomes increase? The neoclassical growth consensus uses the aggregate production function    to suggest that the period of modern economic growth came about because of increases in inputs such as technology and physical and human capital. Also important was the way in which technological progress combined with physical and human capital deepening to create growth and convergence. The issue of distribution of income notwithstanding, it is clear that the average worker can afford more calories in 2014 than in 1875.

Aside from increases in income, there is another reason why the average person can afford more food. Modern agriculture has allowed many countries to produce more food than they need. Despite having more than enough food, however, many governments and multilateral agencies have not solved the food distribution problem. In fact, food shortages, famine, or general food insecurity are caused more often by the failure of government macroeconomic policy, according to the Nobel Prize-winning economist Amartya Sen. Sen has conducted extensive research into issues of inequality, poverty, and the role of government in improving standards of living. Macroeconomic policies that strive toward stable inflation, full employment, education of women, and preservation of property rights are more likely to eliminate starvation and provide for a more even distribution of food.

Because we have more food per capita, global food prices have decreased since 1875. The prices of some foods, however, have decreased more than the prices of others. For example, researchers from the University of Washington have shown that in the United States, calories from zucchini and lettuce are 100 times more expensive than calories from oil, butter, and sugar. Research from countries like India, China, and the United States suggests that as incomes rise, individuals want more calories from fats and protein and fewer from carbohydrates. This has very interesting implications for global food production, obesity, and environmental consequences. Affluent urban India has an obesity problem much like many parts of the United States. The forces of convergence are at work.

Key concepts and summary

When countries with lower levels of GDP per capita catch up to countries with higher levels of GDP per capita, the process is called convergence. Convergence can occur even when both high- and low-income countries increase investment in physical and human capital with the objective of growing GDP. This is because the impact of new investment in physical and human capital on a low-income country may result in huge gains as new skills or equipment are combined with the labor force. In higher-income countries, however, a level of investment equal to that of the low income country is not likely to have as big an impact, because the more developed country most likely has high levels of capital investment. Therefore, the marginal gain from this additional investment tends to be successively less and less. Higher income countries are more likely to have diminishing returns to their investments and must continually invent new technologies; this allows lower-income economies to have a chance for convergent growth. However, many high-income economies have developed economic and political institutions that provide a healthy economic climate for an ongoing stream of technological innovations. Continuous technological innovation can counterbalance diminishing returns to investments in human and physical capital.

References

Central Intelligence Agency. “The World Factbook: Country Comparison: GDP–Real Growth Rate.” https://www.cia.gov/library/publications/the-world-factbook/rankorder/2003rank.html.

Sen, Amartya. “Hunger in the Contemporary World (Discussion Paper DEDPS/8).” The Suntory Centre: London School of Economics and Political Science . Last modified November 1997. http://sticerd.lse.ac.uk/dps/de/dedps8.pdf.

Questions & Answers

how to know photocatalytic properties of tio2 nanoparticles...what to do now
Akash Reply
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Maciej
Do somebody tell me a best nano engineering book for beginners?
s. Reply
what is fullerene does it is used to make bukky balls
Devang Reply
are you nano engineer ?
s.
fullerene is a bucky ball aka Carbon 60 molecule. It was name by the architect Fuller. He design the geodesic dome. it resembles a soccer ball.
Tarell
what is the actual application of fullerenes nowadays?
Damian
That is a great question Damian. best way to answer that question is to Google it. there are hundreds of applications for buck minister fullerenes, from medical to aerospace. you can also find plenty of research papers that will give you great detail on the potential applications of fullerenes.
Tarell
what is the Synthesis, properties,and applications of carbon nano chemistry
Abhijith Reply
Mostly, they use nano carbon for electronics and for materials to be strengthened.
Virgil
is Bucky paper clear?
CYNTHIA
so some one know about replacing silicon atom with phosphorous in semiconductors device?
s. Reply
Yeah, it is a pain to say the least. You basically have to heat the substarte up to around 1000 degrees celcius then pass phosphene gas over top of it, which is explosive and toxic by the way, under very low pressure.
Harper
Do you know which machine is used to that process?
s.
how to fabricate graphene ink ?
SUYASH Reply
for screen printed electrodes ?
SUYASH
What is lattice structure?
s. Reply
of graphene you mean?
Ebrahim
or in general
Ebrahim
in general
s.
Graphene has a hexagonal structure
tahir
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Cied
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Sanket Reply
what's the easiest and fastest way to the synthesize AgNP?
Damian Reply
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Cied
types of nano material
abeetha Reply
I start with an easy one. carbon nanotubes woven into a long filament like a string
Porter
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Porter
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Yasmin
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AMJAD
preparation of nanomaterial
Victor Reply
Yes, Nanotechnology has a very fast field of applications and their is always something new to do with it...
Himanshu Reply
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AMJAD
what is system testing
AMJAD
what is the application of nanotechnology?
Stotaw
In this morden time nanotechnology used in many field . 1-Electronics-manufacturad IC ,RAM,MRAM,solar panel etc 2-Helth and Medical-Nanomedicine,Drug Dilivery for cancer treatment etc 3- Atomobile -MEMS, Coating on car etc. and may other field for details you can check at Google
Azam
anybody can imagine what will be happen after 100 years from now in nano tech world
Prasenjit
after 100 year this will be not nanotechnology maybe this technology name will be change . maybe aftet 100 year . we work on electron lable practically about its properties and behaviour by the different instruments
Azam
name doesn't matter , whatever it will be change... I'm taking about effect on circumstances of the microscopic world
Prasenjit
how hard could it be to apply nanotechnology against viral infections such HIV or Ebola?
Damian
silver nanoparticles could handle the job?
Damian
not now but maybe in future only AgNP maybe any other nanomaterials
Azam
Hello
Uday
I'm interested in Nanotube
Uday
this technology will not going on for the long time , so I'm thinking about femtotechnology 10^-15
Prasenjit
can nanotechnology change the direction of the face of the world
Prasenjit Reply
how did you get the value of 2000N.What calculations are needed to arrive at it
Smarajit Reply
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Equilibrium price is a stable price and it must stay.discuss
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Card 14 / 21: What are the similarities between a consumer’s budget constraint and society’s production possibilities frontier, not just graphically but analytically?
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Source:  OpenStax, Principles of macroeconomics for ap® courses. OpenStax CNX. Aug 24, 2015 Download for free at http://legacy.cnx.org/content/col11864/1.2
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