Economic factors of production such as labour, information, equipment (capital) and energy are combined in different ways according to the activity "technology".
In broad terms technologies are often defined in terms of their "factor intensity" so labour-intensive signifies a process where most of the logic, manipulation and physical force is provided a person making use of relatively simple tools, as in the image above.
At the other end of the spectrum, capital-intensive technologies use automated logic, manipulation and physical force provided by a machine, as in the image on the right.
Innovation occurs as a continual process through subtle changes introduced to technique as a result of learning. Innovation is normally defined as a process whereby a new technological process is used for the first time in a location where it was not used before.
It is common for macroeconomic models to ignore, and therefore not quantify, the contribution of the first type of innovation based upon learning. However, the majority of medium to long term economic growth is based on learning. Macroeconomic models tend to apply more structured descriptions of technology in terms of quantified inputs and outputs as a basis for measuring the impact of "innovation".
In order to develop effective growth strategies and policies there is a need to manage two types of knowledge:
The most difficult type of knowledge to describe and quantify is tacit knowledge, however, effective macroeconomic growth strategies can only be based upon decision analysis models that apply knowledge engineering that combines tacit and explicit knowledge.
- Tacit knowledge - the capabilities gained from learning and embedded in individuals and teams
- Explicit knowledge - the determinant relationships between input and outputs using a specific technology
Economic PerformanceAn underlying factor in the satisfaction of the individual desires of members of the social constituency is the provision of goods and services in accord with such preferences by nature and the activities of people as individuals, groups, communities or enterprises.
In the broadest terms this factor is a complex ecosystem generally referred to as the economy. The performance of the economy in satisfying needs in a sustainable fashion is important in terms of satisfying the needs of the population through the provision of goods and services whose prices are within ranges that people can afford. This is particularly true in terms of the most basic necessities such as adequate food and water, prevention of disease, energy and shelter.
The Decision Analysis Initiative (DAI) is organized as an extension service. Extension is an activity of disseminating useful information and knowledge about:
so as to spread innovation and economic growth through geographic space.
Technology is the specific combination of resources, tools and devices used to undertake an activity such as producing an industrial product, handling documentation and constituency procedures, the automated processing of information or the production of a crop.
Technique is the way in which a given technology is used by a specific person or work group. Quite often people using the same technology can achieve different levels of performance as a direct result of differences in technique. The evolution in technique is a learning process whereby individuals adapt the way they work as they gain more practice (experience) in making using any given technique; technique is constantly evolving.
The Decision Analysis Initiative is an extension service, a proactive means of raising awareness, providing opportunities to assess the worth of technologies and techniques and to provide guidance in the most appropriate way to use them by those interested in adopting a new or improved practice.
The term innovation refers to the process of something being done for the first time in a given location (Mansfield, E., "The Economics of Technological Change", pp.99-100, W.W.Norton & Co., 1968.). In this context, extension has the role of spreading innovation through geographic space so that an increasing number of people apply new technologies and techniques and thereby stimulating a sustained rate of real economic growth. Extension systems have existed for many years in the agricultural sectors as a system to assist farmers take decisions in a complex environment. The approach is particularly relevant to the promotion of decision analysis for practical ends.
Achieving real economic growth
The Decision Analysis Initiative has foundation research groups in Economic Performance and Real Time Audit. The Economic Performance Task Force is concerned with the identification of the determinants of economic performance and is based upon the specification of macoeconomic models that reflect both theory and practice that facilitates the management of technology, technique, learning and innovation. This approach needs to accommodate micro-economic models that incorporate the optimised application of tacit and explicit knowledge.
Work by the Economic Performance Task Force provides guidance to the DAI extension strategies to ensure the relevance of topics to economic growth. It is of fundamental importance that macroeconomic policies do not introduce constraints on the rate of innovation and its geographic diffusion resulting in lower real economic growth. If the relationship between currency volumes and unit prices is imbalanced there will be transactional inflation and the purchasing power of the currency and therefore value of savings will fall (McNeill, H.W., "Planning & Managing Actions to Stimulate Agricultural Efficiency & National Economic Growth", in "Towards a Market-based Privatization Strategy for Hungarian Agriculture", pp. 40-48, Ministry of Agriculture, Budapest, 1993).
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