Introduction

Gaining a better understanding of how technology affects long-run growth and aggregate fluctuations is an enterprise that has never strayed far from the top of the growth economist's research agenda, yet technological change often remains modeled as incremental in nature, adding only a trend to standard growth models. Experience has shown, however, that such change can come in bursts, with flurries of innovative activity following the introduction of a new core technology. This observation has led economists to reserve the term “general-purpose technology” to describe fundamental advances that transform both household life and the ways in which firms conduct business. Looking back over the past two hundred years or so, steam, electricity, internal combustion, and IT seem to qualify as such core technologies. They have affected entire economies. Going back further, the very ability to communicate in writing and, later, to disseminate written information via the printed page also seem to fit well into the notion of a GPT.

The idea that GPTs are somehow different from the more incremental refinements that occur in between their arrivals may be an appealing way to organize thinking about long-run economic fluctuations, but requires establishing some objective criteria for determining just what features a technology must possess to qualify as a GPT as opposed to a more run-of-the-mill invention. This chapter adds some quantitative rigor to the identification of GPTs by looking at two candidates, electrification and IT, using criteria that have been suggested in recent research on the subject.