Source: UPenn library, Apr 1988
In the late 1950s Solow formulated a theory of economic growth that emphasized the importance of technology. He stated that technology-broadly defined as the application of new knowledge to the production process-is chiefly responsible for expanding an economy over the long term, even more so than increases in capital or labor. And since basic and applied research is often the prelude to the birth of new technologies, the work of researchers has increasingly been perceived to have economic-not merely intellectual and cultural-significance.
But most remarkable, and startling even to the discoverer, was the finding, reported in the 1957 article (’‘Technical change and the aggregate production function’ ‘), that seven-eighths of the doubling in gross output per hour of work in the US economy between 1909 and 1949 was due to’ ‘technical change in the broadest sense” (which includes improvements in education of the labor force). Only one-eighth was due to increased injections of capital.
Karl-Goran Maler, Stockholm School of Economics, Sweden, a member of the Nobel committee, noted, ‘‘Solow showed us that in the long run it is not increase in quantity that is important. It is the increase in quality through better technology and increased efficiency.