techniques, and as the dominant motor of the business cycle,that
is, as a factor of instability. The theory of Kalecki and others
who identify the business cycle with fluctuations in fixed
investment will not be impaired in this way.
3. As soon as the subject of technology is introduced some
unpleasant questions arise. How is technical progress to be
measured? Where is the frontier demarkation line to be drawn
between what is endogenous and what is exogenous, i.e. where, at
which stage of the metamorphosis from abstract idea to concrete
production process does technology enter the space of relations
which we choose to define as endogenous? The metamorphosis is
quite complicated: It starts in the field of pure science, basic
research, goes on to applied research,from there to development
from there to the actual commercial production by the pioneer-
innovator and ends with the diffusion of the method.
Of course economic factors are at work more or less all along of
this process and special studies may deal with all the stages in
greater or lesser depth. For macro-economic purposes and at the
present stage of our understanding of the process, however, it is
advisable that we should include only the last stages in a growth
model. That means that we should regard only the investment of the
innovator as endogenous and leave all the preceding stages
outside even though that means, for example, regarding R&D as
exogenous. If we choose this rather conservative and unambitious
approach we can define technical progress by reference to the
yearly sum of investments of an innovative character. All other
investments would be regarded as related to diffusion. The task of
deciding which investment is innovative and which not is thrown on
the specialists of technology assessment. Of course one can find
improvements of secundary importance in practically every
investment. The decision on what is minor and what not will to
some extent rest on judgement and common sense which does not mean
that it is arbitrary. The importance of a new process or product
will be judged by its consequences, that is, by the scope of
diffusion which again can be measured in terms of the volume of
investment. The question of measurement is in any case not new but
has to be answered by everybody who analyses empirically the
course of technological change. We shall take it,then, that as a
first approach we can regard the flow of innovative investments as
a measure of the impact of the ac t or technical
progress pfe maY^r^fSrire^tlfrs cTude concept if "Tt i^^5^s^r6Te^To^^
"“allocate the diffusion investment which has materialised in 'the
course of the years to the respective innovation which has called
it forth. The various innovative investments can then be given
their due weight corresponding to their importance in the total
development. The investment in the first motor car factory, for
example, will only in this wAy be given its due weight w^iich can
of course only be estab1ished\ex post.For innovations wh^ch are in
an early stage of development \he weight attributed to them will
have to be based on guesswork.
7W ^ ZZZ~4 Z 53? y~ ’
r4o ^ fCtZ,
lu4 u-U IU+ «p