While technological change is an ongoing process, there are periods during which technological progress is especially rapid, resulting in new products and falling prices of existing products that have widespread uses in the rest of the economy. Such periods are generally identified with all-purpose technological revolutions. Earlier examples include textiles production and steam power in the industrial revolution, railroads in the nineteenth century, and electricity in the early twentieth century (the automobile could also be included, but its development was relatively gradual). The effects of such revolutions have generally occurred in three (often overlapping) main stages. First, technological change raises productivity growth in the innovating sector; second, falling prices encourage capital deepening; and, finally, there can be significant reorganization of production around the capital goods that embody the new technology.
The growth of the information technology sector (IT) in the 1980s was an important development for the economy, but it spurred relatively little policy or media interest. ...Show more