Chapter08

Chapter08 - Chapter 8 Technological Change and Pollution...

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Chapter 8 Technological Change and Pollution Control Contents: Production Function and Technology Research Adoption of Innovations Adoption Choices of Conservation Technology Costs to Adoption Pollution Tax Considerations Second Best Policies Production Function and Technology In many situations, especially when aggregate behavior is analyzed, it is useful to model technological opportunities by continuous well-behaved production functions such as Y = AK α L β (Y =output, K =capital, L =labor) . A more detailed analysis of production systems recognizes that they consist of distinct technologies that may be embodied in specific capital goods (or may be associated with distinct management strategies). In the short run, production coefficients (input-output relationships) may not differ very much. A significant change in production coefficients may require adoption of a new technology. For example, one can distinguish between “gas guzzlers” and fuel-efficient cars and between mechanical (combine) and manual (sickle) harvesting. New technologies provide an important avenue to address environmental problems. Policy designs have emphasized solutions that lead to both adoption and innovation of new technologies.
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2 Figure 8.1 The Life Cycle of the Technology Research Innovations—new tasks to perform, new products, and new procedures—are elements of both technological and institutional change. Technological changes are innovations leading to changes in production technology, and institutional innovations
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3 are new organizational structures. Innovations in most cases are results of discoveries. Historically, practitioners made most discoveries, but in our century they increasingly become the results of research efforts. It is useful to distinguish between “basic” and “applied” research. Basic research aims to understand basic principles and applied research aims to discover and develop technologies. University research is more likely to concentrate on “basic” research, while industry research has a more applied emphasis. Some of the more important innovations that originated in university research were patented by university scientists and then refined by the industry. A process of “technology transfer” is responsible for commercialization of university research. Scientists have to make choices about their research direction, and how their choices affect the nature of the resulting technology and innovation. The “Induced Innovation Hypothesis” argues that the nature of innovation and new technology reflects economic conditions or inventions as an economic activity. One byproduct of environmental regulation is investment in research aimed to reduce pollution. Concerns about the environmental side effects of pesticides propelled companies to invest in biotechnology and other technologies to replace harmful chemicals. Once substitutes are available, polluting-generating activities are more strictly regulated. The energy crises of the 1970s led to the development of alternative energy industries and research on solar power and energy-saving devices.
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Chapter08 - Chapter 8 Technological Change and Pollution...

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