Technology on its own is quite fascinating and has a great influence on human life. The very idea of innovation and something aiding you to do a certain task, a helping partner throughout the time you desire promotes the leisure aspect of society.
The barter system was a form of communication very well established centuries ago. The idea of an equivalent trade or a trade that is profitable to the traders has continued to serve as the backbone of all business deals. Technology has now become a “middle man” in these transactions.
We believe that technology itself was invented and created in order to establish a business. Without the motive to earn some sort of revenue or capital, innovation would have never been primed during the industrial revolution.
Profitability is a profound thought that drives people towards great standards.
Even with the development of newer technology, without proper communication and business motives, the technology goes to fail. A sense of market orientation is very much necessary to ensure the popularity of the product. Apple would not be Apple if it was not marketed and introduced properly to the general public.
This glimpse of the evolution of technology with respect to mankind proves as a small insight towards understanding the dependence of technology on business minds. It serves as an introduction to my future articles debating and discussing this interdependence. Do stay tuned!
HAS TECHNOLOGY LED TO AN ALTERNATE ECONOMY?
In the 21st century, technology drives economic growth and efficiency. Economics being a social science has begun utilizing the intricacy of science tools. It is used to exploit information, model human behavior and identify factors that drive economic change. Technological revolution has brought about massive changes to societal values and human behavior – which in return initiates the economic cycle.
What is economics?
Economics deals with the study of scarcity, choices and efficient resource allocation. This is done by understanding the production, consumption and interactions of goods and services. It is the study of how people behave and make decisions according to their needs and wants.
What is technology?
Many fields comprehend the concept of technology in different ways. Economics being the administrator to efficient allocation, perceives technology as any communication or networking device that influences inputs. Economics growth can be understood as a greater input value than an output. One key factor to achieve economic growth in the long run is through the use of technology. This can be understood further through the fundamental economic classifications: micro and macro economics.
TECHNOLOGY AT A MICRO-ECONOMIC PERSPECTIVE
Microeconomics is a branch that focuses on how individuals and firms make choices based on their needs and wants from a large variety of output. A fair example of this would be e-commerce and online retailing. The internet has brought consumers and producers from around the world closer together – allowing both sides to have a larger presence and target area. Consumers have more options, even from different countries and sellers while producers have a larger target audience/consumer base. The online retailing has led to firms reaching economies of scale as it has helped lower average cost of production by eliminating infrastructure and labor costs. Technology has also allowed small scaled businesses/individuals like farmers to be able to sell their products at a wider range of prices to help earn minimum living expenses.
EXPANSION OF KNOWLEDGE
Knowledge can be transmitted around the world in less than a second. Services have also revolutionized with the help of technology making it even easier to access for a lower price with a higher quality: achieving efficient allocation. Our ability to understand and learn from data has brought many insights to companies. Many firms have seen an increase in sales and revenue through online ATL and BTL promotions like TV advertisements and social media.
NEW FINANCIAL TRANSACTION METHODS
Financial services have also become much more effortless to take action with. Net banking and UPI systems have allowed firms to see a profitable cash flow and revenue – leading to economic growth. Technological innovation has also allowed multiple forms of money investment: through stocks, bitcoin(digital currency) and capital through apps and softwares.
LABOR AND CAPITAL
With the help of Artificial intelligence(algorithms that can learn and identify patterns from data), scientists began training computers to manage large pools of data leading to a more efficient production process and lower average costs. Technology also opened up new investment opportunities into human capital through online education tools, translators, videos, etc.
Technology indeed is forming an alternate virtual economy. An economy where transactions and human behaviors are extremely influenced by algorithms and high level machine learning. The current pool of data is does not restrict machine learning’s capabilities. This allows it to predict future values with a high degree of accuracy – a very important piece of information for an economist. With the help of this knowledge, future recessions, inflations and economic behavior can be foreseen and anticipated.
The 2020 shut down brought economic predictions and models to the spotlight. Consumer needs and wants were constantly fluctuating during the pandemic – making it difficult to create an accurate forecast. Most economists expect to see a GDP recovery in the second half of 2020, but it was inaccurate. Through research it was understood that the economic models should also consider consumer sentiment and confidence. Economists were only able to achieve this with the help of vast networking and social media marketing. It helped them understand actual consumer behavior and attitudes: allowing them to create a more accurate model that functioned successfully.
A macroeconomic perspective can help understand the negative impacts artificial development has had on a large scale.
TECHNOLOGY AT A MACRO-ECONOMIC PERSPECTIVE
For individuals and small societies, the adoption of technology can be a clear advantage, however it also has several opportunity costs that are sacrificed for its use. One key negative externality is the large scale pollution that arises from the manufacturing of each and every piece of technology.
The new invention also results in AI taking over human labor and costing the jobs of multiple workers. An industrial machine does not require a human to govern it: leaving even uneducated workers unable to afford education and work.
INEQUALITY AND INEQUITY
Technology is a rather new invention that constantly changes based on the scenario. With its spread, human labor has become less important and is being replaced by high tech machines – leading to income inequality. An economy where more jobs are being lost than are being replenished is a symbol of a growth recession. When the world is unable to cope up with the progressing technology, lack of investment and human capital leads to income inequality and inequity.
At a small scale, technology looks helpful to humans. On a holistic view it is destroying basic human capabilities and can lead to a large economic recession or recovery.
Why is technology a key factor of economic growth? Technological advances allow for efficient production of larger amounts and better quality goods and services. However, its replacement is compromising on human capital which can lead to unsustainable change and a deteriorating economy.
Human capital has created technology, in return, technology is taking a toll on human capital. Similarly science fiction stories of machines taking over the world are slowly becoming a reality. Can economic models predict the future of technology? Will it take over the world?