Production Factors and Technology

Abstract

The description of production processes in the previous chapter assumes that something can be made from something else and that there are tools for making things. Now we are going to look at the production process from the energy side, including the effect of basic production equipment, as a set of sophisticated devices allowing human beings to attract energy from natural sources to the production of commodities. We are introducing two sets of quantities which, in the macroeconomical approach, reflect the level of technology in the economy: (1) potential rates of growth of production factors $\tilde{\nu}$ and $\tilde{\eta}$ and (2) technological coefficients λ and ε, which show how much labour and substitutive work are needed to introduce a unit of investment in the production system. In this chapter, the first set of quantities will be considered as exogenous factors, whereas the second set is connected with internal characteristics of technology. Technological coefficients appear to be appropriate and convenient characteristics of technology instilled in an economy and can be easily estimated considering the performance of production equipment.