*

That technological progress results from the introduction of new or previously unused knowledge into the production process;

*

That there are many mechanisms by which knowledge is productively applied, including: Improved worker skills, improved machine design, improved management techniques, and so on.

Measuring the effect of technological progress--so defined--during the 1949 through 1968 time period, we found that:

* The technology added to the nation's production recipe after 1949 accounted for 40 percent of the real increase in private, non-farm output during the period.

* Cumulatively, total output for the period was about $8.2 trillion. If there had been no increase in the level of technology used after 1949, the stock of labor and capital applied would have only yielded a cumulative output of $6.9 trillion. Thus, the leverage on the other two factors of production by technological progress permitted almost 20 percent more output than might otherwise have been achieved with the same quantity of labor and capital.

* Throughout the period the technology factor in the production function increased at a compound rate of 1.7 percent per year. By the end of the period--in 1968--the compounding growth of technology had reached a point at which technological improvements beyond 1949 levels were accounting for 37 percent of output (Figure 1).

Although it is possible to dissent on certain grounds about the exact amount of productivity gains due to technology, the major conclusion is clear. Without the increase of technology and its introduction into the production recipe, this nation would be substantially less wealthy than it is. Much of the economic wherewithal we are now attempting to apply toward the solution of pressing domestic problems is the product of applied technological progress. To expand this economic capacity for problem resolution, this nation must continue to allocate resources to enterprises which generate technological progress and encourage its productive utilization.

This brings us to the second set of findings--those related to the sources or determinants of technological progress. The theoretical and empirical foundation for these assessments is less definitive than for the preceding findings. However, there is general agreement on a list of forces important in the generation of technological progress. The forces are highly interactive but, for analytical reasons, were treated independently. Our findings indicated that most of these forces were of insignificant effect during the relatively short time period under study.

However, three factors--the sex mix of the workforce, education, and R&D-were found to be important determinants of economic gains through technological progress during the Post-World War II period. The first, sex mix, is the product of increasing participation by females in the workforce and increasing productivity by distaff employees. Improvements in this factor during the period accounted for 4 percent of the total gains due to technology. Improved worker productivity through higher educational levels contributed approximately 36 percent. The balance of the technology-induced gain--60 percent--was attributed to R&D after having ascertained that other possible determinants had no measurable or identifiable impact.

The relationship between R&D- and technology-induced economic gains was explored on a distributed-lag basis. Lag distributions between R&D expenditures and initial pay-back and final pay-out in the form of national economic gains were constructed from industry estimates and experience, but when subjected to statistical tests the relationships exhibited reasonably good explanatory power. The findings were that:

On the average--each dollar spent on R&D returns slightly over seven dollars in technologically induced economic gains over an 18-year period following the expenditure.

This finding leads to the strong conclusion that, on the average (including good, bad, and indifferent projects), R&D expenditures have been

an excellent national investment.

The final set of findings relates to the economic impact--via technological progress--of NASA's R&D programs. Assuming that NASA's R&D expenditures had the same pay-off as the average, we found that:

The $25 billion, in 1958 dollars, spent on civilian space R&D during the 1959-1969 period has returned $52 billion through 1970 and will continue to produce pay-off through 1987, at which time the total pay-off will have been $181 billion (Table 1). The discounted rate of return for this invest-. ment will have been 33 percent.

This

As noted, the preceding finding was based on the assumption that NASA R&D spending has an average pay-off effect; there is strong preliminary evidence that the exacting demands of the space program may produce greater than average economic effects due to increased technological leverage. comes about because NASA allocates its R&D dollar to the more technologically intensive segments of the industrial sector of the economy. The weighted average technological index (At) of the industries which perform research for NASA is 2.1, while the multiplier for all manufacturing is 1.4. Although there are a number of conceptual and procedural limitations to the construction of industry-level technological multipliers, the spread seems large enough to support the view that highly technological undertakings, such as the space program, do exert disproportionate weight toward increased national productivity.

PART II

CASE STUDY: TECHNOLOGICAL PROGRESS AND COMMERCIALIZATION OF
COMMUNICATIONS SATELLITES

The process whereby technology is developed and applied in the economic realm includes one of the most complex sets of interactions encountered in today's world. Three elements must be present before new technology is applied: the technology itself must be in existence, there must be a need for the technology, and some organization or combination of organizations must be willing to undertake the risk and investment necessary to bring the technology to the market. In addition, technological progress is a continuous process with no discrete beginning or ends. It is composed of a few major and countless small incremental advances which are constantly being combined and recombined in a bewildering array of ways to satisfy public and private demand. Technology also follows a variety of paths--direct and indirect--in its movement toward application. Only rarely is the application of a technological advance confined to the use for which it was originally developed. The speed and direction of early and subsequent applications is largely conditioned by the mix of participants--public and private--and the roles each adopts in the process. The evolution of needs into viable markets and the structural characteristics of relevant industrial sectors are also important in the pace of technology's application; as a consequence, multiple relationships among consumers, industry and government are inherent in the process.

In short, the technology application process, by which the economic effects measured in Part I come about, almost defies an organized, comprehensive treatment. But, some appreciation of the application process and its complexity is necessary if we are to insure a continuing flow of economic benefits from technological progress and avoid the widely discussed penalties of such progress. Faced with this situation the present researchers chose to undertake a case study of a significant technological endeavor, the intent being to illustrate--with specific examples--significant facets of the process, something of its pervasiveness, the kinds of contributions a national R&D agency, like NASA, makes to the process, and the several types of economic applications which flow from or are accelerated by such a technological undertaking.

Since communication via satellite is clearly an example of technological progress made during the last decade and a half, an examination of the R&D effort culminating in this commercial application was selected for case study. In addition, communication via satellite is the first major direct commercialization of technology to result from the national space program.