Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment


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Structural Economics: Measuring Change in Technology, Lifestyles and the Environment

People live in households, and households are grouped in communities. Perhaps the most important reason for elaborating the treatment of households within structural economics is to facilitate an analysis of the transformative capability of ordinary people as part of the communities and social contexts in which they live and act.

A necessary step in this direction is to create the framework for such analysis. My objective is to develop a framework suitable for representing lifestyle options. Then it will be possible to build alternative scenarios about different lifestyle options for different categories of households. This kind of analysis could prove as useful to the decision-making processes of households and larger social organizations, namely communities, as the extensive specialized and popular literatures about technological options are to corporate decision makers.

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In a more general way, an understanding of the implications of such changes in lifestyles is important for corporations selling goods and services, government agencies providing services and collecting taxes, and citizens concerned about the overall quality of life in their society.

Both kinds of situations would be well served by a 26 Structural Economics common conceptual framework that does not now exist, one that starts with an appropriate classification of households in a given place and time and a description of the lifestyle of each kind of household.

An example category in the United States would be the household of an individual over seventy-five years old, retired from a professional job and living alone in an urban area. This category is probably too small to be of interest in Indonesia. There a relevant category might be a rural household of four adults and four or more children, in which one adult is a paid government employee and the others are unpaid agricultural workers. The most important contribution of economics to sustainable development is the provision of a system-wide framework that is suitable for comparing the implications of alternative future courses of action.

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Economists may simplify the determination of what should be measured, how it is measured, and the relations assumed in mathematical equations; but because they are able to come to conclusions that are concise and concrete, they can hope to provide a basis for action.

Geertz , but that eludes mathematical representation. They also have an understanding of households, lifestyles, and the social fabric that so far has been absent from the largely formalistic work of economists in the area called household economics. It would obviously be of great value to integrate empirical content from the other social sciences with what could be called the systems approach of economics.

This has, of course, been tried but without resounding success as yet. Structural economics provides a conceptual framework that captures the fundamental interrelationships among the economic, social, and environmental aspects of making a living in a particular society. It is issue-oriented in that the development scenarios to be analyzed provide the driving force behind it. Structural models rely on national accounting systems for input—output tables, which are now systematically collected in most countries on a periodic basis.

They also use two sets of related data that national statistical offices around the world are beginning to compile: natural resource accounts and social accounting matrices. Origins and Objectives 27 The social accounting matrix is a generalization of the input—output table that includes additional detail about the income generated for institutions by the factors of production. Different categories of households among the institutions and of labor among the factors of production are distinguished.

For each household category, a social accounting matrix describes its consumption of goods and services and its provision of labor to the different sectors of the economy. Principles for classifying households in social accounting matrices have not yet been adequately developed, and analysis of households has focused exclusively on the distribution of income. Structural economics will require case studies that draw on all the social sciences to identify a basic set of household categories for a particular society and describe the dominant lifestyles of those households.

Such a description will provide an anchor for alternative scenarios about changes in lifestyle.

I attempt in the following chapters of this book to take first steps in a few new directions. I start and remain within the framework of structural economics, extended here from a framework for studying technological change to one that also includes a more adequate treatment of households and their activities. The process involves interplay among several strands.

A conceptual framework represents the activities of different kinds of households and their relations to various economic activities. The data are collected to describe household lifestyles. An analytic framework is developed for the mathematical analysis of these data. Finally, scenarios describe the kinds of lifestyle changes that could be analyzed. In each of these areas structural economics already provides an operational starting point. NOTES 1.

In a more detailed representation with dozens of sectors, this. Brundtland, prime minister of Norway, chaired the commission. Chapter 2 The Analysis of Technological Change Humans, unlike any other forms of life, have devised techniques for evading the confines of the local environment and inhabit the globe as if it were a single ecosystem Eldredge This problematic achievement has convinced prominent life scientists that, for the first time, social decisions are as important as biological evolution in influencing the future prospects for life on Earth. Technology is the fundamental determinant of the impact human society has on its environment.

The Industrial Revolution launched an era of remarkable progress in focusing human ingenuity on the practical objectives of generating, storing, and transmitting energy and on extracting and transforming metals and other minerals. Since then we have come to expect increasing material comfort in everyday life and the endless technological innovation that makes it possible.

The global networks of extremely mobile researchers, businesspeople, and financiers have assured relatively rapid international access to the ideas behind new technologies, independent of where they were developed. While economics is about what is produced and consumed in a society and how those activities are carried out, structural economics goes a step further to provide a distinctive framework for describing production activities in terms of specific technologies and the 29 30 Structural Economics inputs and outputs associated with each.

The power of the approach is achieved through the structure provided by industrial classification schemes and a systematic way of representing inputs and outputs associated with the technologies in use in each industry. The need for different categories of laborers, from cement mixers to automobile mechanics, can also be determined and linked to the wages they earn and the goods and services consumed in their households.

The energy and material requirements and the various wastes associated with production can also be quantified. Input—output economics is focused especially on production technologies and changes in technology. It is a systems approach for describing technology and studying its effects. Wassily Leontief demonstrated its power in several important empirical studies carried out while he was at Harvard. In the late s he founded the Institute for Economic Analysis at New York University and initiated a new set of studies to explore concerns that he had had for many decades.

Leontief worried that technological change in the late twentieth century, mainly computer-based automation, would erode the material well-being of large numbers of people who depend on their wages by making it possible to produce more with far less labor. If empirical analysis confirmed this outcome, he was interested in investigating corporate and government policies that might promote, for example, worker ownership plans, so as to at least partially decouple income from labor.

However, when the results of our analyses suggested that technological change alone would not displace labor at alarming rates, the focus of the inquiry began to shift.

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I personally became increasingly convinced that the environmental consequences of technological choices and technological change were as important as the direct social implications. A number of these empirical investigations are described later in this chapter.

First, scenario assumptions from four studies one on automation and three related to the environment are reported to demonstrate how data are developed for input—output case studies.

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Then selected empirical results are presented. They range from the well-known Leontief paradox established in the s about the role of labor in American imports and exports , through the research on automation in the s, to a sequence of studies in the s Chapter 2.

The Analysis of Technological Change 31 that examine the relationship between the choice of technology and environmental degradation. Industrial Classification Schemes Most technological choices are made in millions of individual business establishments when managers decide what to produce and how to produce it. Different establishments in the same industry may make somewhat different determinations even though they produce similar goods and services.

Within any society, however, there will in practice be only a limited number of ways to grow grain, to make steel, and to generate electricity. The systematic categorization of business establishments is indispensable for research and analysis in structural economics. The classification principles and associated codes that constitute the Standard Industrial Classification, or SIC, are widely used by businesses for reporting and analysis.

The United Nations Statistical Office has produced an International Standard Industrial Classification, and most countries adopt a more or less customized version of it, which provides more detail for the industries in which they are active and less for the others. There are strong common elements in the schemes used in different countries, but they are far from identical.

A moderately detailed version of the Standard Industrial Classification scheme used by the U. Department of Commerce is shown in appendix A. A more aggregated version, of nine major industrial sectors that are intended to cover all economic activities, is shown in table 2. These activities include two extractive sectors agriculture and mining , construction, manufacturing, and four service sectors. Both classifications have the important property of providing a partition of business establishments: that is, every establishment is meant to be assignable to one, and only one, of these sectors.

Thus a farm falls under agriculture, and a steel factory under manufacturing. When the use of a partition is practical, as it is for categorizing business establishments, it offers advantages that no other classification principle can match. Each of these major categories is subdivided into increasingly finer classifications. The classification in the appendix table, which partitions all of the several million business establishments in the United States into fewer than a hundred categories, is at the level of detail most widely utilized in analysis.


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Individual establishments will sometimes disaggregate these codes even further in order to make fine distinctions among their inputs or their outputs. An analyst might choose to use the two-digit scheme for most sectors but include greater detail for a part of the economy of particular interest, say, chemicals. A study might be carried out at the four-digit level but report results aggregated to the much smaller number of one-digit categories. Ease of customizing the degree of detail, and of readily aggregating and disaggregating categories, is made possible by the multileveled structure built into the Standard Industrial Classification.

A slightly modified version of the two-digit classification is shown in appendix A.

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Structural Economics: Measuring Change In Technology, Lifestyles, And The Environment

This simple but powerful structure incorporates numerous assumptions that are consequently shared by independently conducted studies, assuring that their results will be substantially compatible. In April , after several years of preparations, a major change in industrial classifications was announced in the United States: the Standard Industrial Classification, created in the s and last modified in , would be replaced by the North American Industrial Classification System NAICS , which will be used for the first time in to present the results of the Economic Census for Based on a fresh assessment of economic structure rather than modification of an existing classification, the new system differs from earlier industrial classifications in several ways.

The categories are intended to describe equally well the structures of three different economies, those of Canada, the United States, and Mexico, while also being compatible up to a certain level of detail with the International Standard Industrial Classification of the United Nations. Chapter 2. The Analysis of Technological Change 33 The system explicitly distinguishes modern manufacturing industries that had not previously been identified, as well as an enormously expanded array of marketed services.

The NAICS expands the twenty two-digit sectors to six-digit codes describing some twelve hundred industries, compared to the approximately one thousand four-digit codes of the SIC. The intention of both numerical schemes is to achieve a logical structure that describes the current state of the economy while leaving room for modification and future expansion.

The new industries that will be added in the U. Paging is part of an entirely new, two-digit information sector. This sector 51 in tables 2. Likewise, arts, entertainment, and recreation 71 in table 2. A selection is shown in table 2. These include, for example, the reproduction of computer software and paging see table 2. While the new classification poses practical challenges for the analysis of changes from before to later years, it clearly facilitates a research focus on crucial areas of change, such as environmentally motivated technologies and the use and processing of information.

The Representation of Technology A number of different techniques can be used to produce the characteristic outputs of each industry. Grains can be grown on irrigated lands with substantial amounts of chemicals and mechanized equipment and relatively little labor. Alternatively, production of essentially the same output can be achieved using mainly human and animal labor. Nonetheless, the dominant technologies used to grow rice in the United States and in Indonesia, for example, do not overlap because of differences in culture and history, natural endowments, and industrial development.

Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment
Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment Structural Economics: Measuring Change in Technology, Lifestyles, and the Environment

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