[Balabala]

If technological progress is assumed to be capital augmenting, then does it follow that the marginal productivity of capital increases and thus the rate of return on capital also increases?

(Or when piketty etc talk about the rate of return of capital they don't mean the production function input?).
I guess the return on capital and capital share of income can increase even if we assume tech change is labour augmenting?

[Curlyben]

What do YOU think ?
While we're happy to HELP we wont do all the work for you.
Show us what you have done and where you are having problems..

[Balabala]

These questions are my own so I assume they are all true.
Capital augmenting increases mpk yes. Rate of return on capital (yes but
I am trying to make the argument that the impact on growth is different depending on whether tech progress is labour or capital augmenting , but it seems most of the theory assumes it's labour (note question in title as well.. The answer is it simplifies the model).

Does all tech progress increase the rate of return of capital (I assume it must do for this solow assumption to hold)

To make my point I could do with a clear example of capital augmenting tech progress.

[talaniman]

If you mean the capital investment in research and development to develop a product that returns profit, then you must also factor in the effort of the competition as a driving factor. Or eliminating the competition to be more accurate. I think the evolution of the car would give you a good model to base an argument on as the price of energy has lead to lighter more fuel efficient cars that competed with the American heavier car model, and the infrastructure support that came with it.

Analyzing the costs of energy delivery (utility companies for example) and the constant equipment upgrading for efficiency (and regulation) and profits not to mention just the ordinary related maintenance costs, gives you a very complex multi layered process to examine.

They all go into the cost benefit analysis that is necessary to minimize risk, and maximize profit.

Here is a thought though, the TRANSFERENCE of labor cost to technical investment. A machine that replaces a hundred people may be costly initially, but for the long term, cheaper those lazy humans who want MO' MONEY.

Solow won a prize for that thinking.

[Balabala]

I'm most interested in the impact on labour (or the whole economy) rather than the firm level. For the car example, the innovation is increased fuel efficiency. So an improvement to the machinery in the production process caused this? Is this capital augmenting or labour augmenting? I'm struggling to see how anything can be just capital augmenting? It needs to be something that improves capital but doesn't replace workers or improve their productivity. Am I just missing obvious examples of this?

Has it actually increased productivity at the firm level? Economy wide productivity I proves if cars are more efficient of course.

[Balabala]

I'm most interested in the impact on labour (or the whole economy) rather than the firm level. For the car example, the innovation is increased fuel efficiency. So an improvement to the machinery in the production process caused this? Is this capital augmenting or labour augmenting? I'm struggling to see how anything can be just capital augmenting? It needs to be something that improves capital but doesn't replace workers or improve their productivity. Am I just missing obvious examples of this?

Has it actually increased productivity at the firm level? Economy wide productivity I proves if cars are more efficient of course.

Or if it replaces workers does it count as what acemoglu calls skills replacing, and tech progress that augment labour is skills biased potentially.

If you replace a factory of workers with a factory or robots, you still need a worker to stick around to make sure the robots work. Has his productivity not gone way up since the time he was a human doing the job a robot now does (ie is this not ultimately labour augmenting)

[talaniman]

We are talking Solow, and NOT Keynes, aren't we?

[Balabala]

I'm not talking about anything in particular. I could really do with a solid example of capital augmenting that is not also labour augmenting in anyway

[talaniman]

If you replace a factory of workers with a factory or robots, you still need a worker to stick around to make sure the robots work. Has his productivity not gone way up since the time he was a human doing the job a robot now does (ie is this not ultimately labour augmenting)

Ask the worker who gets replaced, and displaced by a robot. You think he feels augmented? There are many examples of this that are solid enough to make your case. Maybe the guys that are left are augmented and have more technical skills, but the fact is there are fewer of them right?

What does that do to your assumption that technology augments labor?

[paraclete]

You example is good Tal but labour is augmented by technology even if it is ultimately abolished. Capital is augmented when it takes less capital to produce a given result such as a higher production rate