Technology · One result of technology's nonphysical nature is that although conventional factors of production are ri in their use, technology is nonrival. If a piece of physical capital such as a hammer is being used by one person, it cannot be used by another. Similarly, a piece of human capital such as an engineer's technica training can be used in only one productive task at a time. Exactly the opposite is true of technology. O person's use of a piece of technology in no way prevents others from using it just as effectively · Excludability is the degree to which an owner of something (such as a good or an input into production can prevent others from using it without permission. Physical capital has a high degree of excludability. Because physical capital is a piece of property, its owner can easily prevent other people from using it. . because its use is excludable, the owner of a piece of physical capital is able to earn a return by chargin other people for its use. By contrast, ideas are often nonexcludable-their very nature makes it hard to prevent someone else from using them. Often, because of nonexcludability, the person who has create new technology will not reap most of the benefits from its creation. This fact diminishes the incentives creating technology . The average US tech. growth rate between 1975-2009: 0.54% . Suppose all of this growth in A is because of technology (T) . Also suppose that India is G years behind US technologically o T2009,India = T2009-G,US o g is the growth rate of technology in the US O T2009,India = T2009-G,us× (1 + g )G o Rearranging it: 1 2009, India = (1+g)-G T 2009, US . We can write the productivity equation separately for the US and India at 2009 o A1 = TIx EI o Au = Tux Eu o Dividing the first by second o A1 _TIE Au TU EU Types of Inefficiency 1. Unproductive activities 2. Idle resources 3. Misallocation of factors among sectors 4. Misallocation of factors among firms 5. Technology blocking Unproductive activities · Resources diverted from productive to unproductive activities . It can be rational from an individual point of view (Illegal activity such as burglary) o people can earn more themselves by engaging in unproductive activities o such activities requires further non-productive spending o ex: hiring guards or installing alarm system o other ex: Arms industry or Narcos! . Rent seeking activities: payment to a factor of production is in excess of what is required to elicit the supply of that factor · Import quotas: domestic price goes higher than world price Idle Resources
. Labour: inefficiency includes both unemployment and underemployment · Capital: a factory running under capacity or not running at all · Roosvelt (1939-Great Recession): "idle man and idle capital" · Same as unproductive activities, underemployment: redistribution of resources rather production of m output Misallocation of factors among sectors Units of output . Misallocation: resources are