Technical Change, Competition, and the Poor
Economists today conventionally assume that new technologies necessarily improve the lives of those who are willing to pay money to purchase the products or processes that embody them. The conclusion follows from their premises-given "economic rationality" (defined as an informed and consistent focus on one's own self-interest) and a "free market" -new technologies by definition must improve the lives of those who pay money to adopt them. As to those who either refuse to buy or cannot afford these new technologies, it is presumed that they will remain at a position of satisfaction (degree of utility) equivalent to the status quo ante. But can we imagine or articulate another perspective? What about new technologies that are expensive to purchase and set up yet are relatively cheap to use once they are acquired and numerous people are using them? Translated into the jargon of economics, I wish to consider the case of technologies that feature high fixed costs, low marginal costs, and substantial "network externalities." One possible result is that a new technology, a more expensive one, can become dominant while simultaneously becoming a necessity for others who may have preferred the status quo ante. In such situations one possible outcome is that a new and more expensive technology can replace older ways of doing things, ways that also featured lower fixed and possibly lower average costs. A possible result is that the median person may be better off after the adoption and diffusion of the new technology (whether he or she is in fact so is an issue-that will not be addressed here), even as the cost of "subsistence" rises. In such a case poverty would be a more difficult condition to escape if, as I am supposing, access to the new technology in question is a condition for minimal economic and social participation in the larger society. Consider the case of the credit card. Not much more than twenty years ago, one could book a plane ticket or hotel room or rent a car by providing a cash deposit. With