Implications for Induced Innovation
The implications of transactions costs and collective action for the induced-innovation model presented earlier are illustrated in Figure 11-3. Changes in the underlying resource base for the country as a whole might imply that the least-cost path of technical change would occur in the direction of arrow Z (i.e., a path that would use relatively abundant
labor and save relatively scarce land). Following path Z might be facilitated by the development of new labor-intensive, biologically-based technologies. However, if a few large-scale producers, due to the presence of transactions costs and collective action, were able to influence public officials so that technology I’0 were to be developed rather than I’ 1, then technical change might occur in the direction of arrow Y (perhaps through the development and adoption of capital-intensive, mechanically-based technologies) rather than arrow Z. Benefits to the large farmers would be maximized but overall economic efficiency gains might be reduced.