From Arnold Kling's Askblog:
There are three types of innovations. The first are “empowering” innovations. These transform complicated, costly products that previously had been available only to a few people, into simpler, cheaper products available to many. The Ford Model T was an empowering innovation, as was the Sony transistor radio.
Empowering innovations create jobs for people who build, distribute, sell and service these products.
The second type are “sustaining” innovations. These replace old products with new. The Toyota Prius hybrid is marvelous — yet every time a customer buys a Prius, a Camry is not sold. Sustaining innovations replace yesterday’s products with today’s products. They keep our economy vibrant — and, in dollars, they account for the most innovation. But they have a zero-sum effect on jobs and capital. The third type are “efficiency” innovations. These reduce the cost of making and distributing existing products and services – like Toyota’s just-in-time manufacturing in carmaking and Geico in online insurance underwriting. Efficiency innovations almost always reduce the net number of jobs in an industry, allow the same amount of work (or more) to get done using fewer people.Pointer from James Pethokoukis.
Christensen says that you need a balance between “empowering innovations” and “efficiency innovations.” We have been getting mostly the latter, and that results in a net loss of jobs....MORE