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Technological Change as Historical Process: The Case of the U.S. Pulp and Paper Industry, 1915–1940

Published online by Cambridge University Press:  03 March 2009

Avi J. Cohen
Avi J. Cohen
Affiliation:
The author is Assistant Professor in the Department ofEconomics at York University, Downsview, Ontario M3J 1P3, Canada.
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Abstract

Technological changes in the U.S. pulp and paper industry between 1915 and 1940 are chronicled, and three patterns—evolutionary bias, output-increasing innovation in response to technological disequilibria, and differences in the timing of innovations between the 1920s and 1930s—are identified and explained by means of a theoretical framework for induced innovation. The framework conceptualizes technological change as a means for growth-seeking firms to overcome barriers to accumulation and provides a general explanation of induced innovation that is situated in historical time.

Type
Articles
Information
The Journal of Economic History , Volume 44 , Issue 3 , September 1984 , pp. 775 - 799
Copyright
Copyright © The Economic History Association 1984

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References

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8 Three other aspects of the pattern of technological change in the industry—non-fourdrinier process innovations, the adaptation of the kraft pulping process for the utilization of southern U.S. pine, and product innovations—are not included here but are discussed in Cohen, A., “The Economic Determination of Technological Change,” chs. 4, 5. Other notable exclusions here are the Canadian pulp and paper industry and a discussion of the role of capital goods suppliers. By the twentieth century, pulp and paper was truly a North American industry and should ideally be discussed in that context. The chronicle of technological change covers all North American innovations. Most information on innovation originated from the Technical Association of the Pulp and Paper Industry (TAPPI). which did not distinguish between U.S. and Canadian advances. The TAPPI reports that appeared in the Paper Trade Journal usually were reproduced in the major Canadian trade journal, The Pulp and Paper Magazine of Canada. Only U.S. economic data are used to explain the pattern of innovation because of the frequent lack of comparable Canadian data and problems in combining data from two countries. The inclusion of Canadian economic data would not substantially alter the explanation, since the United States was by far the major market for industry output. Much of the innovative activity in the industry was performed by capital goods suppliers responding to the needs of pulp and paper firms. Implications of the role of capital goods suppliers are not analyzed since the discussion is limited to the focusing of innovative effort.Google Scholar For analysis of the role of capital goods suppliers see Rosenberg, N., “Technological Change in the Machine Tool Industry, 1840–1910,” in Perspectives;Google ScholarPeck, M. J., “Inventions in the Postwar American Aluminum Industry,” in The Rate and Direction of Inventive Activity, National Bureau of Economic Research (Princeton, 1962);Google ScholarBrown, W. H., “Innovations in the Machine Tool Industry,” Quarterly Journal of Economics, 71 (August 1957);CrossRefGoogle ScholarSchmookler, J., Invention and Economic Growth.Google Scholar

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29 For example, sectional electric drive could be installed on existing paper machines, as the following advertisement from Westinghouse boasts:Google Scholar“Sectional individual motor drive with automatic control … [makes] possible increased speed and production of 25–50 per cent on many existing machines.”Google ScholarPTJ (19 05 1921), p. 31,Google Scholarcited in Lorant, The Role of Capital-Improving Innovations, p. 136.Google Scholar

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42 See Mansfield, E., The Economics of Technological Change (New York, 1968), pp. 92–93.Google Scholar

43 As one industry scientist put it, a new innovation “needs to be adaptable to current hardware if it is to be used in existing plants because of the tremendous investments that have already been made in these facilities. If the new process does not fit present configurations, it must then be installed as a new mill—and this requires faith and audacity.” Strange, J. G., The Paper Industry: A Clinical Study (Appleton, Wisconsin, 1977), p. 77.Google Scholar

44 For independent estimates of increasing returns to scale cost functions see PTJ (20 February 1941), pp. 129–32,Google Scholarand Armstrong, G. R., “An Economic Study of New York's Pulp and Paper Industry,” monograph (Syracuse, 1968), p. 73. Scale economies also were produced by labor requirements, which were fixed by the size of the machinery and were relatively invariant to operating speed. One paper manufacturer wrote: “a machine running at three or four hundred feet per minute will require approximately the same amount of help in the machine room as a machine running eight hundred or a thousand feet per minute or over.”Google ScholarJerome, Mechanization, pp. 249–50. Unit labor costs decreased from about $34/ton for small mills (daily capacity of 10 tons or less) to $8/ton for the largest mills (over 200 tons daily capacity), American Paper and Pulp Association, Monthly Review (March/April/May/ 1935), p. 13.Google Scholar The importance of labor factors, however, should not be overestimated. Federal Trade Commission reports on 1915 newsprint and bookpaper mills found that direct labor costs constituted only 10.0 percent of total costs, cited in Clarke, P. J., “Monopoly and Competition in the American Paper Industry” (Ph.D. diss., Graduate School of Business Administration, New York University, 1941), pp. 65–66.Google Scholar

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51 U.S. Tariff Commission, Report on Wood Pulp, pp. 92, 94. Mills included in the data produced 93 percent of all U.S. wood pulp in 1934.Google Scholar

52 Whitney, “Paper,” p. 363.Google Scholar

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54 “A few experiments, to be sure, have been tried with the sulphite process, but these have led to somewhat negative results, on account of the excessive costs of using a commercial plant for experimental purposes. This is one reason why the paper trade up to the present has not done more along this line.” 60th Congress, 2nd Session, House of Representatives, Select Committee, Pulp and Paper Investigation Hearings, Doe. No. 1502 (Washington D. C., 1909), p. 1461. Also see Carter, C. F. and Williams, B. R., Industry and Technical Progress (New York, 1957), p. 232Google Scholar and Rauch, J., ed., The Kline Guide to the Paper and Pulp Industry (Fairfield, New Jersey, 1976), p. 52.Google Scholar

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70 Although Binswanger will not relinquish the technique of constrained optimization, which is not helpful for explaining innovative attempts to transcend constraints, he arrives at the period-by- period historical approach as the most fruitful for the analysis of technological change: “Equilibriurn growth models are unable to capture many important features of the development process precisely because of their orientation toward equilibrium states and because they take as given so many things that will change in the development process itself, such as market structures, infrastuctural equipment, technology, tastes, the structure of property rights, and many other institutions. Development should rather be viewed as an iterative adjustment process to disequilibria caused by the development and production process itself and by exogenous shocks and influences. A fruitful approach might be to view development as a sequence of periods. At the beginning of each period, technology, tastes, capital stocks, and institutions are given and can be taken as parameters that enter the optimization problems of the participants in the development process. Individuals and organizations then allocate resources to production, investment, technical change, and institutional change. In addition, exogenous shocks such as weather, developments in international markets, advances in basic and supporting sciences, and changes in ideas and tastes occur. Individual allocation decisions and exogenous shocks jointly determine production and consumption flows and changes in stocks, technology, institutions, and possibly, tastes. New disequilibria emerge. The next period's problem then starts with those newly created parameters, and a new round is initiated. In a way, this is a sort of dynamic programming model, except that individual actors have different objective functions. Such an approach lacks all the neatness of equilibrium growth models and will be extremely difficult to put into strict modeling frameworks. But thinking and looking at subproblems in these terms might allow us to learn more about development than we can learn from growth models.” Binswanger and Ruttan, Induced Innovation, pp. 157–58.Google Scholar

71 According to Schumpeter in “The Creative Response in Economic History,”, innovation, as an entrepreneurial or creative response, “can always be understood ex post; but it can practically never be understood ex ante; that is to say, it cannot be predicted by applying the ordinary rules of inference from the pre-existing facts. That is why the ‘how’ [of the mechanism through which it acts] must be investigated in each case (p. 150).” Schumpeter's “mechanism” that must be individually investigated is the focusing process of the theoretical framework—the interaction of firms attempting to overcome constraints on accumulation within the historically specific structure of production and demand. For a general discussion of the methodological significance of causal mechanisms in economic explanations see Cohen, A., “The Methodological Resolution of the Cambridge Controversies,” Journal of Post Keynesian Economics, 6 (Summer 1984).CrossRefGoogle Scholar