8.2 The Very Long Run: Changes in

Technology

In the long run, profit-maximizing firms faced with given technologies
choose the cost-minimizing mix of factors to produce their desired level
of output. Firms are therefore on, rather than above, their LRAC curves. In
the very long run, however, there are improvements in available
knowledge and resources. Such changes cause downward shifts in LRAC
curves.

The decrease in costs that can be achieved by choosing from among
available factors of production, known techniques, and alternative levels
of output is necessarily limited by the existing state of knowledge. In
contrast, improvements by invention and innovation are potentially
limitless.

Technological change refers to all changes in the available techniques
of production. There are countless examples, including the invention of
the assembly line, the development of robotics, the invention of fuel-
efficient jet engines, the creation of new medical and drug treatments, the
creation of the Internet, the development of wireless communication
devices, the invention of 3D printing, and the development of machine
learning and artificial intelligence. To measure the extent of technological
change, economists usually use the notion of productivity , defined as a

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