Scientific and technological effort as measured by the main resources of scientists and technologists is regarded as an essential
factor in technological efficiency. Their contribution to industrial
production may be specified as three separate functions: research and
development, on- the -shop -floor and scientific management. There is an
obvious difference in the nature of activity as well as in the length
of time during which each type of scientific effort is likely to pay off.
It seems thus necessary to distinguish between scientific efforts directed
at current productive activities and those devoted to investment in future
From statistical point of view errors of omission in the specification
of the production function are likely to result from ignoring the introduction of essential factors such as scientific effort as an explicit
factor of production. Ignoring the correction for an incomplete adjustment
of the studied units to the prevailing phrase of the trade cycle is treated
as an omission error on the grounds that the technical efficiency of all
factors rather than the performance of capital alone is the one most
likely to be affected by variations in the level of activity. Moreover,
errors of specification in the measurement of the input factors
result from ignoring the heterogeneity of capital and labour. These
errors of specification are likely to impart serious statistical bias in
the estimated technological efficiency and in the estimated coefficients
of the production function. Furthermore, they are likely to lead to unsound policy recommendations (see Chapter V).
The attempt made in order to avoid these sources of specification
errors singularly and simultaneously provided, on the whole, consistent and
statistically significant results despite data limitations. An appreciable
part of the third factor of production or technical efficiency as estimated
by the traditionally specified production function is explained when an account is taken of the vintage of capital, the structure of capital
-viand the structure of labour, (Chapters VI, VII and IX). The results
of correcting for the degree of capacity utilization and of the explicit
introduction of: current, lagged and disaggregated scientific effort
seem to be consistent with the desirable property of reducing the bias
that is likely to result from errors of omission in the specification
of the production function. (see Chapters VIII, X, and XI).
The model is applied to a cross -section of inter -industry in 1962,
mainly on British and partly on Scottish manufacturing industries.
In order to carry out the present investigation a laborious attempt
has been made to implement existing British data on 23 manufacturing
industries. Net output has been interpolated between the years 1959 -
1962 inclusive. The Cambridge estimates of the Stock of all Fixed Assets,
Plant and Machinery and other structures were further disaggregated.
Modern and old layers of the vintage of: All Fixed Assets, Plant and
Machinery and other structures were estimated. for 1962. For Scottish
manufacturing industries an estimation has been carried out for Gross
Output, Net Output, Stock of All Fixed Assets, Plant and Machinery, and
other structures of capital for 23 industries in 1962, (see Chapter IV).