Abstract/Index

We study a simple model for the evolution of the cost (or more gen- erally the performance) of a technology or production process. The technology can be decomposed into n components, each of which interacts with a cluster of d 􀀀 1 other, dependent components. In- novation occurs through a series of trial-and-error events, each of which consists of randomly changing the cost of each component in a cluster, and accepting the changes only if the total cost of the entire cluster is lowered. We show that the relationship between the cost of the whole technology and the number of innovation at- tempts is asymptotically a power law, matching the functional form often observed for empirical data. The exponent of the power law depends on the intrinsic diculty of nding better components, and on what we term the design complexity: The more complex the design, the slower the rate of improvement. Letting d as de- ned above be the connectivity, in the special case in which the connectivity is constant, the design complexity is simply the connec- tivity. When the connectivity varies, bottlenecks can arise in which a few components limit progress. In this case the design complexity is more complicated, depending on the details of the design. The number of bottlenecks also determines whether progress is steady, or whether there are periods of stasis punctuated by occasional large changes. Our model connects the engineering properties of a design to historical studies of technology improvement.