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Statistical basis for predicting technological progress.

Nagy B, Farmer JD, Bui QM, Trancik JE - PLoS ONE (2013)

Bottom Line: We show for the first time that these regularities are observed in data to such a degree that the performance of these two laws is nearly the same.Our results show that technological progress is forecastable, with the square root of the logarithmic error growing linearly with the forecasting horizon at a typical rate of 2.5% per year.These results have implications for theories of technological change, and assessments of candidate technologies and policies for climate change mitigation.

View Article: PubMed Central - PubMed

Affiliation: Santa Fe Institute, Santa Fe, New Mexico, USA.

ABSTRACT
Forecasting technological progress is of great interest to engineers, policy makers, and private investors. Several models have been proposed for predicting technological improvement, but how well do these models perform? An early hypothesis made by Theodore Wright in 1936 is that cost decreases as a power law of cumulative production. An alternative hypothesis is Moore's law, which can be generalized to say that technologies improve exponentially with time. Other alternatives were proposed by Goddard, Sinclair et al., and Nordhaus. These hypotheses have not previously been rigorously tested. Using a new database on the cost and production of 62 different technologies, which is the most expansive of its kind, we test the ability of six different postulated laws to predict future costs. Our approach involves hindcasting and developing a statistical model to rank the performance of the postulated laws. Wright's law produces the best forecasts, but Moore's law is not far behind. We discover a previously unobserved regularity that production tends to increase exponentially. A combination of an exponential decrease in cost and an exponential increase in production would make Moore's law and Wright's law indistinguishable, as originally pointed out by Sahal. We show for the first time that these regularities are observed in data to such a degree that the performance of these two laws is nearly the same. Our results show that technological progress is forecastable, with the square root of the logarithmic error growing linearly with the forecasting horizon at a typical rate of 2.5% per year. These results have implications for theories of technological change, and assessments of candidate technologies and policies for climate change mitigation.

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An illustration of the growth of errors with time using the Wright model.The mean value of the logarithmic hindcasting error for each dataset is plotted against the hindcasting horizon , in years. An error of , for example, indicates that the predicted value is three times as big as the actual value. The longest data-sets are: PrimaryAluminum (green), PrimaryMagnesium (dark blue), DRAM (grey), and Transistor (red).
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pone-0052669-g001: An illustration of the growth of errors with time using the Wright model.The mean value of the logarithmic hindcasting error for each dataset is plotted against the hindcasting horizon , in years. An error of , for example, indicates that the predicted value is three times as big as the actual value. The longest data-sets are: PrimaryAluminum (green), PrimaryMagnesium (dark blue), DRAM (grey), and Transistor (red).

Mentions: The quality of forecasts is examined for all datasets and all hypotheses (and visualized as a three-dimensional error mountain, as shown in File S1). For Wright's law, an illustration of the growth of forecasting errors as a function of the forecasting horizon is given in Fig. 1.


Statistical basis for predicting technological progress.

Nagy B, Farmer JD, Bui QM, Trancik JE - PLoS ONE (2013)

An illustration of the growth of errors with time using the Wright model.The mean value of the logarithmic hindcasting error for each dataset is plotted against the hindcasting horizon , in years. An error of , for example, indicates that the predicted value is three times as big as the actual value. The longest data-sets are: PrimaryAluminum (green), PrimaryMagnesium (dark blue), DRAM (grey), and Transistor (red).
© Copyright Policy
Related In: Results  -  Collection

Show All Figures
getmorefigures.php?uid=PMC3585312&req=5

pone-0052669-g001: An illustration of the growth of errors with time using the Wright model.The mean value of the logarithmic hindcasting error for each dataset is plotted against the hindcasting horizon , in years. An error of , for example, indicates that the predicted value is three times as big as the actual value. The longest data-sets are: PrimaryAluminum (green), PrimaryMagnesium (dark blue), DRAM (grey), and Transistor (red).
Mentions: The quality of forecasts is examined for all datasets and all hypotheses (and visualized as a three-dimensional error mountain, as shown in File S1). For Wright's law, an illustration of the growth of forecasting errors as a function of the forecasting horizon is given in Fig. 1.

Bottom Line: We show for the first time that these regularities are observed in data to such a degree that the performance of these two laws is nearly the same.Our results show that technological progress is forecastable, with the square root of the logarithmic error growing linearly with the forecasting horizon at a typical rate of 2.5% per year.These results have implications for theories of technological change, and assessments of candidate technologies and policies for climate change mitigation.

View Article: PubMed Central - PubMed

Affiliation: Santa Fe Institute, Santa Fe, New Mexico, USA.

ABSTRACT
Forecasting technological progress is of great interest to engineers, policy makers, and private investors. Several models have been proposed for predicting technological improvement, but how well do these models perform? An early hypothesis made by Theodore Wright in 1936 is that cost decreases as a power law of cumulative production. An alternative hypothesis is Moore's law, which can be generalized to say that technologies improve exponentially with time. Other alternatives were proposed by Goddard, Sinclair et al., and Nordhaus. These hypotheses have not previously been rigorously tested. Using a new database on the cost and production of 62 different technologies, which is the most expansive of its kind, we test the ability of six different postulated laws to predict future costs. Our approach involves hindcasting and developing a statistical model to rank the performance of the postulated laws. Wright's law produces the best forecasts, but Moore's law is not far behind. We discover a previously unobserved regularity that production tends to increase exponentially. A combination of an exponential decrease in cost and an exponential increase in production would make Moore's law and Wright's law indistinguishable, as originally pointed out by Sahal. We show for the first time that these regularities are observed in data to such a degree that the performance of these two laws is nearly the same. Our results show that technological progress is forecastable, with the square root of the logarithmic error growing linearly with the forecasting horizon at a typical rate of 2.5% per year. These results have implications for theories of technological change, and assessments of candidate technologies and policies for climate change mitigation.

Show MeSH
Related in: MedlinePlus