PrepTest 42, Section 4, Question 17

Because the market system enables entrepreneurs and investors who develop new technology to reap financial rewards from their risk of capital, it may seem that the primary result of this activity is that some people who have spare capital accumulate more. But in spite of the fact that the profits derived from various technological developments have accrued to relatively few people, the developments themselves have served overall as a remarkable democratizing force. In fact, under the regime of the market, the gap in benefits accruing to different groups of people has been narrowed in the long term.

This tendency can be seen in various well-known technological developments. For example, before the printing press was introduced centuries ago, few people had access to written materials, much less to scribes and private secretaries to produce and transcribe documents. Since printed materials have become widely available, however, people without special position or resources�and in numbers once thought impossible�can take literacy and the use of printed texts for granted. With the distribution of books and periodicals in public libraries, this process has been extended to the point where people in general can have essentially equal access to a vast range of texts that would once have been available only to a very few. A more recent technological development extends this process beyond printed documents. A child in school with access to a personal computer and modem�which is becoming fairly common in technologically advanced societies�has computing power and database access equal to that of the best-connected scientists and engineers at top-level labs of just fifteen years ago, a time when relatively few people had personal access to any computing power. Or consider the uses of technology for leisure. In previous centuries only a few people with abundant resources had the ability and time to hire professional entertainment, and to have contact through travel and written communication�both of which were prohibitively expensive�with distant people. But now broadcast technology is widely available, and so almost anyone can have an entertainment cornucopia unimagined in earlier times. Similarly, the development of inexpensive mail distribution and telephone connections and, more recently, the establishment of the even more efficient medium of electronic mail have greatly extended the power of distant communication.

This kind of gradual diffusion of benefits across society is not an accident of these particular technological developments, but rather the result of a general tendency of the market system. Entrepreneurs and investors often are unable to maximize financial success without expanding their market, and this involves structuring their prices to the consumers so as to make their technologies genuinely accessible to an ever-larger share of the population. In other words, because market competition drives prices down, it tends to diffuse access to new technology across society as a result.

Because the market system enables entrepreneurs and investors who develop new technology to reap financial rewards from their risk of capital, it may seem that the primary result of this activity is that some people who have spare capital accumulate more. But in spite of the fact that the profits derived from various technological developments have accrued to relatively few people, the developments themselves have served overall as a remarkable democratizing force. In fact, under the regime of the market, the gap in benefits accruing to different groups of people has been narrowed in the long term.

This tendency can be seen in various well-known technological developments. For example, before the printing press was introduced centuries ago, few people had access to written materials, much less to scribes and private secretaries to produce and transcribe documents. Since printed materials have become widely available, however, people without special position or resources�and in numbers once thought impossible�can take literacy and the use of printed texts for granted. With the distribution of books and periodicals in public libraries, this process has been extended to the point where people in general can have essentially equal access to a vast range of texts that would once have been available only to a very few. A more recent technological development extends this process beyond printed documents. A child in school with access to a personal computer and modem�which is becoming fairly common in technologically advanced societies�has computing power and database access equal to that of the best-connected scientists and engineers at top-level labs of just fifteen years ago, a time when relatively few people had personal access to any computing power. Or consider the uses of technology for leisure. In previous centuries only a few people with abundant resources had the ability and time to hire professional entertainment, and to have contact through travel and written communication�both of which were prohibitively expensive�with distant people. But now broadcast technology is widely available, and so almost anyone can have an entertainment cornucopia unimagined in earlier times. Similarly, the development of inexpensive mail distribution and telephone connections and, more recently, the establishment of the even more efficient medium of electronic mail have greatly extended the power of distant communication.

This kind of gradual diffusion of benefits across society is not an accident of these particular technological developments, but rather the result of a general tendency of the market system. Entrepreneurs and investors often are unable to maximize financial success without expanding their market, and this involves structuring their prices to the consumers so as to make their technologies genuinely accessible to an ever-larger share of the population. In other words, because market competition drives prices down, it tends to diffuse access to new technology across society as a result.