How predictable is technological progress?

J. Doyne Farmer, Francois Lafond

(Submitted on 18 Feb 2015)

http://arxiv.org/pdf/1502.05274.pdf

Recently it has become clear that many technologies follow a generalized version of Moore's law, i.e. costs tend to drop exponentially, at different rates that depend on the technology. Here we formulate Moore's law as a time series model and apply it to historical data on 53 technologies. Under the simple assumption of a correlated geometric random walk we derive a closed form expression approximating the distribution of forecast errors as a function of time. Based on hind-casting experiments we show that it is possible to collapse the forecast errors for many different technologies at many time horizons onto the same universal distribution. As a practical demonstration we make distributional forecasts at different time horizons for solar photovoltaic modules, and show how our method can be used to estimate the probability that a given technology will outperform another technology at a given point in the future.

Subjects:	Economics (q-fin.EC); Physics and Society (physics.soc-ph)
Cite as:	arXiv:1502.05274 [q-fin.EC]
	(or arXiv:1502.05274v1 [q-fin.EC] for this version)