The question of technology is a familiar one for the science fiction genre, but it is almost equally important in the fantasy and urban fantasy genres. In the last, the relationship between technology and magic, or technology and paranormals, is very important.
With that in mind, let’s break the issue down by genre:
Most fantasy worlds are stuck in a medieval to early modern level of technology with occasional forays into ancient and Victorian levels. In part, this trend is likely due to the tradition of medieval romances and legends that serve as the foundation of the modern genre. The medieval era also tends to be romanticized to some extent in Western society, functioning as a source of and setting for dreams and flights of fancy, the home of the proverbial knight in shining armor.
The tendency toward the medieval could also be tied to the same reasons that Renaissance faires and HMB are popular. Frankly, swords and armor are, in the popular imagination, cool. The era before gunpowder and WWI-type horrific warfare—mass destruction, mass chemical/biological weapons, nuclear devices, carpet bombing—and even the printing press is often seen as “simpler” somehow.
That said, there is no real reason that fantasy has to be stuck in the medieval or Renaissance technology level. It could easily be set in a secondary world with modern technology (Max Gladstone gets close to this), or Victorian, or steam (China Mieville), or others.
Urban fantasy, in the majority of cases, is based in modern technology, which brings in other issues and potential tweaks to the subject.
The interaction between magic and technology is, perhaps, the most important issue. Some hold that magic and modern technology are incompatible and affect each other negatively. They decide that magic and tech contradict each other and cancel each other out. Others argue that there is no reason the two should be inimical, but rather that they can work well together. And, of course, there are those who fall somewhere in between. Jim Butcher and Ilona Andrews provide good examples here, with technology and magic continually vying with each other.
Even if magic and technology can be co-mingled, that does not necessarily speak to every species. Sometimes, to play with ideas, authors limit technology problems to certain species. For instance, the classic fae and iron issue, which causes trouble for fae trying to travel in the modern world, in cars made of steel.
The question does provide fertile ground for unusual effect, though. For instance, high concentrations of magic may affect electronics (Rowling). Cell phone signals may interact with certain paranormal lineages to attract monsters (Riordan, Percy Jackson). Magic may only disrupt technology if it is directly applied to the piece of technology (Riordan, Kane Chronicles).
Technological development is an issue of obvious importance to the science fiction genre, from cyberpunk’s chrome to space opera’s blasters to the entire genre’s starships. Whether the technology involves travel ,communications, medicine, protection, combat, lifespans, cloning, genetic engineering, robotics, or AI, it can all profoundly affect the cultures and societies of the world. The choice of technology can also affect what stories can be told in the setting—if interstellar travel or communications are difficult or slow, then the setting is unlikely to have a galaxy spanning civil war with epic space battles.
Choosing the level of technology, or levels if each area is considered independently, should be done carefully so the technology doesn’t bury the story or other world elements. With that in mind, the technology will both define societies and be defined by them. Take, as an example, smartphone technology. The introduction of relatively cheap, and thus widespread, smartphone usage has brought about significant changes in all of Earth’s societies in terms of communication, connectivity to others, cross-cultural dissemination, information gathering, traffic safety, and a host of other areas. On the other hand, society has defined the smartphone in terms of usage as well. The evolution of the smartphone has been guided just as much, if not moreso, by average users and their desires as it has been by programmers and engineers. Regardless, technology will always affect the social growth and evolution of societies, whether that tech be cloning, cybernetics, regular space travel, or cold fusion.
Additionally, technology can be widely different based on species or nation, and not just in level of development. Example 1: Star Trek’s Romulans have cloaking technology that other species lack, Klingons use disrupters while the Federation uses phasers. Example 2: Babylon 5’s humans use rotational methods for artificial gravity, Vorlons have living bio-tech ships, Shadows have cloaking tech.
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