Electricity doesn't work well around Hogwarts. In The Anubis Gates, written in 1983 by Tim Powers, there are some areas in space (and time) where magic is stronger and technologic equipment tends to malfunction. These areas become more frequent, and more intense, as you travel to the past.

When did this idea originate? What was the earliest story where this dichotomy happens?

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    I'm not sure this is in the spirit of your question; but mythological races like the Irish Tuatha Dé Danann, a supernatural race forced underground/away by the ancestors of man(using 'technology' such as forged iron) are a likely origin of the magic-supplanted-by-tech/progress idea... – VapedCrusader Feb 28 '16 at 15:22
  • Tolkien probably at least at a rough level. – Azor Ahai -him- Feb 28 '16 at 23:20
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    @VapedCrusader I agree. The question must state what kind of improved usage is counted as "technology." It's a good question :) – apollo Mar 1 '16 at 9:56
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    As far as "vice versa" The Shannara books by Terry Brooks are the opposite. Post human apocalypse magic. The (can't believe I'm saying this) MTV tv series airing now is pretty good. – Joshua Mar 1 '16 at 14:58
  • @apollo For this purpose I include within the category of technology to every machine with a not live, "animal" power. Electricity, steam, clock springs... A wheel or a lever are also simple machines, but a rickshaw with "animal" power would not be precluded by magic. – Ginasius Mar 1 '16 at 23:06

There may be earlier works, yet I will offer up the short story "Stranglehold" by Christopher Anvil, published June 1966 and part of the "Interstellar Patrol" series.

This story focuses on the prerequisites of science or magic arising in a culture, and theorizes as to why they are incompatible. It may not be the first, but it is earlier than the 1983 story quoted in the question, sprang to my mind quickly as an example of this idea being explored (and well), and gives a time for any other answers to beat.

Another possibility is the Lord Darcy series, which had stories being published around the same time, with the earliest story, "The Eyes Have It" first published in 1964. This one has an alternate history, where magic and magical theory arose instead of science and scientific theory. There is much less focus on the how and why they are incompatible, but the idea (that they are both culturally and physically) does come across in the stories.

The idea itself is likely much older, as VapedCrusader mentions in their comment it may have originated in the symbolism of cold iron (man made, man worked, some of the oldest technologies) as an effective protection against magic. There are works which might mention that people of science don't believe in magic (I thought of Dracula, in 1897, where the disbelief in magic by the science minded is a plot point), or the reverse, or stories which simply assume use of one precludes the other. Or stories where it does not.

I chose to offer these stories as examples because they deliberately acknowledge and explore the idea that Magic or Technology preclude the other, and wonders why. And also because I thought of them when I saw the question. It also gives anyone with other answers some concrete benchmark to beat in offering other stories

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