Understanding Digital Technology’s Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past
AbstractThree styles of explanation have been advanced by economists seeking to account for the so-called 'productivity paradox'. The coincidence of a persisting slowdown in the growth of measured total factor productivity (TFP) in the US, since the mid-1970's, with the wave of information technology (It) innovations, is said by some to be an illusion due to the mismeasurement of real output growth; by others to expose the mistaken expectations about the benefits of computerization; and by still others to reflect the amount of time, and the volume of intangible investments in 'learning', and the time required for ancillary innovations that allow the new digital technologies to be applied in ways that are reflected in measured productivity growth. This paper shows that rather than viewing these as competing hypotheses, the dynamics of the transition to a new technological and economic regime based upon a general purpose technology (GPT) should be understood to be likely to give rise to all three 'effects.' It more fully articulates and supports this thesis, which was first advanced in the 'computer and dynamo' papers by David (1990, 1991). The relevance of that historical experience is re-asserted and supported by further evidence rebutting skeptics who have argued that the diffusion of electrification and computerization have little in common. New evidence is produced about the links between IT use, mass customization, and the upward bias of output price deflators arising from the method used to 'chain in' new products prices. The measurement bias due to the exclusion of intangible investments from the scope of the official national product accounts also is examined. Further, it is argued that the development of the general-purpose PC delayed the re-organization of businesses along lines that would have more directly raised task productivity, even though the technologies yielded positive 'revenue productivity' gains for large companies. The paper concludes by indicating the emerging technical and organizational developments that are likely to deliver a sustained surge of measured TFP growth during the decades that lie immediately ahead.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by EconWPA in its series Macroeconomics with number 0502022.
Length: 28 pages
Date of creation: 10 Feb 2005
Date of revision:
Note: Type of Document - pdf; pages: 28
Contact details of provider:
Web page: http://22.214.171.124
Other versions of this item:
- David, P.A., 2000. "Understanding Digital Technology's Evolution and the Path of Measured Productivity Growth: Present and Future in the Mirror of the Past," Papers 99-011, United Nations World Employment Programme-.
- E - Macroeconomics and Monetary Economics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-16 (All new papers)
- NEP-INO-2005-04-16 (Innovation)
- NEP-MAC-2005-04-16 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul David & Gavin Wright, 1999.
"General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution,"
Economics Series Working Papers
1999-W31, University of Oxford, Department of Economics.
- Paul A. David & Gavin Wright, . "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Working Papers 99026, Stanford University, Department of Economics.
- Paul A. David & Gavin Wright, 1999. "General Purpose Technologies and Surges in Productivity: Historical Reflections on the Future of the ICT Revolution," Oxford University Economic and Social History Series _031, Economics Group, Nuffield College, University of Oxford.
- Claudia Goldin & Lawrence F. Katz, 1998.
"The Origins Of Technology-Skill Complementarity,"
The Quarterly Journal of Economics,
MIT Press, vol. 113(3), pages 693-732, August.
- W. Erwin Diewert & Kevin J. Fox, 1999. "Can measurement error explain the productivity paradox?," Canadian Journal of Economics, Canadian Economics Association, vol. 32(2), pages 251-280, April.
- Robert J. Gordon, 1996.
"Problems in the Measurement and Performance of Service-Sector Productivity in the United States,"
NBER Working Papers
5519, National Bureau of Economic Research, Inc.
- Robert Gordon, 1995. "Problems in the Measurement and Performance of Service-Sector Productivity in the United States," RBA Annual Conference Volume, in: Palle Andersen & Jacqueline Dwyer & David Gruen (ed.), Productivity and Growth Reserve Bank of Australia.
- Brynjolfsson, Erik. & Hitt, Lorin M., 1995.
"Paradox lost? : firm-level evidence on the returns to information systems spending,"
3786-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Erik Brynjolfsson & Lorin Hitt, 1996. "Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending," Management Science, INFORMS, vol. 42(4), pages 541-558, April.
- Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall.
- Abramovitz, Moses & David, Paul A, 1973. "Reinterpreting Economic Growth: Parables and Realities," American Economic Review, American Economic Association, vol. 63(2), pages 428-39, May.
- Martin Neil Baily & Robert J. Gordon, 1988. "The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(2), pages 347-432.
- W. Michael Cox & Roy J. Ruffin, 1998. "What should economists measure? The implications of mass production vs. mass customization," Working Papers 9803, Federal Reserve Bank of Dallas.
- W. Michael Cox & Richard Alm, 1998. "The right stuff: America's move to mass customization," Annual Report, Federal Reserve Bank of Dallas, pages 3-26.
- Erik Brynjolfsson & Lorin Hitt, 1997. "Paradox Lost? Firm-level Evidence of High Returns to Information Systems Spending," Working Paper Series 162, MIT Center for Coordination Science.
- Boyer, Robert, 2001. "La "nouvelle économie" au futur antérieur : histoire, théories, géographie," CEPREMAP Working Papers (Couverture Orange) 0113, CEPREMAP.
- Alan Hughes & Michael S Scott Morton, 2005. "ICT and productivity growth - the paradox resolved?," ESRC Centre for Business Research - Working Papers wp316, ESRC Centre for Business Research.
- Paul A. David, 2001. "An Introduction to the Economy of the Knowledge Society," Economics Series Working Papers 84, University of Oxford, Department of Economics.
- Consoli, Davide & Patrucco, Pier Paolo & Quatraro, Francesco, 2006. "Un'Analisi Comparata delle Performance Tecnologiche nel Nord-Ovest Sabaudo nel Lungo Periodo nel Contesto delle RegioniItaliane: Gli Anni 1980-2001," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200605, University of Turin.
- Nirvikar Singh, 2004. "Information Technology and India’s Economic Development," Development and Comp Systems 0412007, EconWPA.
- Carolina Castaldi & Sandro Sapio, 2008. "Growing like mushrooms? Sectoral evidence from four large European economies," Journal of Evolutionary Economics, Springer, vol. 18(3), pages 509-527, August.
- Hiroshi Ohashi, 2003. "Econometric analysis of price index for home video cassette recorders in the U.S., 1978-1987," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 12(2), pages 179-197.
- Takase, Kae & Murota, Yasuhiro, 2004. "The impact of IT investment on energy: Japan and US comparison in 2010," Energy Policy, Elsevier, vol. 32(11), pages 1291-1301, July.
- Matteo Bugamelli & Patrizio Pagano & Francesco PaternÃ² & Alberto Franco Pozzolo & Fabiano Schivardi & Salvatore Rossi, 2001.
"Ingredients for the New Economy: How Much does finance matter?,"
Temi di discussione (Economic working papers)
418, Bank of Italy, Economic Research and International Relations Area.
- Bugamelli, M. & Pagano, P. & Paterno, F. & Pozzolo, A.F. & Rossi, S. & Schivardi, F., 2003. "Ingredients for The New Economy: How Much Does Finance Matter?," EIFC - Technology and Finance Working Papers 31, United Nations University, Institute for New Technologies.
- Sandro Sapio & Grid Thoma, 2006. "The Growth of Industrial Sectors: Theoretical Insights and Empirical Evidence from U.S. Manufacturing," LEM Papers Series 2006/09, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Simona Iammarino & Cecilia Jona-Lasini & Susanna Mantegazza, 2004. "Labour productivity, ICT and regions: The revival of Italian “dualism”?," SPRU Working Paper Series 127, SPRU - Science and Technology Policy Research, University of Sussex.
- Boyer, Robert, 2001. "L'économiste face aux innovations qui font époque : les relations entre histoire et théorie," CEPREMAP Working Papers (Couverture Orange) 0112, CEPREMAP.
- Carolina Castaldi & Giovanni Dosi, 2008. "Technical Change and Economic Growth: Some Lessons from Secular Patterns and Some Conjectures on the Current Impact of ICT Technology," LEM Papers Series 2008/01, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Mauro Napoletano & Jean-Luc Gaffard, 2009.
"Country Size, Appropriate Policy, and Economic Performance: Some Evidence from OECD Countries,"
Sciences Po publications
2009-08, Sciences Po.
- Mauro Napoletano & Jean-Luc Gaffard, 2009. "Country Size, Appropriate Policy, and Economic Performance: Some Evidence from OECD Countries," Documents de Travail de l'OFCE 2009-08, Observatoire Francais des Conjonctures Economiques (OFCE).
- Paul A. David, 2005. "Productivity growth prospects and the new economy in historical perspective," Economic History 0502005, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.