The authors use the analysis of diffusion to identify how previous waves of investment that underpinned the first and second industrial revolutions drove productivity improvement and use the results of this analysis to develop a model to describe the path to realise potential future benefits. This is why productivity growth is important - if new technologies are not able to increase the level of productivity in the economy, then the business cases for investment will not be attractive and hence the wave of investment required to drive a major technological revolution looks some way off.but maybe I am wrong.Īt the heart of the challenge to the benefits of technology in the work of Gordon and others is the failure of increased investment in technology to deliver faster productivity gain. A new paper by Iraj Sanjee, Sanjay Kamat, Subra Prakash and Marcus Weldon published in the Bell Labs Technical Journal provides a convincing narrative of how the potential of technology to improve productivity will be realised. With corporate capital investment under pressure in most developed economies and businesses seeking to maximise the useful life of their assets as far as possible, investment is difficult to generate. Prejudice and personal experience aside, the primary reason for my scepticism about the likely rate of change is the level of investment that is required to introduce new technology. Gordon argued in "The rise and fall of American growth", that the upcoming range of technologies does not possess the potential to drive rapid productivity improvements of the scale seen in the period 1940 to 1950 with an impact through to 1970.which means its hard to find the money. I am, however, not just a sceptic about the pace of change, I also find myself more in agreement with the likes of Robert Gordon rather than Bryjolfsson and McAfee, and remain unconvinced about many of the predictions of the scale of the upcoming impact of technology. Nevertheless, while I am sure we will continue to see technological change, my experience leads me to believe that the rate of adoption and impact will continue to lag the forecasts that regularly capture the headlines. I am conscious therefore that the fact I have worked extensively in the technology and telecommunications sectors may make me too sceptical of claims about the pace at which technology will change our economy and society. Technology, be ready to be disappointed.Įconomists are always taught to be careful not to extrapolate from their own experiences to develop conclusions for the economy as a whole.
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