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Can Technology Hurt Productivity?

Summary:
March 22, 2018 —  Declining growth rates in productivity and GDP have been observed in recent years.  A variety of explanations have been offered. The most prominent explanations involve technology.   On the one hand, Robert Gordon (2016) has argued persuasively that we should not expect Information and Communications Technology (ICT) and other technological innovations of recent years to have as big an economic payoff as electricity, the automobile, and other technological revolutions of the past.   On the other hand, Martin Feldstein (2017) has argued persuasively that productivity growth is higher than we realize, because government statistics “grossly understate the value of improvements in the quality of existing goods and services” and “don’t even try to measure the full

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March 22, 2018 —  Declining growth rates in productivity and GDP have been observed in recent years.  A variety of explanations have been offered.

The most prominent explanations involve technology.   On the one hand, Robert Gordon (2016) has argued persuasively that we should not expect Information and Communications Technology (ICT) and other technological innovations of recent years to have as big an economic payoff as electricity, the automobile, and other technological revolutions of the past.   On the other hand, Martin Feldstein (2017) has argued persuasively that productivity growth is higher than we realize, because government statistics “grossly understate the value of improvements in the quality of existing goods and services” and “don’t even try to measure the full contribution,” of new goods and services, and that these measurement errors are probably becoming more important over time.

Less attention has been given to another possibility:  while ICT and other technological developments bring many heralded benefits, they have some less-heralded negative side-effects that may contribute to the slowdown in productivity and growth.  At the risk of being thought a Luddite, I offer a partial list.

  • Disruptive innovation is disruptive. For example, the advantages of each new incarnation of computer software or hardware are partially offset by the hours that we have to spend learning how to use it.  Glitches often bedevil the transitions.
  • Spam, viruses, and security breaches, impose big costs on businesses as well as households.
  • Employees spend part of each work day on non-work emails, social media, internet videos and videogames. “Technology is hi-jacking our minds and society,” says a group of Silicon Valley technologists.
  • Addictive videogames may undermine job skills and hours worked for some of the young. A recent study by Mark Aguiar and co-authors finds recreational computer activities partly explain a decline in labor supply by men ages 21 to 30.  Now entering the job market is a generation that has been shaped by the smart phone.
  • Even the productivity gains from such widely hyped innovations as tele-commuting have been brought into question. Research turns out to show that laptops in the classroom slow student learning, even when used to take notes rather than surf the web.
  • At the risk of angering Bitcoin enthusiasts: digital currencies have not in fact proven to be more efficient as a means of payment or store of value than conventional money, as I understand it. To the contrary, they encourage the diversion of resources away from productive uses.  Adding insult (social cost) to injury (waste of resources), the energy intensity of the “mining” is bad for the environment and the anonymity of their use is bad for law enforcement.
  • I find it hard to forebear expanding into things that merely undermine quality of life even if they don’t show up in the productivity statistics. Have you stopped answering your phone due to the proliferation of robocalls?
  • How about the dangers of texting while driving? In the United States, the National Highway Traffic Safety Administration reports that 3,477 people were killed and 391,000 were injured in motor vehicle crashes involving distracted drivers in 2015, with texting being the biggest culprit, particularly among young people.
  • And the big one: Does anyone still think that the replacement of old media with new media has unambiguously improved the clarity of the public exchange of information and the quality of the democratic political process? False news has been found to spread faster on Twitter than true news.  The problem is so intractable that President Trump has been able to subvert the usefulness of the phrase “fake news” just by applying it to all real news that he doesn’t like.
  • Those are just negative side effects of information technology. A list of other technological innovations with big obvious downsides would include opiates, advanced weaponry, and more.

To be clear, I am not suggesting that the net effects of recent technological advances are negative.   Many have had huge positive effects.   Also, historians such as Paul David and technology experts such as Erik Brynjolfsson, Daniel Rock, and Chad Syverson argue persuasively that there has always been a substantial lag between the time of a major new breakthrough (like the steam engine, electricity or the automobile) and the time when it yields net economic gains, because firms, buildings, and infrastructure need to be re-configured to take full advantage of the technology.  Presumably the same will happen with recent technologies.

Still, some innovations have negative side-effects, for productivity and for society, and these should not be ignored.

[An earlier version of this column appeared at Project Syndicate.  ]

Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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