On the general computers and productivity question, _The Economist_ had an interesting take last month in their "How Real Is The New Economy?" issue (July 24th). In their "Special" they wrote:
<quote>
The improvement in measured productivity since the mid-1990s is surprisingly, extraordinarily, concentrated in one small sector of the high-tech economy: computer manufacturing. Robert Gordon, a professor of economics at Northwestern University and one of America's leading authorities on productivity, has carefully broken down the aggregate numbers. ["Has the 'New Economy' rendered the productivity slow-down obsolete?" By Robert Gordon. Unpublished paper available at http:// faculty-web.at.nwu.edu/economics/gordon] He finds that, as prices collapsed, productivity growth in computer manufacturing improved at a staggering 42% a year between the fourth quarter of 1995 and the first quarter of 1999 (see table). Even though computer manufacturing is just 1.2% of America's output, that improvement was big enough to move the figures for the whole of the private non-farm economy. Indeed, allowing for other factors as well, productivity in durable-goods manufacturing apart from computers, and in the manufacturing of non-durable goods, actually grew more slowly in the most recent period than during the "slowdown" years of 1972-95.
Mr. Gordon sums it up this way: "The productivity performance of the manufacturing sector of the United States economy since 1995 has been abysmal rather than admirable. Not only has producivity growth in non-durable manufacturing *decelerated* in 1995-1999 compared to 1972-95, but productivity growth in durable manufacturing stripped of computers has *decelerated even more.* " The new productivity numbers, far from settling the debate in favour of the new-economy optimists, seem thus to point the other way. And if the productivity miracle is so narrowly confined, its sustainability must be in doubt. To date, the IT revolution would appear to boil down to this: computer technology has proved unbelievably effective at reproducing itself; beyond that, its apparent influence on productivity (in manufacturing, at any rate) has so far been somewhere between imperceptible and adverse."
<endquote>
Of course, the optimists would be well within their rights to say all the gains are in the service sector, if only we could ever measure them. But that was where this article started, with what they call Solow's paradox: how come we these computers show up everywhere except in the productivity statistics?
Michael
__________________________________________________________________________ Michael Pollak................New York City..............mpollak at panix.com