Andrew McAfee offers a fascinating report on, and response to, a speech by Northwestern economist Robert Gordon last week. Gordon, whose 2000 paper “Does the New Economy Measure Up to the Great Inventions of the Past?” is a classic of the genre, was, as McAfee notes, “one of the last serious scholars to accept the conclusion that IT was having a positive and significant impact on productivity in the US, but he came around when the data showed him clearly that this was in fact the case.”
Now, though, Gordon is having fresh doubts about IT’s long-term potential for boosting productivity. The doubts are spurred by the apparently sharp decline in productivity growth which began in mid-2004 and has continued to the present (following nearly a decade of robust growth). The decline, which, McAfee says, “threatens to take us back to the anemic 1972-1995 productivity growth levels,” has led Gordon to join
a growing chorus of voices who are arguing that the strong relationship between IT investment and productivity growth has broken down recently. If this is accurate, it’s quite bad news. Productivity growth is a primary engine of economic growth and, ultimately, of increases in standard of living. If the wonderful, unprecedented, and unanticipated productivity increases we’ve been enjoying since 1995 are in fact coming to and end despite our continued investment in computing, and despite the fact that computers continue to get much more powerful over time, then we have a problem.
McAfee does a nice job of summarizing Gordon’s pessimistic view – and of providing an optimistic counter to it. He believes that “like previous general purpose technologies IT is having a deeply transformative effect, which will take many years to play out completely.” But he admits that if the productivity numbers remain depressed, he will, like Gordon before him, have to modify his view.