The Slowing Pace of Progress
There is a distinction to be made between inventions that are merely sophisticated--such as, say, personal digital assistants--and those that fundamentally alter the human condition. The invention of the light bulb created more useful hours in each day for virtually every human being. The electric motor directly raised the productivity in every sphere of life, from speeding up assembly lines to creating so many labor-saving devices in the home that millions of housewives were able to join the paid work force. The internal combustion engine allowed for mass, high-speed transportation of both people and freight while also opening up vast regions of cheap land to suburban development. The materials revolution that brought us petroleum refining, synthetic chemicals, and pharmaceuticals involved learning to rearrange molecules in ways that made raw materials fundamentally more valuable. Without the genetically improved seeds that brought us the "Green Revolution" of the late 1960s and '70s, there would be mass starvation.
Can we make any parallel claim about the single greatest technology of our own time? It remains possible that networked computers and other new information technologies will one day create similar, societywide bursts in productivity, health, and wealth. Yet to date, the marginal gains computers have brought to communications are modest even compared with the improvements made by the telegraph. The first trans-Atlantic telegraph cable in 1866 reduced the time required to send a message from New York to London from about a week to a few minutes. Notes economist Alan Blinder: "No modern IT innovation has, or I dare say will, come close to such a gain!"
And with computers, it is also possible that their largest benefits have already been realized. Consider the gain in productivity achieved when offices started converting from typewriters to word processors. A circa-1978 Wang 10A word processor with daisy-wheel printer, though expensive and difficult to operate, offered a quantum leap over the typewriter because it allowed users to correct and edit documents and manage mailing lists at far greater speed. Every year since, word processors have become cheaper, more powerful, and easier to use, but the marginal gain in productivity thereby achieved continues to decline. Indeed, for many users, converting to, say, the latest generation of Word, after having already invested in learning to use WordPerfect five years before, entails a net loss of productivity.
Linking computers to the Internet might seem to offer large gains in productivity, but as Professor Gordon points out, the evidence from the marketplace suggests the opposite. Even with Internet access now easily available, sales of computers are now no higher than one would expect given their continually falling price. The implication, notes Gordon, is that the incremental benefit of additional computer power continues to shrink.
But what if, as is widely promised, the Internet soon offers consumers the ability to download videos at a low price, or to conduct videoconferences, or shop for the best values with no more effort than using a television remote? As Gordon and other economists point out, the returns to the economy as a whole would be much smaller than might be imagined. This is because the growth of E-commerce largely involves simply substituting existing forms of economic activity--such as visiting a bookstore, renting a video, or calling a travel agent--with a virtual equivalent. Yes, there may be a potential gain in efficiency to be had from buying a book online, but it comes at the cost of cannibalizing existing bookstore sales. By contrast, internal combustion engines and electric motors, while displacing steam technology, also made possible wholly new products, ranging from aircraft to air conditioners, for which there was little or no previously existing substitute.
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