![]() Techno-pessimists like Gordon can rightly say that mobile phones hardly register on that scale. In comparison, printing looks like a minor change and telephones a mere nudge. However, this inevitable waning of progress does not discredit recent developments.įor example, writing broke the biggest barrier for long-distance communication three millennia ago. There are still gaps to be filled and improvements to be made, but nothing in comparison with the opportunities of 100 years ago. Prosperous people already enjoy long, healthy, comfortable, well-informed and well-entertained lives. After the first two revolutions, there is not as much room for life-transforming technological breakthroughs as before. Human beings have only a finite capacity to enjoy their material lives. He thinks the third industrial revolution, of data processing, is a pale shadow of its steam and electricity powered predecessors. Gordon’s other argument for a productivity slowdown is qualitative. That omission probably explains much of the reported slowdown in productivity growth. Specifically, the internet revolution has received little statistical appreciation. They try, but they struggle to take into account entirely new products and little improvements which reshape lifestyles for the better. ![]() Statisticians compiling real GDP just have to do their best to guess in a consistent way. However, while the improvements are genuine, they cannot be quantified, because human satisfaction cannot be measured. Real GDP should reflect the fact that consumers are getting greater benefits for the same money. A smartphone provides more value than an identically priced landline. A dollar’s worth of electric light is obviously better than a dollar’s worth of candle-light. Real GDP is a fine number in many ways, but it relies heavily on so-called hedonic adjustments – estimates of how much more satisfaction new products give than the old ones they replace. Productivity is the ratio of output to input, calculated as the ratio of real GDP to hours of labour. Gordon discusses the issue, but misses the central weakness of the standard measure of productivity. While the data shows a clear productivity slowdown, the data is probably wrong. There is a big problem with the conclusion. The recent “frenetic pace of innovation” has relatively little “impact on productivity growth”. His answer is that appearances are deceptive. The Northwestern University professor’s most recent paper, “Why Has Economic Growth Slowed When Innovation Appears to be Accelerating?” was published in April by the U.S. A visitor shakes hands with a humanoid robot at the booth of IBG at Hannover Messe, the trade fair in Hanover, Germany, April 23, 2018.
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