Type of work: Article (academic)
ICT & Information Society
Solow’s aphorism, now more than ten years old, is often quoted. Is there a
paradox? And if so, what can be said about it? This paper reviews and assesses
the most common ‘explanations’ for the paradox. It contains separate sections
evaluating each of the following positions:
(1) You don’t see computers ‘everywhere,’ in a meaningful economic sense.
Computers and information processing equipment are a relatively small share of
GDP and of the capital stock.
(2) You only think you see computers everywhere. Government hedonic price
indexes for computers fall ‘too fast,’ according to this position, and therefore
measured real computer output growth is also ‘too fast.’
(3) You may not see computers everywhere, but in the industrial sectors where
you most see them, output is poorly measured. Examples are finance and
insurance, which are heavy users of information technology and where even the
concept of output is poorly specified.
(4) Whether or not you see computers everywhere, some of what they do is not
counted in economic statistics. Examples are consumption on the job,
convenience, better user-interface, and so forth.
(5) You don’t see computers in the productivity statistics yet, but wait a bit and
you will. This is the analogy with the diffusion of electricity; the idea that the
productivity implications of a new technology are only visible with a long lag.
(6) You see computers everywhere but in the productivity statistics because
computers are not as productive as you think. Here, there are many anecdotes,
such as failed computer system design projects, but there are also assertions
from computer science that computer and software design has taken a wrong turn.
(7) There is no paradox: some economists are counting innovations and new
products on an arithmetic scale when they should count on a logarithmic scale.