I’m reminded of the 1998 Nobel Laureate Paul Krugman quote:
> “The growth of the Internet will slow drastically, as the flaw in ‘Metcalfe’s law’—which states that the number of potential connections in a network is proportional to the square of the number of participants—becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.”
The internets impact on society and business didn’t happen overnight. Naive studies on how people are using it today miss the point. I remember a clip from David letterman where he was mocking bill gates about the internet. Gates said you can get baseball recaps, to which letterman replied “have you ever heard of a radio?”
But maybe I’m just more optimistic because these tools have made a huge impact on my life and productivity gain is more than low single digits. I’m not typical, but I imagine others will catch up.
I think any analysis of Internet's impact on the economy should also address the relatively constant angle of productivity growth: https://fred.stlouisfed.org/series/OPHNFB
The Internet Was an Economic Disappointment April 4, 2023 https://archive.ph/3fidX
>Life being what it is, several people came back at me, citing a prediction I made in 1998 that the internet’s growth would soon slow and that “by 2005 or so, it will become clear that the internet’s impact on the economy has been no greater than the fax machine’s.” I did indeed say that, in a throwaway piece I wrote for the magazine The Red Herring — a piece I still don’t remember having written, but I guess I was trying to be provocative.
..
>But how wrong was I, really, about the internet’s economic impact? Or, since this shouldn’t be about me, have the past few decades generally vindicated visionaries who asserted that information technology would change everything? Or have they vindicated techno-skeptics like the economist Robert Gordon, who argued in a 2016 book that the innovations of the late 20th and early 21st century were far less fundamental than those between 1870 and 1940? Well, by the numbers, the skeptics have won the argument, hands down.
>In that last newsletter, we looked at 10-year rates of growth in labor productivity, which suggested that information technology did indeed produce a bump in economic growth between the mid-1990s and the mid-2000s, but one that was relatively modest and short-lived. Today, let me take a slightly different approach. The Bureau of Labor Statistics produces historical estimates, going back to 1948, of both labor productivity and “total factor productivity,” an estimate of the productivity of all inputs, including capital as well as labor, which is widely used by economists as a measure of technological progress. A truly fundamental technological innovation should cause sustained growth in both these measures, especially total factor productivity.
(read the article to see pictures)
>See the great productivity boom that followed the rise of the internet? Neither do I.
People who can't admit when they are wrong are absolutely insufferable.
His mistake was in couching it language of Internet adoption rather than the gross impact on economic productivity. He was wrong on the former and mostly right on the latter. It is very possible for a technology to have dramatic effect on society without a big impact on overall economic productivity
Darren acegmolu is making only the latter argument. I’m betting he’s right.
Well then I don't care what "productivity" means I guess.
Everyone glued to their smart phones, AI making decisions on tarrif policy. ML algorithms dictating who stays in the country and who is dissappeared...
But it all amounts to nothing worth worrying about because "productivity".
Fortunately Kruman is not one of them.