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.

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>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.