Productivity paradox

In the latter view, this disconnect is emblematic of our need to understand and do a better job of deploying the technology that becomes available to us rather than an arcane paradox that by its nature is difficult to unravel.

[7][8] As with previous technologies, an extremely large number of initial cutting-edge investments in IT were counterproductive and over-optimistic.

[9] Some modest IT-based gains may have been difficult to detect amid the apparent overall slowing of productivity growth, which is generally attributed to one or more of a variety of non-IT factors, such as oil shocks, increased regulation or other cultural changes, a hypothetical decrease in labor quality, a hypothetical exhaustion or slowdown in non-IT innovation, and/or a coincidence of sector-specific problems.

The US government's calculations of real GDP does not take into account inflation directly, and during the 1970s and 1980s these calculations estimate inflation from observing the change in total spending and change in total units consumed for goods and services over time.

These estimated implicit price decreases are indications of the scale of productivity growth missing from the output measurements.

[1] Other economists have made a more controversial charge against the utility of computers: that they pale into insignificance as a source of productivity advantage when compared to the Industrial Revolution, electrification, infrastructures (canals and waterways, railroads, highway system), Fordist mass production and the replacement of human and animal power with machines.

[13] [14] However, the hypothesis that IT was fundamentally unproductive weakened in the early 1990s, as total factor productivity growth in the United States accelerated.

Thus, the modern real output calculations will characterize consumer spending for new products and services, as well as any spending for quality improvements not captured by the hedonic regression models, as inflation, which overstates inflation and underestimates productivity growth.

Productivity benefits from IT investments in the mid-1990s tend to come from their ability to improve supply-chain, back-office and end-to-end operations.

[28] Computers and mobile phones are continually cited as the greatest reducers of workplace productivity by means of distraction.

[29] Despite high expectations for online retail sales, individual item and small quantity handling and transportation costs may offset the savings of not having to maintain bricks and mortar stores.

[30] Online retail sales has proven successful in specialty items, collectibles and higher priced goods.

Online commerce has been extremely successful in banking, airline, hotel, and rental car reservations, to name a few.