The Computer Revolution: An Economic Perspective

The Computer Revolution: An Economic Perspective

The Computer Revolution: An Economic Perspective

The Computer Revolution: An Economic Perspective

Synopsis

'For more than a decade, American corporations have been shoveling billions of dollars in computers down a black hole, with no response at all from the sluggish growth rate of American productivity. Dan Sichel's pathbreaking book helps us to explain the computer paradox by showing that computer hardware is too small a share of the capital stock to matter much, and that there are reasons to doubt a future surge in the contribution of computer hardware and software to growth. ---------Robert J. Gordon

Excerpt

In recent decades, U.S. businesses have spent billions of dollars on information technology, and many commentators have pointed to this computer revolution as a key factor boosting economic growth and productivity. Despite this rapid expansion of computer use, however, the economy's productivity performance has been lackluster. Because increases in productivity are the ultimate source of improved living standards, sluggish productivity growth does not bode well for advances in the nation's economic well-being. Thus, the implications of computerization for economic growth and productivity are a crucial issue for economists, business leaders, and policymakers.

In this book Daniel E. Sichel provides a straightforward guide to the economic issues involved. He reviews the basic facts about computer hardware and software in the economy, explains how information technology contributes to economic growth, and offers a plausible guide on the size of those contributions in recent years. He details what would have to happen for these contributions to pick up substantially in coming years.

Sichel's analysis places limits on the size of the past and future contribution of computers to the overall economy. When compared with the size of the slowdown in productivity growth in the 1970s, the overall impact of computers appears relatively modest, partly because the share of computers in the nation's capital stock is surprisingly small. Consequently, even though information technologies have dramatically affected many individual companies and jobs, caution with respect to macroeconomic effects is in order. The nation can not yet assume that the computer revolution will ensure a huge boost to aggregate productivity growth.

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