Whatever happened to the massive productivity boost which much (surely?) have been the result of the internet?
Because (surely?) the internet must have led to an unequalled, world historical boost in productivity?
A decade ago people all over the place were saying confidently that the economic effect of the internet would outstrip the effects seen by the invention of railways and telecommunications, and that new synergies from fast and universal communication would generate a society of massive capability (a huge step-up like the effect of the population concentration of the first cities, or the nation state).
Science and technology would be accelerated qualitatively by the speed of access to the scholarly literature, rapid and universal sharing of methods, critique and results, international collaborations…
That was the theory.
Yet economic growth since the internet came has been, well – ahem! – very modest…
Indeed, the current ‘credit crunch’ recession revealed that much of what economists had thought was internet-produced growth in productivity, was in fact a progressive increase in borrowing.
Charlton then goes on to suggest one explanation, that “Economists were correct, and there really has been a huge boost in productivity/ growth – but its measurement was not captured by GDP or other economic measures in use.” Charlton rejects this in favor of the idea that “The boost in growth has been almost-wholly or more-than absorbed by an expansion of parasitic bureaucracy.”
I actually think both notions are true. When I do my taxes at home with Turbo Tax instead of hiring an accountant, I have reduced GDP. When I get information from Google books rather than get in my car and drive to a library (or bookstore) I am reducing GDP. I am also saving money. Both these things are good for the society. Economist’s “hooked on growth” had better be getting this productivity improvement into their models..
As to the bureaucracy suck, it certainly looks that way in the Pentagon where it now costs about $1 million a year to send one soldier to Afghanistan. I think it cost about $45,000 per year in the Korean war and $85,000 in Vietnam.
Charlton has a third explanation, that “there was *not* in fact a huge boost in productivity.” Which is the better argument? Or are they both true?