Computers and Productivity
By Arnold Kling
At lunch today with Robin Hanson, guest blogger Bryan Caplan, and blogging competitor Tyler Cowen, someone brought up the subject of computers and productivity. I am scanning Brad DeLong’s reading list for a course in American Economic History, and naturally he points to something on the topic, by Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh.
Of the 1.57 percentage point increase in ALP [Aggregate Labor Productivity] growth after 1995, 0.86 percentage point was due to capital deepening and 0.80 percentage point due to faster TFP [Total Factor Productivity] growth, with a small decline in labor quality growth of –0.09 percentage point. IT [Information Technology] production accounted for more than 35 percent of the increase in aggregate TFP, far exceeding the 5 percent share of IT goods in aggregate output. This sizable contribution reflects the exceedingly high rates of technological progress in IT production and is manifest in the 9.2 percent per year decline in the price of IT output in 1995-2003. Similarly, 60 percent of the increased capital deepening in 1995-2003 was attributable to IT, although information processing equipment and software accounted for only about one-quarter of private fixed investments in this period. This large contribution reflects both the rapid accumulation of IT capital as prices fell and IT capital’s high marginal product.
For Discussion. How much of what computers routinely do for us now could not have been done by computers prevalent in the 1980’s?