How ICT measures up to other great inventions in history
Has the impact of ICT changed the world as much as earlier technological innovations - like electricity or the internal combustion engine?
Ericsson takes great interest in understanding how ICT impacts economic development and a number of studies have shown that ICT has been driving productivity and economic growth globally.
Nevertheless, in his seminal book The Rise and Fall of American Growth (Princeton University Press), professor Robert Gordon at the Northwestern University in Illinois concludes that productivity grew far more quickly during the period 1920–1970 compared to the period after 1970 in the US. Gordon concludes that the pace of innovation since 1970 has not been as broad or as deep as that spurred by innovations starting in the 1920s.
We beg to differ on this conclusion. It is too early to evaluate the full economic impact of mobile communications or the Internet, and it is possible that the Internet of Things (IoT) will dramatically change production in the 2020s to the same extent as electric motors did in the 1920s.
Gordon argues that since the 1920s everyday life has changed in so many dimensions, including those associated with electricity, the internal combustion engine, health, working conditions and the networking of the home. Progress after 1970 has been more narrowly focused on entertainment, communication, and information technology, areas in which progress did not arrive with a great and sudden burst as for the great inventions of the past.
Gordon’s book provides a thorough exposé of the fantastic increase in the standard of living in the US based on both qualitative and quantitative sources. One example is that the average number of hours worked per week decreased from 60 hours in early 1900 to 40 hours by the 1940.
Yet, when it comes to analyzing the economic impact from innovations after 1970, we believe that Gordon misses two important points.
Firstly, the enormous impact of ICT outside of the US economy is omitted. The price of computing power contained in the Cray-1 super computer in 1976, fell from US$ 8.8 million to US$ 0.6 in 2014. This tremendous price fall cannot be rivalled by electric motors or combustion engines. Moreover, the decrease in prices of ICT products has enabled diffusion of these products to many developing countries at a rate not equivalent to earlier technological breakthroughs. For example, Q3 2016 there are 5.1 billion mobile subscribers! Taking into account economic development in China, India, Brazil, Indonesia and a number African countries, it is not so obvious that the economic impact of the ICT-revolution has been less important than that of electricity and combustion engines.
Secondly, Gordon’s stance is primarily built on the fact that productivity growth was considerably higher in 1920-1970 compared to the period 1970-2014. However, electricity and the internal combustion engine were invented much earlier than the 1920s. There is a lag from invention until there is any discernible economic impact. The Internet started to be used on a wide scale first in the 1990s and it was only quite recently that machines started to be connected.
As we stated in the beginning, it is too early to evaluate the full economic impact of mobile communications or the Internet. In addition, it is possible that the Internet of Things (IoT) will dramatically change production in the 2020s to the same extent as electric motors did in the 1920s.
Economists as well as engineers will find great value in reading Gordon’s book, even if it still remains to be proven that ICT has not yet measured up to the great inventions of the past.
To read more about this subject, these are some recommendations:
Gordon, Robert J. (2016), The Rise and Fall of American Growth, Princeton University Press, Oxford and Princeton.
Edquist, Harald and Henrekson, Magnus (2016), Do R&D and ICT Affect Total Factor Productivity Growth Differently, Telecommunications Policy, Forthcoming.