Computers appeared everywhere except in the productivity statistics.
Solow's line of 1987 named a real puzzle: American productivity growth stayed weak through two decades of heavy computer investment. The explanations that survived were mismeasurement of output, long lags while firms reorganised themselves around the technology, and gains captured by some firms at the expense of others. Measured productivity growth accelerated in the late 1990s, which is generally treated as the paradox closing.
In practice
- A firm buys a system that saves each clerk an hour a day, and total output does not move, because the hour goes to work that was already waiting.
- A department automates its reporting and hires two people to manage the reports.
- Standing
- Historically resolved for computers. Whether the same lag explains the figures for today's technologies is an open question rather than a settled one. Compare Jevons's paradox and the irony of automation.
- Subject
- Economics & Incentives
- Essay
- Rules for choosing, and the paradoxes that humbled the theory