Is tech­nol­ogy hurt­ing pro­duc­tiv­ity?

It is pos­si­ble that new tech­nolo­gies are not just do­ing less to boost pro­duc­tiv­ity than past in­no­va­tions. They may ac­tu­ally have neg­a­tive side ef­fects that un­der­mine pro­duc­tiv­ity growth, and that re­duce our well­be­ing in other ways as well.

Financial Nigeria Magazine - - Contents -

In re­cent years, pro­duc­tiv­ity growth in de­vel­oped economies has been stag­nat­ing. The most prom­i­nent ex­pla­na­tions of this trend in­volve tech­nol­ogy. Tech­no­log­i­cal progress is sup­posed to in­crease economies’ pro­duc­tiv­ity and po­ten­tial growth. So what’s go­ing on?

Har­vard’s Martin Feld­stein has ar­gued per­sua­sively that pro­duc­tiv­ity growth is ac­tu­ally higher than we re­al­ize, be­cause gov­ern­ment sta­tis­tics “grossly un­der­state the value of im­prove­ments in the qual­ity of ex­ist­ing goods and ser­vices” and “don’t even try to mea­sure the full con­tri­bu­tion,” of new goods and ser­vices. Over time, he as­serts, these mea­sure­ment er­rors are prob­a­bly be­com­ing more im­por­tant.

North­west­ern Uni­ver­sity’s Robert Gor­don is less op­ti­mistic. He has ar­gued – also per­sua­sively – that to­day’s in­no­va­tions in ar­eas like in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy (ICT) can­not be ex­pected to have as big an eco­nomic pay­off as those of the past, such as elec­tric­ity and the au­to­mo­bile.

But it’s pos­si­ble that ICT and other new tech­nolo­gies are not just do­ing less to boost pro­duc­tiv­ity than past in­no­va­tions; they may ac­tu­ally have some neg­a­tive side ef­fects that un­der­mine pro­duc­tiv­ity and GDP growth. One need not be a mod­ern-day Lud­dite to ac­knowl­edge the po­ten­tial pro­duc­tiv­ity pit­falls of tech­no­log­i­cal in­no­va­tion.

The first might seem ob­vi­ous: tech­no­log­i­cal dis­rup­tion is, well, dis­rup­tive. It de­mands that peo­ple learn new skills, adapt to new sys­tems, and change their be­hav­iour. While a new it­er­a­tion of com­puter soft­ware or hard­ware may of­fer more ca­pac­ity, ef­fi­ciency, or per­for­mance, those ad­van­tages are at least partly off­set by the time users have to spend learn­ing to use it. And glitches of­ten be­devil the tran­si­tion.

The fast-chang­ing na­ture of to­day’s dig­i­tal tech­nolo­gies also raises se­cu­rity chal­lenges. Spam, viruses, cy­ber­at­tacks, and other kinds of se­cu­rity breaches can im­pose ma­jor costs on busi­nesses and house­holds.

Then there is the im­pact that con­nec­tiv­ity has on our daily lives, in­clud­ing our abil­ity to work and learn. Non-work emails, so­cial me­dia, In­ter­net videos, and videogames can eas­ily dis­tract em­ploy­ees, off­set­ting at least some of the pro­duc­tiv­ity-rais­ing po­ten­tial of that same con­nec­tiv­ity. Such dis­ad­van­tages may be­come even more pro­nounced when work­ers telecom­mute.

Similarly, the smart phone has shaped the minds of young peo­ple, who barely re­mem­ber what it was like be­fore ad­dic­tive ac­tiv­i­ties – from video games to so­cial me­dia – were con­stantly at their fin­ger­tips. Ac­cord­ing to one re­cent study, recre­ational com­puter ac­tiv­i­ties partly ex­plain a de­cline in labour sup­ply among men ages 21 to 30. More­over, re­search shows that lap­tops in the class­room slow stu­dent learn­ing, even when used to take notes, rather than surf the web.

More­over, smart phones un­der­mine phys­i­cal safety in some con­texts. In the

United States, the Na­tional High­way Traf­fic Safety Ad­min­is­tra­tion re­ports that 3,477 peo­ple were killed and 391,000 were in­jured in mo­tor ve­hi­cle crashes in­volv­ing dis­tracted driv­ers in 2015, with tex­ting be­ing the big­gest cul­prit, par­tic­u­larly among young peo­ple.

Dig­i­tal cur­ren­cies like Bit­coin have also so far failed to live up to the hype sur­round­ing them. Far from be­ing more ef­fi­cient as a means of pay­ment or store of value than con­ven­tional money, cryp­tocur­ren­cies seem to en­cour­age the diversion of re­sources away from pro­duc­tive uses. They also harm the en­vi­ron­ment, owing to the en­er­gy­in­ten­sive “min­ing” process, while the to­tal anonymity they of­fer un­der­mines law en­force­ment.

Be­yond new tech­nolo­gies’ di­rect and in­di­rect neg­a­tive ef­fects on pro­duc­tiv­ity, there is a risk that they are un­der­min­ing peo­ple’s qual­ity of life. Few peo­ple have pos­i­tive feel­ings about, say, the au­to­matic phone calls that have come to plague many of our lives.

Then there is the ever-present “fake news” prob­lem. The ad­vent of dig­i­tal “new me­dia” was once her­alded as a de­moc­ra­tiz­ing trend that would give or­di­nary peo­ple a mea­sure of con­trol over the “air waves,” at the ex­pense of big com­pa­nies or es­tab­lished in­sti­tu­tions. But it has lately be­come ap­par­ent that “de­moc­ra­tiz­ing” in­for­ma­tion may not ac­tu­ally be good for democ­racy. For ex­am­ple, fake news has been found to spread faster on Twit­ter than true news. This has not only made cit­i­zens less in­formed in many cases; it has also en­abled pub­lic fig­ures – most no­tably, US Pres­i­dent Don­ald Trump – to dis­miss the truth as “fake.”

And these are just the down­sides of in­for­ma­tion tech­nol­ogy. Other tech­no­log­i­cal in­no­va­tions with ma­jor ob­vi­ous draw­backs in­clude opi­ate painkillers and in­creas­ingly ad­vanced weaponry.

To be clear, I am not sug­gest­ing that the net ef­fects of re­cent tech­no­log­i­cal ad­vances are neg­a­tive. On the con­trary, many have de­liv­ered huge ben­e­fits, and that will prob­a­bly con­tinue to be the case.

Tech­nolo­gies may have pro­duc­tiv­ity rais­ing po­ten­tial that is yet to be tapped. His­to­ri­ans like Paul David and tech­nol­ogy ex­perts like Erik Bryn­jolf­s­son, Daniel Rock, and Chad Syver­son ar­gue that it has al­ways taken time for ma­jor break­throughs (like the steam en­gine, elec­tric­ity, or the au­to­mo­bile) to yield net eco­nomic gains, be­cause busi­nesses, build­ings, and in­fra­struc­ture need to be re-con­fig­ured. Pre­sum­ably the same will hap­pen with re­cent tech­nolo­gies.

But this is not a rea­son to ig­nore the neg­a­tive con­se­quences of new in­no­va­tions. As a group of Sil­i­con Val­ley tech­nol­o­gists has warned, “Tech­nol­ogy is hi­jack­ing our minds and so­ci­ety.” We must take back con­trol, en­sur­ing that we do not just make our world “smarter,” but also make sure we are smart about how we use it.

Jef­frey Frankel, a pro­fes­sor at Har­vard Uni­ver­sity's Kennedy School of Gov­ern­ment, pre­vi­ously served as a mem­ber of Pres­i­dent Bill Clin­ton’s Coun­cil of Eco­nomic Ad­vis­ers. He is a re­search as­so­ciate at the US Na­tional Bu­reau of Eco­nomic Re­search, where he is a mem­ber of the Busi­ness Cy­cle Dat­ing Com­mit­tee, the of­fi­cial US ar­biter of re­ces­sion and re­cov­ery. Copy­right: Project Syn­di­cate

Re­search shows that lap­tops in the class­room slow stu­dent learn­ing, even when used to take notes, rather than surf the web.

Jef­frey Frankel

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