• Yes. The big gains in the 20th century resulted from transformative innovations that are much rarer today.
  By Tyler Cowen
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  Technologies such as electricity, automobiles, radios, and airplanes transformed the way we lived and worked in the last century. Innovations today, including the Internet, have less impact on our lives—and our productivity.
• No. We’ve only just begun to reap the productivity benefits of digital technology.
  By Andrew McAfee and Erik Brynjolfsson
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  • 

  
  As ubiquitous as the computer chip seems, there are still areas, such as mining and agriculture, that have yet to take full advantage of it. In addition, the technology itself keeps improving. This means the opportunities for productivity gains will keep increasing as well.

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• Digital technology in these very days opens up to a New era in 3D CAD and product development technologies.

  Only last week PTC (NASDAQ: PMTC) and a host of partners ranging from Microsoft (NASDAQ:MSFT), to 3D Systems, Nvidia (NASDAQ:NVDA), Dell (NASDAQ:DELL) and HP (NYSE:HPQ) engaged a large customer base in presenting and discussing the strategy for supporting ever faster new product development process.

  As Chief Information Officer of a discrete manufacturing company, I had decided to be an early adopter of CREO, the latest development in CAD that allows for flexible modeling processes, and was able to present the first product developed with this tool.

  In a number of industrial sectors, corporations have tackled the economic crisis by speeding up the launch of new products and shortening their supply chains. This can be seen as growing trend since outsourced operations in China (and other low cost countries) suffer from steep increases in labor and freight costs.

  It is therefore logical to think that the wave of investments in these technologies, supporting faster and more collaborative product development that allow manufacturing to be closer to consumers and thus relocate to US, is set to grow.
  Indeed CREO and the latest generation of 3D technologies do provide manufacturing companies an important support in the key areas of product development and manufacturing and supply chain operations, hence in improving farther our productivity.

  Posted 23 June 2011, 14:22 by Roberto Dolci

• Gains of technology (like internet, ICT etc.) might take a while to flow through into the home economy as not the entire world is yet a “connected world”. Majority of investments in such technologies were initiated by developed countries while rest of the world started reaping the benefits earlier. Once a major portion of the interacting economies trade two way commerce of equal scale, the benefits start showing up.

  Posted 6 June 2011, 04:03 by RK Bhardwaj

• Although both sides make excellent points, I have little doubt there is an unimaginable stream of innovative ideas ahead which will surely bring some country a huge success.

  I believe the basic question is simply if the USA will continue to be the primary country where the people behind those ideas choose to set up shop. If it is, the USA economy will continue to grow and remain the unchallenged leader for years and years. If those ideas (and the people driving them) go outside the USA then the future will be a gradual winding down of a great giant.

  To ensure the USA remains strong over the long run (next 25 to 50 years) I believe there must be a radical shift in the USA. Living and building businesses in Singapore for the past 16 years is a stark contrast to the USA. Government and policy is focused on attracting successful leaders and winning companies to establish operations here.

  The USA business and political environment must regain competitiveness (visa vi other countries) and therefore US needs a series of policy changes at the highest levels of government for the USA to retain/regain its lead in the next years of the global economy:

  o Tax-both personal income tax as well as investment & capital gains

  o SME- government incentives need to be made realistic, truly be accessible and helpful in the formation of new SME’s

  o Deregulation-the Wall Street Journal reports >80,000 pages of new legislation in the pipeline, the US needs old fashioned practical common sense forced onto the legislature

  o Immigration law-attract and retain smart productive people, especially those who have gone through university in the USA

  o Education- although the US is arguably the best already, is there enough focus on innovation and entrepreneurs?

  I would highly recommend a read though this brief summary and adaptation to corportat innovatio of Arnold Toynbee’s thesis “A Study of History” (http://philippesilberzahneng.wordpress.com/2010/04/01/loss-of-creative-capacity-cause-of-organizational-decline ), Although a bit too black and white regarding adminstrators versus entreprenures for my taste the overall message is very provactive. I found this key note very timely, particularly around the concept of how long the momentum of a fallen leader can mask fundamental failure.

  Where can the USA find political leadership with the ideas, will, and capacity to drive such massive and significant change?

  Posted 5 June 2011, 22:55 by Scott Mac Meekin

• It’s not that the computer-IT-Internet don’t hold additional potential, it’s that it is the optimists’ only hope. Almost all of the potential of this paradigm is already exhausted in developed countries. For comparison, try going back to corporate accounting, book keeping, billing and ordering with tabulating machines and mechanical adding machines.

  Comparing the computer-IT-Internet paradigm to the great inventions is nonsense.
  Two –thirds of the world’s population would not exist without chemical fertilizers and high yield crop varieties developed by Green Revolution, and the average person in what are developed countries would not have disposable income if agriculture were not mechanized.

  Extensive urbanization is only possible with railroad and highway infrastructures and internal combustion engines (or electrified rail). Before these infrastructures, hauling grain more than 125 miles by wagon exhausted the entire value of the cargo.

  People who bull up the internet probably have no understanding of the thousands of pounds of bulk materials and food it takes annually to support each individual in a developed country: sand, gravel, crushed stone, grains, cement, steel, paper, plastics, glass, petroleum, coal, lumber, ores, etc. Working behind the scenes are mining shovels digging minerals, some with buckets as large as 168 cubic meters and consuming the power of a city of 100,000. These materials are automatically loaded onto ships, barges and railcars, sometimes transported thousands of miles, automatically unloaded with conveyors or mobile equipment and processed in massive, automated factories powered with large electric motors. The finished goods are put in shipping containers or loaded into rail cars or trucks on pallets with forklifts, transported to warehouses for distribution to retail outlets. And in all of this, most goods are never touched by human hands.

  Networks of pipelines carry water and gas to our homes, saving women from hauling 100 gallons of water per household member each day and saving men from cutting firewood for heating and cooking. Lastly, there is household electricity, which provides cheap electric light to lengthen our days and run our household appliances.

  These technologies lowered the cost of goods to almost nothing in terms of time worked for their purchase compared to pre-industrial times.

  Every great innovation started with a vision. One of the most interesting visions was interchangeable parts for firearms, a French idea brought to the U.S. by Thomas Jefferson. Interchangeable firearms parts were developed by the U.S. Federal armories over a period of four decades, initially at great expense compared to unique arms made by craftsmen. The system led to the development of better machine tools and methods to produce precision parts was a necessary factor for mass production at Ford Motor ca. 1914.
  Another great U.S. Government sponsored program was the highway system, particularly in the 1930s. The Internet was yet another successful Federal program that we all know of, but practically no one knows of the success of the U.S. Dept. of Agriculture, through county agents, spreading knowledge of modern farming techniques, resulting in previously unheard of crop yields and productivity that greatly lowered the cost of food.

  Now, if the Internet can do anything more to improve the condition of mankind than it has done in the last 15 years, someone please lay out the grand vision. Perhaps we need a program for health care similar to the U.S.D.A’s.

  Posted 5 June 2011, 20:27 by Paul Moreno

• My apologies if my point has been raised before in the comments section. I must admit I have not read all 83 comments published sofar.

  Tyler Cowen states that: “Eventually, the American economy will see some major technological breakthroughs and we will succeed at better exploiting the economic potential of the Internet.”

  Whereas Mrs McAfee & Brynjolfsson point out that: “we predict that productivity growth will continue its recent healthy upward trend. We say this because we see no shortage of opportunities for applying yesterday’s and today’s technologies to current inefficiencies. And there’s still plenty of inefficiency out there.”

  I think the idea that the American economy will be ‘saved’ by some technological breakthrough is unfounded. And I believe that productivity gains should not be reduced to increased process efficiencies. Productivity is as much, if not more, about decision making (doing the right thing) than about improved process efficiencies (doing things right).

  And it is in the decision making part of productivity that the US is failing. Productivity gains in percentage points, although a rather convenient metric, do not provide much value and can be manipulated in many ways. Much more interesting is to compare the US to other countries in terms of performance results. Doing so, the picture becomes clearer:

  - In 2008, the U.S. had fallen from first to third in global merchandise exports. The U.S. trails Japan for worldwide patent applications, but China soon to bypass both. In 2009, the Information Technology and Innovation Foundation reports that the U.S. ranks last among the 49 nations survey when it came to “change” in “global innovation-based competitiveness” in the last decade.

  - After leading the world for decades in 25-34 year olds with university degrees, the U.S. is now in 12th place. The World Economic Forum ranked the U.S. at 52nd among 139 nations in the quality of its university math and science instruction in 2010. Nearly 50% of all graduate students in the sciences in the U.S. are foreigners, most of whom will be returning to their home countries.

  - In the Legatum study, the U.S. ranks 27th for the health of its citizens; life expectancy is below average compared to 30 advanced countries measured by the OECD and obesity is the highest in the U.S. among all those countries. The Legatum Institute, a London-based research firm publishes an annual “prosperity index” and ranks the U.S. 9th, five notches lower than last year. The U.S. poverty level is the third worst among advanced nations according to the OECD. Only Turkey and Mexico are worse.

  - The U.S. ranks 13th in terms of well being according to the United Nations Human Development Index, and ranks 11th in the OECD’s measure of “life satisfaction.” According toe the OECD 15 year olds in the U.S. rank 17th in the world in science and 25th in math. The U.S. ranks 12th among developed countries in college graduation. and 79th in elementary-school enrollment.

  - Ten years ago the U.S. was ranked first in terms of average wealth per adult. In 2010, it fell to 7th.

  - In 2001 the U.S. ranked 4th in the world in per capita broadband Internet use. Today it ranks 15th. The U.S. has lost over 40,000 factories since 2001. The U.S. has lost 32% of all U.S. its manufacturing jobs since the year 2000.

  - Manufacturing employment in the computer industry in the U.S. is at the same level in 2010 that it was in 1975.

  - Median household income in the U.S. has declined between 2009 and 2010, the second year in a row of decline.

  - According to a new study by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at is current rate, the U.S. economy will lose over 500,000 jobs in one year; between 2000 and 2009 America’s trade deficit with China increased nearly 300%.

  - The U.S. federal government spending as a percentage of GDP is now up to about 36%. The Congressional Budget Office is projecting that U.S. government public debt will hit 716% of GDP by the year 2080. 25 percent of the federal budget is spent on the military. The cost for the Iraq and Afghanistan wars is now creeping up to $10 trillion.

  - Fortune magazine’s ranking of the world’s largest companies has only two American firms in the top 10—Wal-Mart at No. 1 and ExxonMobil at No. 3. And there are already three Chinese companies in the top 10. The U.S. ranks 23rd in the world in terms of infrastructure, well behind that of every other major advanced economy.The American Society of Civil Engineers prepared a report card on the state of America’s infrastructure-roads, bridges, dams etc. In the latest version the overall “GPA’ for the U.S. was a “D,” and the cost of bringing all systems up to adequacy, not an “A” was estimated at $2.2 trillion.

  Do I need to go on?

  Whatever productivity gains the US has managed in the last 50 years, the sad conclusion is: the US is losing ground in a big way.

  My point is, technology will not change these rankings, but I believe the right policies will. Doing the right thing is much more important than doing things right.

  (And Peter Drucker is right, again!)

  Etienne Douaze.

  Posted 4 June 2011, 06:36 by Etienne Douaze

• Mr. Cowen alludes to income stagnation despite dramatic gains in productivity, and other research has demonstrated that the profits from productivity gains accrue predominantly to the top of the income scale.

  McAfee and Brynjolfsson are more optimistic about future productivity gains and technology, but essentially ignore the income argument altogether.

  Until the benefits of increased productivity are shared more broadly and used to help return the middle class to social and economic prominence (e.g., driving consumer spending and GDP), the average citizen will not give a damn. Or worse, they will blame technology for the downward mobility of average workers, as has happened before.

  Republican efforts to dismantle social safety-net programs and the evident friendliness of the Roberts Supreme Court to business interests will continue to further alienate the working class until sooner or later they realize they have been behaving against their obvious self-interest.

  Posted 3 June 2011, 17:00 by Stratocaster

• I think that one needs to frame this discussion into a broader macroeconomic context. While the internet may have contrubuted to increasing aggregate productivity, any resulting benefit has affected a decreasing fraction of the population. One has to face the reality that so much of the US population is highly un-educated and increasingly dependent on state subsidies to make a living. So, at best any economic improvement has been very unequally distributed. Furthermore, the productiviy increases have remained concentrated to specific applications. For example, there has been very little or no true innovation in energy generation, energy transport and energy efficiency, and the US is as dependent on hydrocarbon technology as it has ever been. Manufacturing has also been highly neglected and so on and so forth.

  The other troubling factor is the absurdly low level of general education of the US population, especially on subjects like engineering and other practical specialties.

  Finally, the US economy is undergoing the effects of a massive deleveraging cycle, which needs to work itself through the system and is going to have an impact on the economy besides any future changes in productivity.

  It is conceivable that the US will eventually start a new wave of innovation. However, more painful stages may be required before that happens. Practically speaking, there are strongly entrenched components of the US society that will defend the status quo until the very end and oppose the adoption of new technology, in particular in the energy generation sector. History teaches that major paradigm shifts do not happen just because of innovation, but because of seismic changes in the fabric of a society, as such transitions are hardly ever smooth and continuous. This consitutes the essence of Kondratieff types long cycles.

  In practical terms, it may mean that the US economy may need to get further into a critical stage before a new serious wave of innovation will take place and the existing establishment can be replaced.

  As an historical anecdote, it is interesting to note that most major empires in the past thrived by one specific technology and withered when that one technology became unable to sustain continued expansion. Eventually new powers based on new technologies would emerge, but not until prolonged “middle ages” types of periods.

  It is always tempting to say that “this time is different” because, in this case, of intenet technology, but this is hardly ever the case.

  Posted 3 June 2011, 12:37 by Andrea Malagoli

• Productivity is most commonly defined as the output of an individual effort over a period of time. In the case of both of these articles the output of an individual employee over a period of time.

  With this definition of productivity in mind I strongly contend that the U.S. isn’t about to stagnate unless internal forces are exerted to create stagnation (ie. – punishing people for higher productivity by denying them the fruits of their labors). Few nations have as much access to the vast libraries of information contain on the internet as Americans do. While knowledge isn’t innovation or productivity it is necessary to create the innovations that lead to higher productivity. Additionally the popularity of social media site such as Facebook and Linked-in provide for collaboration research on an unprecedented level. The “social media factor” to the productivity puzzle has not been researched enough to provide any credible inferences as to how much impact it could have, but my personal experiences with various groups on linked-in has provided me with insight and case studies that would have taken my father’s generation a lifetime to accumulate.

  Finally as a professional trainer & consultant I spend thousands of hours each year teaching people to apply accepted standards and standardized practices to their work. By my estimation an additional 25% efficiency could easily be gained from wider acceptance of ANSI / IEEE / ASME / NIST, and other industry standards. Employees need to stop reinventing the wheel and spend more time finding applications for it. That’s what creates revenue for companies and demonstrates measureable productivity gains.

  Posted 3 June 2011, 12:09 by Michael Adcock

• ‘Frozen’ rules laws customs are retarding social change in much of the West, esp the USA. Tech change has been hiding the stagnation, not so successfully now. Looking at another person or culture can help one become more self-aware. PRChina has similar rigidity, and that culture has a yin yang – with ‘anything goes’ when out of sight. Shan zhai lives in that ‘out of sight’ – out of control space. It matches the skunkworks and jugaad, and agile development patterns.

  Allowing shan zhai into for example the US medical and military would create huge cost & efficiency changes.

  Posted 3 June 2011, 11:09 by vic williams

• People will not be fully engaged in work or productivity when they are scared and living without hope of a better future. Most have no trust in the system or the government…

  Posted 3 June 2011, 10:32 by Jim of Perth, Western Australia

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