NCPA Study Analyzes the New American Economy: Building the Right Stuff


Dallas - (Tuesday, June 22, 1999) - Just as Henry Ford's assembly line and the resulting practice of mass production revolutionized the United States' economy during the Industrial Age, companies like Texas' Dell Computers and Connecticut's Interactive Custom Clothes look to transform how America's economy works and is quantified in the Information Age.

This, according to a new study published by the National Center for Policy Analysis, is due to a new trend that is becoming a permanent part of the economic lexicon: "mass customization." Mass customization not only promises to change the very way businesses do business, but also the very way economic health is identified and calculated.

Industrial Age technology replaced muscle power with machine power, which ran assembly lines. Information Age technology complements machine power with brain power, enabling businesses to recognize each consumer's preferences and deliver what they want at a reasonable price, the study says.

"What is increasingly shaping today's economy is not the raw power of machines cranking out mass quantities of identical products, but the subtle power of knowledge and technology creating products for a target market of one," said W. Michael Cox, the Chief Economist with the Federal Reserve Bank of Dallas, who co-authored the study.

While most people intuitively understand how mass customization represents an improvement over mass production, the economic benefits are hard to quantify, especially with the rudimentary economic yardsticks now available. Conceived in an era of mass production, the nations' gross domestic product (GDP) and productivity statistics may be able to count more stuff, but they give little credit for the right stuff. For example:

  • GDP is designed merely to measure the number of units produced, but falls far short in measuring intangible benefits like consumer satisfaction. A library with 100 copies of the same book and one with copies of 100 different books would be calculated as the same by GDP measures.
  • GDP accurately measures the gains in society's living standards when technological progress lowers marginal costs, but totally ignores the gains in living standards when technology reduces fixed costs.
  • GDP also fails to accurately take into account the benefits to society of technological advance in areas such a medicine. Scientists who discover vaccines save countless lives and untold pain and suffering, but shut down whole industries dedicated to research, treatment, fund-raising and public education -- all of which add to GDP.

Said Cox: "From computers to clothing to cars, technology is allowing consumers to get more personalization at mass-production prices. As we move into the 21st Century, we are moving into a new economic era, one where consumers will be better off than ever before -- because we'll live in a world of our own design."