Technology and Economic Growth in the Information Age

Policy Backgrounders | Economy

No. 147
Thursday, March 12, 1998
by W. Michael Cox & Richard Alm


Introduction

The idea of rapid progress runs counter to well-publicized reports of an American economy whose growth rate has slipped. Pessimists, citing statistics on weakening productivity and gross domestic product growth, contend the economy isn't strong enough to keep improving Americans' standard of living. They offer a dour view: the generation coming of age today will be the first in American history not to live better than its parents.1

Yet there is plenty of evidence that this generation is better off than any that have gone before, and given the technologies likely to shape the next quarter century, there are reasons to believe that progress will be faster than ever - a stunning display of capitalism's ability to lift living standards. To suppose otherwise would be to exhibit the shortsightedness of Charles H. Duell, commissioner of the U.S. Office of Patents, who in 1899 said, "Everything that can be invented has been invented."

"The usual measures of progress - output and productivity - are losing relevance in this age of increasingly rapid technological advances."

Ironically, though, our economic statistics may miss the show. The usual measures of progress - output and productivity - are losing relevance in this age of increasingly rapid technological advances. As the economy evolves, it is delivering not only a greater quantity of goods and services, but also improved quality and greater variety. Workers and their families will be better off because they will have more time off, better working conditions, more enjoyable jobs and other benefits that raise our living standards but aren't easily measured and therefore often aren't counted in gross domestic product (GDP).

The next quarter century of capitalism promises a silent boom - a rapid economic advance that will improve everyday life but elude the regular readings of the economy's vital signs. Statistical tools simply can't keep up with an economy moving at light speed.2


Read Article as PDF