Technology and Economic Growth in the Information Age

Policy Backgrounders | Economy

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


Notes

  1. Just the doomsday book titles alone are enough to scare us to death. A long list, it would include: Dr. Ravi Batra, The Pooring of America: Competition and the Myth of Free Trade (New York: Collier Books, 1994); Jeffrey Madrick, The End of Affluence: The Causes and Consequences of America's Economic Dilemma (New York: Random House, 1995); Katherine S. Newman, Declining Fortunes: The Withering of the American Dream (New York: Basic Books, 1993); Wallace C. Peterson, Silent Depression: the Fate of the American Dream (New York: W.W. Norton, 1994); and Juliet B. Schor, The Overworked American: The Unexpected Decline of Leisure (New York: Basic Books, 1993).
  2. For a discussion of these aspects, see W. Michael Cox and Richard Alm, "The Economy at Light Speed: Technology and Growth in the Information Age and Beyond," Annual Report, Federal Reserve Bank of Dallas, 1996, pp. 2-17.
  3. The list of inventors' failed endeavors would fill books. For an amusing and instructive exploration of this topic see Kenneth Larson, Mousetraps and Muffling Caps: One Hundred Brilliant and Bizarre United States Patents (New York: Arbor House, 1986).
  4. Joseph Schumpeter understood the capitalist mechanism quite clearly when he wrote "Economists are at long last emerging from the stage in which price competition was all they saw. In capitalist reality...it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization....Competition which...strikes...existing firms...at their foundations and their very lives. This kind of competition is ... much more effective than the other... and [is]...the powerful lever that in the long run expands output." Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper & Brothers Publishers, 1950), p. 84.
  5. U.S. Bureau of the Census, Statistical Abstract of the United States: 1996 (116th edition) (Washington, D.C., 1996), Table No. 855, "New Product Introductions of Consumer Packaged Products: 1980 to 1994," p. 548.
  6. Otis Port, "Look Ma, No Hands," Business Week, August 14, 1995, pp. 80-81.
  7. John Carey, "Tilling the Soil by Satellite," Business Week, December 11, 1995, p. 112; Phil Scott, "Never Get Lost Again," Reader's Digest, August, 1996, pp. 54-59; "Who Uses GPS and for What?" Time Service Department, U.S. Naval Observatory, http://tycho.usno.navy.mil/gps_apps.html (17 Feb. 1997); "Cadillac Systems Integration and Engineering Preeminence," press release, August 14, 1995, Cadillac Motor Car Division, General Motors Corp., Detroit, Mich.
  8. Neil Singer, "Sandia team produces intelligent micromachines," March 15, 1996, Sandia National Research Laboratories, Albuquerque, N.M., http://www.sandia.gov (Dec. 17, 1996).
  9. "The Human Genome: the proper study of mankind," Economist, September 14, 1996, p. 19; Naomi Freundlich, "Die young - at an old age," Business Week, October 7, 1996, pp. 154-156; "The Human Genome Project: From Maps to Medicine," U.S. Department of Health and Human Services, Public Health Service, National Institutes of Health, NIH Publication No. 96-3897.
  10. For other examples of recent technological progress, see "Measuring atoms: micro, nano, pico, femto," Economist, October 14, 1995, pp. 98-99; John Carey, "Science's New Nano Frontier," Business Week, July 1, 1996, pp. 101-102; "Sowing cells, growing organs," Economist, January 6, 1996, pp. 65-66.
  11. Authors' own ranking based on the extent to which the invention is subsequently connected to other inventions or industries. For a discussion of the subject, see James Burke, Connections (Boston: Little, Brown and Company, 1978).
  12. For a list of inventions and their dates, see W. Michael Cox and Richard Alm, "The Service Sector: Give It Some Respect," Annual Report, Federal Reserve Bank of Dallas, 1994, Exhibit 10, "Tools of the Ages," p.15, and Peter North, The Wall Chart on Science and Invention (New York: Dorset Press, 1991).
  13. U.S. Bureau of the Census, Statistical Abstract of the United States, various issues; Historical Statistics of the United States: Colonial Times to 1970, Part I, 1975; Cellular Telecommunications Industry Association, "Wireless Growth Sets New Annual Records," media release, September 19, 1996; and The World Almanac Book of Facts 1997, ed. Robert Famighetti (Mahwah, N.J.: World Almanac Books, 1996).
  14. William D. Nordhaus, "Do real output and real wage measures capture reality? The history of light suggests not," Yale Cowles Foundation Discussion Paper No. 1078, September 1994.
  15. Michael J. Boskin, prepared statement in "Consumer price index: hearings before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 109-115.
  16. U.S. researchers, say, can travel in seconds from Ukraine to the U.K. in cyberspace at virtually no cost, whereas alternative modes of travel would cost thousands of dollars. As living standards rise, the needs fulfilled are more intangible.
  17. John P. Robinson and Ann Bostrom, "The overestimated workweek? What time diary measures suggest," Monthly Labor Review, No. 117, August 1994, pp. 11-23.
  18. For a discussion of the changing nature of progress itself, see C. Owen Paepke, The Evolution of Progress (New York: Random House, 1993).

Selected References

Advisory Commission to Study the Consumer Price Index, "Toward a More Accurate Measure of the Cost of Living: Final Report to the Senate Finance Committee," December 4, 1996.

Batra, Dr. Ravi, The Pooring of America: Competition and the Myth of Free Trade (New York: Collier Books, 1994).

Berndt, Ernst R., Zvi Griliches and Neal Rappaport, "Econometric Estimates of Prices Indexes for Personal Computers in the 1990s," National Bureau of Economic Research Working Paper Series, No. 4549, November 1993.

Boskin, Michael J., prepared statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 109-115.

Burke, James, Connections (Boston: Little, Brown and Company, 1978).

Burns, Arthur F., Production Trends in the United States Since 1870 (New York: National Bureau of Economic Research, 1934).

Cellular Telecommunications Industry Association, "Wireless Growth Sets New Annual Records," media release, September 19, 1996.

Congressional Budget Office, Is the Growth of the CPI a Biased Measure of Changes in the Cost of Living? (Washington, D.C.: Congressional Budget Office, October 1994).

Darby, Michael R., prepared statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 173-176.

Diewert, W. Erwin, prepared statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 115-118.

Famighetti, Robert, ed., The World Almanac and Book of Facts 1997 (Mahwah, N.J.: World Almanac Books, 1996).

Foulkes, Fred K., Creating More Meaningful Work (New York: American Management Association, 1969).

Gordon, Robert J., prepared statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 122-126.

Greenspan, Alan, prepared statement in "Review of Congressional Budget Cost Estimating: Joint Hearing Before the House of Representatives Committee on the Budget and the Senate Committee on the Budget," Serial no. 104-1, U.S. Government Printing Office, 1995, pp. 130-149.

Greenwood, Jeremy, and Mehmet Yorukoglu, "1974," Carnegie- Rochester Conference Series on Public Policy, forthcoming.

Griliches, Zvi, prepared statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 129-132.

Jorgenson, Dale W., statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 36-41.

Klumpner, Jim, "Fact and Fancy: CPI Biases and the Federal Budget," Business Economics 31 (April 1996): pp. 22-29.

Larson, Kenneth, Mousetraps and Muffling Caps: One Hundred Brilliant and Bizarre United States Patents (New York: Arbor House, 1986).

Lebow, David E., John M. Roberts and David J. Stockton, "Monetary Policy and the Price Level,' " mimeo, Federal Reserve Board, 1994.

Madrick, Jeffrey, The End of Affluence: The Causes and Consequences of America's Economic Dilemma (New York: Random House, 1995).

Moulton, Brent R., "Bias in the Consumer Price Index: What Is the Evidence?" Journal of Economic Perspectives 10 (Fall 1996), pp. 159-177.

Nakamura, Leonard, "Is the U.S. Economy Really Growing Too Slowly? Maybe We're Measuring Growth Wrong," Federal Reserve Bank of Philadelphia Business Review, forthcoming; "Is U.S. Economic Performance Really that Bad?" Federal Reserve Bank of Philadelphia Working Paper No. 95-21/R, April 1996; "Measuring Inflation in a High-Tech Age," Federal Reserve Bank of Philadelphia Business Review, November/December 1995, pp. 13-25.

National Safety Council, "Work, 1995" in Accident Facts, 1996 edition (Itasca, Ill.: National Safety Council, 1996).

Newman, Katherine S., Declining Fortunes: The Withering of the American Dream (New York: Basic Books, 1993).

Nordhaus, William D., "Do Real Output and Real Wage Measures Capture Reality? The History of Light Suggests Not," Yale Cowles Foundation Discussion Paper No. 1078, September 1994.

North, Peter, The Wall Chart of Science and Invention (New York: Dorset Press, 1991).

Paepke, C. Owen, The Evolution of Progress (New York: Random House, 1993).

Pakes, Ariel, statement in "Consumer Price Index: Hearings Before the Committee on Finance, United States Senate," Senate Hearing 104-69, U.S. Government Printing Office, 1995, pp. 44-48.

Peterson, Wallace C. Peterson, Silent Depression: the Fate of the American Dream (New York: W.W. Norton, 1994).

Price, C. W., Orval Simpson, Dale Wolf, Charles Woodward, F. J. Moss, W. R. Basset and Others, Working Conditions, Wages and Profits (Chicago: A. W. Shaw, 1920).

Robinson, John P., and Ann Bostrom, "The Overestimated Workweek? What Time Diary Measures Suggest," Monthly Labor Review 117 (August 1994), pp. 11-23.

Schor, Juliet B., The Overworked American: The Unexpected Decline of Leisure (New York: Basic Books, 1993).

Schumpeter, Joseph, Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, vol. 2 (New York: McGraw-Hill, 1939).

Schumpeter, Joseph A., Capitalism, Socialism, and Democracy (New York: Harper & Brothers Publishers, 1950).

Shapiro, Matthew D., and David W. Wilcox, "Mismeasurement in the Consumer Price Index: An Evaluation," NBER Macroeconomics Annual 1996 (Cambridge, Mass.: MIT Press, 1996), pp. 93-142.

Sherwood, Mark K., "Difficulties in the Measurement of Service Outputs," Monthly Labor Review 117 (March 1994), pp. 11-19.

Slifman, L., and C. Corrado, "Decomposition of Productivity and Unit Costs," Board of Governors of the Federal Reserve System, mimeo, November 18, 1996.

W. E. Upjohn Institute for Employment Research, Work in America: Report of a Special Task Force to the Secretary of Health, Education and Welfare (Cambridge, Mass.: MIT Press, 1973).

U.S. Bureau of the Census, Statistical Abstract of the United States, various years; Historical Statistics of the United States: Colonial Times to 1970, Part 1, 1975.

U.S. Department of Energy, Energy Information Administration, Housing Characteristics (Washington, D.C.: Government Printing Office, various years).

U.S. Department of Labor, Bureau of Labor Statistics, Compensation and Working Conditions, June 1996; CPI Detailed Report: Data for January 1994, March 1994.

Veblen, Thorstein, The Theory of the Leisure Class: An Economic Study of Institutions (New York: MacMillan, 1899).

Wynne, Mark A., and Fiona D. Sigalla, "The Consumer Price Index," Federal Reserve Bank of Dallas Economic Review, Second Quarter 1994, pp. 1- 22. ISBN #1-56808-035-2


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