NCPA - National Center for Policy Analysis

Is The Economy Carrying Its Weight?

March 26, 1999

Chris Meyer, director of Ernst & Young's Center for Business Innovation, is looking at the economy from an intriguing new perspective: how much it weighs.

Pound for pound, Americans are producing less today -- but those pounds are worth more. For example, a laptop computer is more valuable the smaller and lighter it is. Weight-producing parts of the economy, such as farming, construction, manufacturing and mining, have declined in importance compared to "light-weight" activities, such as services, retail and transportation.

  • In 1977, the average American produced 5,300 pounds of output.
  • But by 1997, he accounted for just 4,100 pounds -- a 23 percent drop.
  • The value of each pound of output, however, had surged to $6.52 -- a 79 percent increase.
  • Meyer estimates that 90 percent of the value of the average car is in the on-board and factory software -- light-weight items compared with the steel involved.

While working for ITT in 1980, Meyer was trying to teach the European Ministry of Post, Telephone and Telegraph about telephone switches. The problem was the ministry paid for switches by the pound. So it considered the bulky mechanical switches more valuable than the new digital switches.

Source: Macroscope, "What Does Economy Weigh?" Investor's Business Daily, March 26, 1999.

 

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