NCPA - National Center for Policy Analysis

Machine Tools: An Overlooked Factor In Productivity Gains?

September 28, 2000

A report being released today suggests that consumers have saved billions of dollars over the past five years because of technological, material and process advances in the manufacturing of machine tools -- which are employed in the making of everything from cars to air conditioners to airplanes.

The report, prepared for the Association for Manufacturing Technology by Joel Popkin & Co., concludes that:

  • Advances in machine tools have helped drive down the costs and enhanced the quality and energy efficiency of durable goods in recent years.
  • Indeed, with durable goods prices remaining flat from 1996 to 1999, consumers have saved in excess of $101 billion.
  • Increased productivity in durable-goods manufacturing has added $618 billion to gross domestic product between 1992 and 1998.
  • To give an example, the introduction of a new kind of compressor whose manufacture required machine tools with a precision down to 10-millionths of a meter, allowed a 10 percent cut in the energy use of air conditioners between 1990 and 1997.

Two academic studies of recent productivity gains have found that more than half of the increase has occurred outside the computers, software and telecommunications sectors.

Economists say that sizable productivity gains have yet to be explained. But the manufacturing sector, of which machine tools are a critical part, has probably been a substantial contributor.

Source: Steve Liesman, "Crucial Driver of U.S. Productivity Gains May Be Improvements in Machine Tools," Wall Street Journal, September 28, 2000.


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