Productivity paradox

The productivity paradox refers to the slowdown in productivity growth in the United States in the 1970s and 80s despite rapid development in the field of information technology (IT) over the same period. During that time, despite dramatic advances in computer power and increasing investment in IT, productivity growth slowed down at the level of the whole U.S. economy, and often within individual sectors that had invested heavily in IT. While the computing capacity of the U.S. increased a hundredfold in the 1970s and 1980s, labor productivity growth slowed from over 3% in the 1960s to roughly 1% in the 1990s. This perceived paradox was popularized in the media by analysts such as Steven Roach and Paul Strassman, and the concept is sometimes referred to as the Solow computer paradox in reference to Robert Solow's 1987 quip, "You can see the computer age everywhere but in the productivity statistics." The paradox has been defined as a perceived "discrepancy between measures of investment in information technology and measures of output at the national level."

Many observers disagree that any meaningful "productivity paradox" exists and others, while acknowledging the disconnect between IT capacity and spending, view it less as a paradox than a series of unwarranted assumptions about the impact of technology on productivity. In the latter view, this disconnect is emblematic of our need to understand and do a better job of deploying the technology that becomes available to us rather than an arcane paradox that by its nature is difficult to unravel. Some point to historical parallels with the steam engine and with electricity, where the dividends of a productivity-enhancing disruptive technology were reaped only slowly, with an initial lag, over the course of decades, due to the time required for the technologies to diffuse into common use, and due to the time required to reorganize around and master efficient use of the new technology. As with previous technologies, an extremely large number of initial cutting-edge investments in IT were counterproductive and over-optimistic. Some modest IT-based gains may have been difficult to detect amid the apparent overall slowing of productivity growth, which is generally attributed to one or more of a variety of non-IT factors, such as oil shocks, increased regulation or other cultural changes, a hypothetical decrease in labor quality, a hypothetical exhaustion or slowdown in non-IT innovation, and/or a coincidence of sector-specific problems.

...
Wikipedia