(p. A2) In a recent paper Erik Brynjolfsson and Daniel Rock of the Massachusetts Institute of Technology and Chad Syverson of the University of Chicago note electric motors based on alternating current were introduced in the late 1800s but even by 1919 half of U.S. factories still weren’t electrified. The integrated circuit was commercialized in the 1960s yet 25 years later computers still represented just 5% of the value of all business equipment. Indeed, since the introduction of computers labor productivity has behaved much as it did after the introduction of electric motors and the internal combustion engine.
The authors blame these lags on the cost and time it takes for businesses to adapt to new technologies, obstacles they see at work today. Online shopping came along in the 1990s but retailers struggled to adapt business processes to the internet. They needed to build complementary infrastructure such as fulfillment centers, and, the authors note, customers had to adapt their habits, as well.
. . .
. . . perhaps the U.S. is at a point when technology and an economy growing solidly with low unemployment become mutually reinforcing. “Entrepreneurs are more willing to take risks, including investments in new technologies and new business models when the economy is running hotter,” says Mr. Brynjolfsson. “This will speed up the adoption of the kinds of conventions needed to take full advantage of artificial intelligence and other new technologies,” he said.
For the full commentary, see:
Greg Ip. ”CAPITAL ACCOUNT; Technology-Driven Boom Is Finally Coming.” The Wall Street Journal (Thurs., December 28, 2017): A2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 27, 2017, and has the title ”CAPITAL ACCOUNT; A Tech-Driven Boom Is Coming; Please Be Patient.”)
The Brynjolfsson, Rock and Syverson paper, mentioned above, is:
Brynjolfsson, Erik, Daniel Rock, and Chad Syverson. “Artificial Intelligence and the Modern Productivity Paradox: A Clash of Expectations and Statistics.” NBER Working Papers # 24001. National Bureau of Economic Research, Inc., Nov. 2017.