Whither productivity

Monthly Labor Review, August, 2001

It may be that the oft-remarked refusal of measured productivity to soar immediately after the invention of the microchip is the extension of a common historical pattern. "In many ways," suggest Kevin L. Klieson and David C. Wheelock, "the absence of immediate productivity improvement with the advent of information processing technology was not unlike earlier experiences with general purpose technologies." Their article in The Regional Economist quarterly from the St. Louis Fed goes on to review historical research on the English and American Industrial Revolutions.

In the English case, for example, Klieson and Wheelock cite evidence that "at the height of the British Industrial Revolution (1760-1830) output per capita grew less than 0.5 percent per year on average, about the same rate as during 1700-60." It was, they report, during the next 4 decades--1830-70--that per capita productivity growth quadrupled.

Even more striking was the evolution of the defining invention of that Revolution--the steam engine. The steam engine was first demonstrated in 1712, but it was not until 1765 that the steam engine was developed into a device that could be used to power a factory. Given this historical perspective, Klieson and Wheelock are encouraged about the puzzle posed by the gap between the invention of the microchip--the defining invention of the computer revolution sweeping today's economy--in the 1970s and the lag until the latter half of the 1990s of an acceleration on productivity growth. "More important," they assert, "the evidence suggests that a significant portion of the faster rates of labor productivity growth stems from an acceleration of [total factor productivity] growth."

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