The internet has been a cheap disappointment

In my last column I wrote about the possible economic implications of the artificial intelligence and argued that while these may be important, history tells us they will take longer to materialize than many people expect.

As things stand, many people have been reaching out to me to remind me of the prediction I made in 1998 that the growth of the Internet would soon slow down and that “by 2005 or so, it will become apparent that the impact of the Internet on the economy was no greater than that.” than that of the fax”.

And it’s true that I said it, in a throwaway article I wrote for The Red Herring magazine, which I still don’t remember writing, but I guess it was to argue.

Of course I was wrong that the internet was dying, which I admitted.

And here we are.

Show me an economist who says they’ve never made a bad prediction, and I’ll show you someone who is dishonest or unwilling to run. intellectual risks.

But how wrong was he really about the economic impact of the Internet?

Or, since this shouldn’t be about me, have the last few decades generally justified the visionaries who claimed that information technology would change everything?

Or have they justified technology doubters like economist Robert Gordon, who argued in a 2016 book that the innovations of the late 20th and early 21st centuries were too less fundamental compared to those existing between 1870 and 1940?

Well, when it comes to figures, that is indisputable skeptics They won the argument.

In that latest collaboration, we looked at 10-year labor productivity growth rates, which indicated that information technology did, in fact, drive an increase in economic growth between the mid-1990s and mid-1990s. 90’s. -lived.

Optics

Now I’m going to take a slightly different approach.

The Bureau of Labor Statistics makes historical calculations, dating back to 1948, of both labor productivity as “total factor productivity”, a calculation of the productivity of all inputs, including both capital and labour, which is widely used by economists as an indicator of technological progress.

A truly fundamental technological innovation should generate a sustained growth of these two indicators, in particular that of total factor productivity.

So I decided to analyze the 25-year rates of change of these two indicators.

I choose 25 years, in part, because it is the approximate period of a generation and, in part, because that prediction was made 25 years ago.

That comparison doesn’t show a huge productivity boom after the advent of the Internet.

It is true that some justification can be given for the difference in numbers and all the hype.

One of them is to say that the internet has actually done things that are very important to the economy, but they have been thwarted for negative factors:

a deterioration in the work ethic, the mysterious decline in construction productivity, or something like that.

The other is that official economic growth figures fail to capture many unseen benefits.

I like being able to have access to live music concerts Youtube; As far as I know, those benefits are not counted in gross domestic product.

Indeed, official economic growth certainly will underestimate real progress in the condition of human beings.

But this has been the case for a long time.

Before the Internet, official economic data did not directly capture the benefits of, for example, the sharp reduction in infant mortality due to better sanitation or the dramatic improvement in air quality since 1970.

Are those invisible benefits greater now than they were in the past?

It is unlikely.

Perhaps the bottom line is that no one is arguing that the Internet has been useless; Of course it has contributed to economic growth.

Rather, the argument is that its advantages were not exceptionally large compared to earlier, less sophisticated technologies.

For example, around 1920, only one in five households in the United States had a washing machine; in 1970 nearly everyone had washing machines or access to one.

Don’t you think it made a big difference?

Are you sure it made less difference than widespread broadband access?

Because the fact is, while it’s important to move information everywhere, we still live in a world of matterhe:

Most of what we consume is something material or face-to-face services, things that the internet hasn’t affected very drastically.

So it’s entirely possible that AI — or, at any rate, what we call artificial intelligence, whether or not that name is justified — will actually be something of massive importance.

But one thing we should have learned from the history of information technology is that things that seem exceptionally fascinating aren’t actually that useful, and vice versa.

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