Nicholas Bloom: belief

Transcript context

…Why hasn’t information technology boosted productivity more? Productivity is sluggish. IT has been taking off like crazy. Companies, big business is what uses IT. How do we fit the whole picture together? [laughs] Another age-old debate goes back to Robert Solow’s quip in the New York Times. He wrote, I think, in ’86, “You see computers everywhere except in the productivity figures.” So you’re right. Paul David and Tim Bresnahan at Stanford, my colleagues, have had various . . . Again, there’s an old literature about general-purpose technologies, these technologies that change society, and at least two previous ones were the steam engine and the electric motor. The big question is, why haven’t computers done that? They seem as transformational as the previous two. As we discussed, productivity growth rates in the US have been declining since the ’50s and don’t seem to have picked up much, anyway, with computers. I think the primary reason people argue for this is, you need to change society in order to exploit this. In fact, in an odd way, COVID, the pandemic, and working from home is one example of this — all the technology necessary for working from home. Just to be clear, the internet and email, cheap personal computers and video calls have all been around since the late 2000s. The last piece, Skype, came out in 2003. But it isn’t until the pandemic that we actually massively embraced working from home. Why is that? I think it’s just social norms and firm organizational practices were slow to change. I think something holding back the impact of ICT is firms and society don’t change that rapidly. A good example: Paul David mentions about electricity that when electricity came in — which I believe is in the 1910s, 1920s — factories were slow to adopt it. The reason was, in the older factories where you had a big steam engine or even a waterwheel, it made sense to have the building very vertical. You’d have four stories around this one central shaft, which belts would connect to, which drove all your mechanical power. With electricity, instead, you can have lots of little localized electric motors, which is a large flat building. That explains, if you look at really old-fashioned factories in the center of Manhattan and places where they were built 200 years ago, they’re very tall buildings. Modern factories are low-slung, massive sheds. But of course, when electricity came in, it’s very hard to reshape all those buildings, and it takes decades. It’s kind of like that with reshaping the management, organizational structures of society. I think that’s one reason why it’s taken so long for IT to affect productivity. Italy has had almost no per capita income growth for about 20 years now. Is that because of the deficiencies of Italian firms? Italy hasn’t changed enough?…

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