Web 2.0 Is Everywhere, Except in the Productivity Statistics

Web 2.0 moves us closer to frictionless (free, instantaneous) communication, but we were already pretty close.

We have a productivity paradox. Web 2.0 (including social media) is radically transforming society and entire industries -- Facebook has about 800 million users, Twitter has about 500 million users. McKinsey & Company predicts as much as ~$1 trillion/year in productivity gains from the Web 2.0 "revolution," with anticipated productivity gains of up to 35 percent for some activities. Clay Shirky believes Web 2.0 radically lowers transaction costs, making fundamentally new methods of production feasible (for example, the volunteer community that builds/edits Wikipedia).

So far, and paradoxically (considering how much Web 2.0 has touched our lives), no productivity revolution is visible. During 1948-2011, U.S. non-farm business labor productivity (i.e., output per work hour) grew by an average of only 2.2 percent/year, and during 2007-2011, by just 1.8 percent/year. Looking to the future, don't hold your breath awaiting a Web 2.0 productivity revolution. In historical context, Web 2.0 is an incremental communications improvement -- not a revolutionary one.

For most of human history, productivity growth was negligible, causing per capita income to remain the same from one generation to the next. Significant productivity growth only began about 250 years ago with the Industrial Revolution. A major contributor to this productivity growth came from rapid improvement in communications.