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Is Productivity Growth Becoming Irrelevant?

Some economists see low business investment, poor skills, outdated infrastructure, or excessive regulation holding back potential growth nowadays. But there may be a deeper explanation: As we get richer, measured productivity may inevitably slow, and measured per capita GDP may tell us ever less about trends in human welfare.

LONDON – As the Nobel laureate economist Robert Solow noted in 1987, computers are “everywhere but in the productivity statistics.” Since then, the so-called productivity paradox has become ever more striking. Automation has eliminated many jobs. Robots and artificial intelligence now seem to promise (or threaten) yet more radical change. Yet productivity growth has slowed across the advanced economies; in Britain, labor is no more productive today than it was in 2007.

Some economists see low business investment, poor skills, outdated infrastructure, or excessive regulation holding back potential growth. Others note wide disparities in productivity between leaders and laggards among industrial manufacturers. Still others question whether information technology is really so distinctively powerful.

But the explanation may lie deeper still. As we get richer, measured productivity may inevitably slow, and measured GDP per capita may tell us ever less about trends in human welfare.

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