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Is Technology Hurting Productivity?

It is possible that new technologies are not just doing less to boost productivity than past innovations. They may actually have negative side effects that undermine productivity growth, and that reduce our wellbeing in other ways as well.

CAMBRIDGE – In recent years, productivity growth in developed economies has been stagnating. The most prominent explanations of this trend involve technology. Technological progress is supposed to increase economies’ productivity and potential growth. So what’s going on?

Harvard’s Martin Feldstein has argued persuasively that productivity growth is actually higher than we realize, because government statistics “grossly understate the value of improvements in the quality of existing goods and services” and “don’t even try to measure the full contribution,” of new goods and services. Over time, he asserts, these measurement errors are probably becoming more important.

Northwestern University’s Robert Gordon is less optimistic. He has argued – also persuasively – that today’s innovations in areas like information and communications technology (ICT) cannot be expected to have as big an economic payoff as those of the past, such as electricity and the automobile.

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