Information technology: A new era?
Information technology: A new era?

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Information technology: A new era?

3.3 A summary

I have shown that, while IT has no doubt had an impact on productivity, it is not clear whether this goes beyond the IT-producing sector, or whether the gains will outlast the boom period of the business cycle. With so much debate, whom should we believe? Perhaps, as is often the case, the truth lies somewhere in the middle. The optimistic view highlights the way that IT has transformed society, and how this transformation has in many instances led to growth through the productivity-enhancing aspects of IT. The pessimistic view reminds us to be cautious in attributing such growth solely to the rise of IT, given that the rise in productivity has occurred during the boom period of the business cycle. Others argue that perhaps the productivity increase has occurred as a result of influences unrelated to IT, such as the rise of flexible labour markets. If the increase continues, it would appear that the productivity increases have been trend increases. If they fall, it would appear that they are more cyclical in nature.

Exercise 3

List two or three things that could happen in the US economy in the future that would go some way towards settling the debate between optimists and pessimists on the impact of IT.


Three things that could happen in industrialised economies in the future that would go some way towards settling the debate between optimists and pessimists on the impact of IT on productivity in favour of the optimists/pessimists are:

  1. the US ecomony endures a recession and productivity growth remains unusually high/falls back to its historical average;

  2. other industrialised economies with relatively inflexible labour markets experience/fail to experience a surge in productivity led by IT;

  3. a permanent trend rise in productivity begins/is not observed a few years after PCs reach 50 per cent market saturation in successive economies.


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