According to the Economist, a team at Harvard led by Dale Jorgenson has determined that the benefits of IT investment we have seen in the United States aren't evident in Japan and Europe because they are being mismeasured:
Mr Jorgenson uses data for Europe and Japan which are adjusted to incorporate price deflators and measures of software expenditure similar to those used in America. Unfortunately, the detailed information needed to make these adjustments is available for most economies only up to 2000. Even so, the results are striking. For instance, they suggest that Japan's GDP grew by an annual average of 2.1% in the second half of the 1990s, compared with only 1.4% according to official statistics.
Employing these revised data, Mr Jorgenson finds that in all G7 economies, not just America, a boom in IT investment helped to boost growth in the second half of the 1990s. Indeed, the contribution to GDP growth from IT capital spending was almost as big in Japan as in America—although it was offset by a fall in investment of other sorts. All of the European economies also saw a marked increase in their IT capital stock, albeit smaller than in America. As in Japan, in many European countries this was partly countered by weaker non-IT investment.
I'd say that the different perceived value of the returns on IT investment are a combination of overstatement of the value to the U.S. economy and an understatement of the European and Japanese returns.
The article goes on to talk about "deficient demand" in Japan and Europe, "The snag is that elsewhere it has been partly disguised by the poor performance of investment in other things," which is a fancy way of saying -- in my opinion -- that the benefits of IT aren't being recognized. But I'd say that is actually a failure of IT marketing and product follow-through, not some kind of fault in the populations of other countries.
This same researcher said in 1991 that IT investment would "ease the economic slowdown," which was patently wrong. It seems he expects perfect responses by the market to imperfect technology or technology marketing.
I think we have a ways to go on the understanding the economic benefits of technology front.Posted by Mitch Ratcliffe at October 27, 2003 09:44 AM | TrackBack