Paul Krugman Debunks One of the Bigger Economic Hoaxes of Our Time
Paul Krugman takes a walk on his snarky side in Monday's column. Turns out he thinks that the whole technological revolution and its transformative effects on the economy have been exaggerated. "Remember Douglas Adams’s 1979 novel The Hitchhiker’s Guide to the Galaxy?" he opens. "It began with some technology snark, dismissing Earth as a planet whose life-forms 'are so amazingly primitive that they still think digital watches are a pretty neat idea.' But that was then, in the early stages of the information technology revolution.
"Since then we’ve moved on to much more significant things, so much so that the big technology idea of 2015, so far, is a digital watch. But this one tells you to stand up if you’ve been sitting too long!"
Krugman does not doubt the fact that technological wonders just keep on coming, but he does venture the possiblity that the big changes in productivity and incomes are simply not materializing along with them.
It wouldn't be the first time a techno-revolution failed to deliver. In the early stages of the internet, around 1979 when Hitchhiker's Guide was published, we were in the middle of a “productivity paradox.” This, according to Krugman, was "a two-decade-long period during which technology seemed to be advancing rapidly — personal computing, cellphones, local area networks and the early stages of the Internet — yet economic growth was sluggish and incomes stagnant. Many hypotheses were advanced to explain that paradox, with the most popular probably being that inventing a technology and learning to use it effectively aren’t the same thing. Give it time, said economic historians, and computers will eventually deliver the goods (and services)."
"This optimism seemed vindicated when productivity growth finally took off circa 1995. Progress was back — and so was America, which seemed to be at the cutting edge of the revolution."
But the rapid economic progress did not sustain itself. It was more of a spurt, "which sputtered out around a decade ago."
We've all got various iDevices now, which is great, but economic growth is pretty slow.
The point is the digital revolution has been a massive disappointment from an economic point of view.
Then to the big question. Why?
Could be that "new technologies are more fun than fundamental," Krugman writes. "Peter Thiel, one of the founders of PayPal, famously remarked that we wanted flying cars but got 140 characters instead. And he’s not alone in suggesting that information technology that excites the Twittering classes may not be a big deal for the economy as a whole."
More future revolutions are still being breathlessly hyped. Big Data! 3-D printing!
Or maybe, Krugman says, "we're on track for another big meh."