The Optimist's Case For Information Technology

A blog about business and economics.
Aug. 28 2012 3:06 PM

The Optimist's Case For Information Technology

Thinking more about the Robert Gordon paper I mentioned yesterday in the context of how amazing indoor plumbing is, I think he partakes of a broad trend toward underrating the potential of digital technology, or ICT (information and communications technology) as the economics cool kids call it.

This often hinged around Robert Solow's 1987 quip that "You can see the computer age everywhere but in the productivity statistics." But the thing about that is that in retrospect you could barely see the computer age at all in 1987. The remarkable thing about ICT is that thanks to Moore's Law there's a back half of the chessboard phenomenon meaning that we'll see much more progress in the underlying technology over the next fifteen years than we saw over the past fifteen years.


And I think that if you look at what ICT has done since 1987, you'll see that it's revolutionized a lot of industries. Magazine and newspaper publishing are totally different, encyclopedias are totally different, travel guides are totally different, we book airplane flights and reserve hotel rooms differently, and the music industry is unrecognizable. None of this makes a huge difference to the aggregate economy because it happens to be the case that these aren't very economically significant realms of endeavor. But it's pretty clear that the ICT wave keeps on rolling and impacting more and more industries. Retail is changing a lot. People are making restaurant reservations differently. People are hailing cabs differently and finding real esate differently. The idea of a cookbook as something other than a collection of cool food photography already seems quaint. Storefront photograpic film development isn't a business anymore.

But even though life is full of these little things, to really transform the economy as a whole you need to be able to transform health care, education, or the housing/transportation nexus. Those are the big pillars of economic life. And thus far, ICT has made only a modest difference. But does anyone really doubt that it will? Schools have poured a ton of money into ICT and tech-focused startups are circling the education sector aiming to disrupt it. Something's going to change here. IBM built a supercomputer that can win at Jeopardy which is cool but useless and now they're trying to turn it into a medical diagnostic engine. Computer-driven cars are already a real thing. Right now, price is a big barrier to adoption but if there's anything we know about ICT hardware it's that the price will fall.

I'm not saying these sectors are going to be revolutionized next year anymore than I think Barnes & Noble will close all its stores next year and just sell Nooks online. But everyone knows the digital revolution will keep sweeping through the remaining bits of publishing, and I think it's clearly heading for the med/ed/transport pillars soon enough. I don't know that doing a medical consult with your home computer and then having your prescription automatically disatched by autonomous vehicle equals a change comparable to indoor plumbing, but it's a big deal.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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