Posted by admin | Posted in UK ISPs | Posted on 30-04-2012-05-2008
The great question at the moment is that we know that we have an industrial revolution going on. the internet in short. this allows us to do new things and also to do old things differently. this is pretty much the definition of innovation and of productivity growth. But we’ve a problem: we cannot actually see this in the figures for economic growth.
This piece at the Harvard Business Review gives us a flavour of the arguments:
More prosaically, the 15 years since the Internet became a major part of our lives has been marked here in the U.S. — birthplace of the Internet — by mostly disappointing economic growth.
My own answer to this is that this is simply a problem of measurement. of the way in which GDP itself is a useful but not complete measure.
Firstly, much of what we use the net for is simply not calculated in economic statistics. Because what we do is simply not monetised. When you look at the statistics the internet turns up as the amount of money we spend on our ISPs and really not much else. But we’re all well aware that we’re doing online is worth a multiple of the $30-$50 a month we’re paying for it but the way that GDP is calculated just doesn’t capture it.
Secondly, certain uses of the internet actually reduce GDP: even while making us as individuals richer. perhaps the view is coloured by personal experience but I well recall back in the 1990s working in Russia. We were spending some $5,000 to $6,000 a month purely on telephone calls. I don’t use the phone any less now than I used to then but that huge bill is now replaced by a Skype subscription. I don’t even know how much I spend on it: they come and take €25 every couple of months and that’s it. in the way that GDP is calculated that is a new technology shrinking GDP.
So at least part of the absence of evidence for economic grwoth from innovation is simply that we’re measuring economic growth wrong.
But there is one more point to be made:
Even beyond the technological challenges, there are lots of other obstacles to change. Stephenson, who has “devoted a shocking amount of time” lately to learning about alternative space-launch technologies, said at MIT that “the reason none of them happen turns out to be insurance.”
We have managed to build an economy where trying something new has become increasingly difficult. I’ve long argued, as an example, that space flight would do better to ignore the US as an operating base given the costs the FAA load onto gaining permissions. It’s generally accepted that environmental regulations mean that no one will ever be able to build a new copper smelter in the country: the old ones are grandfathered in and so a new one would face huge costs that they don’t. I looked into a small (5 people, so yes small) plant to test a new method of rare earths separation in my native UK. planning permission, just the licences let alone the actual research work, would have taken 18 months to gain.
So while I do think that some of our lack of recorded economic growth from innovation is simply that we’re not measuring it properly I also think that we really do have a problem. It’s more difficult to innovate simply because the law makes it harder to do so.