The Economics Of Information Technology Explaining The Productivity Paradox

Excerpt from The Economics of Information Technology Explaining the Productivity Paradox The past forty years have seen dramatic advances in the technology of information processing, and its widespread adoption bears testimony to the advent of the 'information society'. However, the economic implications of this transition remain to some degree obscure, since there is little evidence that the new technology has led to clear improvements in productive efficiency. Indeed, during the past twenty years the United States' economy has suffered from a declining rate of productivity growth, despite sharply accelerating investment in computer-based systems. Several attempts have been made to resolve this 'productivity paradox', yet none has proved entirely satisfactory. In this work, we propose a new explanation of the paradox, and present economic evidence in its support. The central argument is that information technology has altered the economies of production in favor of differentiated output, and that our methods of productivity measurement tend to discount the benefits of greater product variety. The validity of this reasoning is demonstrated by an empirical study of the United States' private economy, covering the forty-year period from 1950 to 1989. Despite these results, however, we conclude that declining productivity growth is not merely an accounting fiction, since our current economic system is relatively ill-suited to differentiated production. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

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From networks to databases, email to voicemail, the amount of capital being invested in information technology each year is staggering. By 1996, U.S. firms were spending more than $500 billion annually on software, networks and staff. The recently merged Bank of America and NationsBank have an initial IT budget of 4 billion dollars. As firms like this push rapidly into the business world of the 21st century, the question has remained: how do firms measure returns from these substantial investments in information technology? Henry C. Lucas, effectively answers this question by providing a creative and reliable framework for measuring the competitive advantages and profits gained through investments in state-of-the-art information systems. There is value in information technology, and it is possible to show returns, Lucas argues--unfortunately this value just doesn't always show up clearly on the bottom line of a ledger. In five expertly presented sections, he spells out exactly what businesses can expect from their information technology investments--some investments create a measurable value, some do not, but all are important nonetheless. Through a precise mix of frameworks and models, such as an Investment Opportunities Matrix, and punctuated with real examples from successful firms, this is the first book to allow executives to see exactly how their information technology investment can be expected to return value, thereby maximizing their advantages in an age of global competitiveness. Indeed, firms who manage their information systems most efficiently are best suited to succeed in a rapidly evolving marketplace. With so much at stake, Information Technology is certain to be the essential guide for firms determined to compete and flourish in the highly competitive economy of the next century.

Interest in information technology and the media is growing apace. This book has been specially written to provide an economics framework for analysing the nature and scope, as well as issues, pertaining to the new information and communication technology and revolution. It also presents some trends and perspectives from the Asia-Pacific region. While the economic principles of efficiency and competition are the same everywhere, many socio-political issues with respect to information technology and the media are unique to some specific cultural contexts. The book will be useful to students, researchers and policymakers in mass communication, information technology and the media.

This volume focuses on the Information and Communication (ICT) revolution and its impact on economic growth. Even though the emergence of the knowledge economy is at the center of attention by media and is often a subject of economic policy debate, economic research on the issue is still relatively underdeveloped and many aspects of it are still awaiting proper theoretical and empirical scrutiny. One important question is whether, as many economists and opinion leaders maintain the knowledge economy and the new information technologies have fostered the birth of a 'new economy' which by inducing a strong productivity growth in most sectors, is behind the impressive growth of GDP experienced by the US economy. Empirical research has in fact been unable to provide a conclusive answer to this question. This book debates this issue and provides the opportunity to discuss the economic and social effects of the ICT revolution. It also focuses on the functioning and the micro-economic structure of the ICT sector, as well as on its impact on various industries, on the financial system and on the labor market. It analyses the role of the ICT revolution on regional development and it addresses important policy issues such as its consequences for antitrust legislation and government regulation.

The Economics of Information Technology is a concise and accessible review of some of the important economic factors affecting information technology industries. These industries are characterized by high fixed costs and low marginal costs of production, large switching costs for users, and strong network effects. These factors combine to produce some unique behavior. The book consists of two parts. In the first part, Professor Varian outlines the basic economics of these industries. In the second part, Professors Farrell and Shapiro describe the impact of these factors on competition policy. The clarity of the analysis and exposition makes this an ideal introduction for undergraduate and graduate students in economics, business strategy, law and related areas.