Brynjolfsson: The Productivity Paradox of Information Technology

Brynjolfsson, E., 1993. The productivity paradox of information technology. Communications of the ACM, 36(12), 66-77.

Written in 1993, this article represents an important contribution to the exploration of ICT technology just at the beginning of the internet revolution. The article examines a potential paradox in the deployment of ICT and its expected benefits. Supposively, the increased use of ICT should improve productivity of workers. However, this was not the case in the US at the time of writing. There are four explanations that are given for this: “…outputs and inputs have been mismeasured, that learning and adjustment cause lags, that profits have been redistributed and dissipated, and that information and technology have been mismanaged…” (1).

“After reviewing and assessing the research to date, it appears that the shortfall of IT productivity is as much due to deficiencies in our measurement and methodological tool kit and as to mismanagement by developers and users of IT” (2).

Good review of the studies of productivity and ICT. “A possible explanation of poor measurement of productivity: For example, if a clothing manufacturer chooses to produce more colors and sizes of shirts, which may have value to consumers, existing productivity measures rarely account for such value and will typically show higher "productivity" in a firm that produces a single color and size. Higher prices in industries with increasing product diversity is likely to be attributed to inflation, despite the real increase in value provided to consumers” (8).

And:

“In services, the problem of unmeasured improvements can be even worse than in manufacturing. For instance, the convenience afforded by 24-hour automatic teller machines (ATMs) is a clear example of an unmeasured quality improvement. How much value has this contributed to banking customers? Government statistics implicitly assume it is all captured in the number of transaction, or worse, that output is a constant multiple of labor input!” (8).

Time lags: studies have shown that 2-3 years can be typical before large improvements are found.

Redistributional effects: ICT might not change the size “of the pie”, but it does redistribute the size of the slices.