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MAR 9, 2014
3/10/2014
In this period, when resources flowed to this innovative sector, GDP growth was markedly lower than it was before. Even in the best of times, it did not lead to an increase in living standards (except for the bankers), and it eventually led to the crisis from which we are only now recovering. The net social contribution of all of this innovation was negative. Similarly, the dot-com bubble that preceded this period was marked by innovation Web sites through which one could order dog food and soft drinks online. At least this era left a legacy of efficient search engines and a fiber-optic infrastructure. But it is not an easy matter to assess how the time savings implied by online shopping, or the cost savings that might result from increased competition (owing to greater ease of price comparison online), affects our standard of living. Two things should be clear. First, the profitability of an innovation may not be a good measure of its net contribution to our standard of living. In our winner-takes-all economy, an innovator who develops a better Web site for online dog-food purchases and deliveries may attract everyone around the world who uses the Internet to order dog food, making enormous profits in the process. But without the delivery service, much of those profits simply would have gone to others. The Web sites net contribution to economic growth may in fact be relatively small. Moreover, if an innovation, such as ATMs in banking, leads to increased unemployment, none of the social cost neither the suffering of those who are laid off nor the increased fiscal cost of paying them unemployment benefits is reflected in firms profitability. Likewise, our GDP metric does not reflect the cost of the increased insecurity individuals may feel with the increased risk of a loss of a job. Equally important, it often does not accurately reflect the improvement in societal wellbeing resulting from innovation. In a simpler world, where innovation simply meant lowering the cost of production of, say, an automobile, it was easy to assess an innovations value. But when innovation affects an automobiles quality, the task becomes far more difficult. And this is even more apparent in other arenas: How do we accurately assess the fact that, owing to medical progress, heart surgery is more likely to be successful now than in the past, leading to a significant increase in life expectancy and quality of life? Still, one cannot avoid the uneasy feeling that, when all is said and done, the contribution of recent technological innovations to long-term growth in living
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standards may be substantially less than the enthusiasts claim. A lot of intellectual effort has been devoted to devising better ways of maximizing advertising and marketing budgets targeting customers, especially the affluent, who might actually buy the product. But standards of living might have been raised even more if all of this innovative talent had been allocated to more fundamental research or even to more applied research that could have led to new products. Yes, being better connected with each other, through Facebook or Twitter, is valuable. But how can we compare these innovations with those like the laser, the transistor, the Turing machine, and the mapping of the human genome, each of which has led to a flood of transformative products? Of course, there are grounds for a sigh of relief. Although we may not know how much recent technological innovations are contributing to our wellbeing, at least we know that, unlike the wave of financial innovations that marked the pre-crisis global economy, the effect is positive. http://www.project-syndicate.org/commentary/joseph-e--stiglitz-argues-that-the-impact-oftechnological-change-on-living-standards-has-become-increasingly-unclear
1995-2014 Project Syndicate
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