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The following article appeared in Left Business Observer #79, October 1997. It retains its copyright and may not be reprinted or redistributed in any form - print, electronic, facsimile, anything - without the permission of LBO.

Where's the payoff?

Daniel E. Sichel, The Computer Revolution: An Economic Perspective (Washington: Brookings Institution Press, 164 pp., $38.95 hardcover, $16.95 paperback).

Adherents of the New Paradigm - a fashionable doctrine holding that new technology has kicked the U.S. economy onto a permanently higher productivity path, meaning perpetual growth without inflation, and, most importantly, an exuberant, eternal bull market in stocks - took cheer from revisions to the second quarter productivity figures. Instead of rising a mere 0.7% annual rate, as the Bureau of Labor Statistics initially reported, output per hour worked blossomed this past spring by 2.7%. Finally, heavy investments in computers and other electronic gadgetry were showing up in the productivity numbers, where they'd been MIA for years.

Or, putting the emphasis somewhat differently, as Business Week observed, "[T]he new industrial revolution [computers] herald has hardly begun. Their real potential has been snagged in false starts in use - but they're on their way." Finally! And, computers might also put an end to the business cycle. The only problem with these arguments is that they come from the magazine's June 21, 1958, issue.

That BW quote is marshalled by Daniel Sichel, along with quite a few others from the business press over the last 40 years, to show that the payoff lurking just around the corner - or finally arriving - is an ancient theme in popular commentary on the economic possibilities of computers. Yet despite the latest BLS revision of the productivity figures, the long-term payoff still seems deferred; the spring 1997 burst looks like a blip if you inspect any time period longer than three months. The present business cycle expansion, now over six years old, has the lowest rate of productivity growth of any since modern numbers begin in 1947, and the 1990s are the weakest decade of the five shown in the nearby chart. Yes, there's a pickup in manufacturing productivity compared with earlier decades,