Productivity paradox

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The productivity paradox (also known as the Solow computer paradox) is the observation made in Computer Supported Cooperative Work and other business process analysis that, as new information technology is introduced, worker productivity may go down, not up. It was especially common in the late 1980s and early 1990s.

It was widely believed that office automation was boosting labour (or total factor) productivity, but the growth accounts didn't seem to confirm the idea, because the "computer-era" from the early 1970s to the time he was writing included a massive slow-down in growth as the machines were becoming ubiquitous. (Other variables in country's economies were changing simultaneously, growth accounting separates out the improvement in production output using the same capital and labour resources as input by calculating a "Solow residual".)

The computer industry's response to the paradox was to say that computers actually would improve productivity, and that investment in more information technology would be a path to growth, based on two arguments:

There may be a "lag" in productivity improvements (the idea was that the economy would need to adapt before the capital investment in computerized automation would pay off). In 1990 the economist Paul David made an analogy from the modern PC to the introduction of the electric motor after its 1880 invention; the payoff from the new technology was not measured in economic statistics in the interval starting 1913. (This would suggest a lag of at least thirty years before production can fully utilize IT advantages, but by 1990 the acceleration in growth might have been detectable on this timescale.) The electric motor had a "lag" in productivity because people could not really benefit from the increased efficiency until electric generators were introduced, supplying electricity to factories. For this same reason, the "lag" in productivity exhibited by the computer industry is because computers did not show their productivity until things like software, the internet, and handhelds became prevalent. A chart of GDP growth from 1870 to 2006 illustrates this point very well. (see General purpose technology#Lag)
The productivity growth produced from IT may already be occurring, but a flaw in the measurement tools available are hiding it.

Another answer, from economists Stephen Oliner & Dan Sichel was to deny the significance of the (high-profile) IT-sector; they said that information technology accounted for no more than two percent of the capital stock in any country in the world.

Other economists have made a more controversial charge against the utility of computers: that they pale into insignificance as a source of productivity advantage when compared to the true industrial revolution, or the adoption of the motor car.

A number of explanations of this have been advanced, including:

The tendency - at least initially - of computer technology to be used for applications that have little impact on overall productivity, e.g. word processing.
inefficiencies arising from running manual paper-based and computer-based processes in parallel, requiring two separate sets of activities and human effort to mediate between them - usually considered a technology alignment problem
poor user interfaces that confuse users, prevent or slow access to time-saving facilities, are internally inconsistent both with each other and with terms used in work processes - a concern addressed in part by enterprise taxonomy
extremely poor hardware and related boot image control standards that forced users into endless "fixes" as operating systems and applications clashed - addressed in part by single board computers and simpler more automated re-install procedures, and the rise of software specifically to solve this problem, e.g. Norton Ghost
technology-driven change driven by companies such as Microsoft which profit directly from more rapid "upgrades"
an emphasis on presentation technology and even persuasion technology such as PowerPoint, at the direct expense of core business processes and learning - addressed in some companies including IBM and Sun by creating a PowerPoint-Free Zone
the blind assumption that introducing new technology must be good

By the late 1990s there were some signs that productivity in the workplace had improved, especially in the United States. Furthermore, Erik Brynjolfsson and his colleagues found a significant positive relationship between IT investments and productivity in a series of studies.¹

However, new problems had emerged, including: