Economic productivity in the Knowledge Society: A critical review of productivity theory and the impacts of ICT

Ilkka Tuomi

Abstract



According to several widely publicized and influential studies, information and communication technologies (ICTs) were a major source of productivity growth during the 1990s in many developed countries. The diffusion of ICTs has been argued to permanently change the rate of sustainable economic growth, and they have frequently been described as core technologies of the emerging knowledge–based economy.

This paper examines critically the concepts and methods of ICT productivity studies. It concludes that current analytical techniques do not allow quantification of the productivity impacts of ICTs.

ICT productivity studies are problematic due to three main reasons. First, the current measures of economic output miss essential parts of output in knowledge–based economies. Second, productivity calculations measure inputs and outputs in ways that are conceptually and empirically problematic. Third, the theoretical models that have been used to analyze the impacts of ICTs often make assumptions that may be unrealistic; for example, they require that innovation can be neglected as a competitive factor and as a source of growth.

Although economic studies are only partially able to grasp the significance of ICTs, these technologies are transforming the foundations of economy and society. A number of important conceptual, methodological and empirical issues need to be studied. To fully analyze the socio–economic impacts of ICTs we may need a new "productivity paradigm."

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DOI: http://dx.doi.org/10.5210/fm.v9i7.1159



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