[tt] NYT: Study Says Computers Give Big Boosts to Productivity

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Study Says Computers Give Big Boosts to Productivity
http://www.nytimes.com/2007/03/13/technology/13tech.html

By STEVE LOHR

Money spent on computing technology delivers gains in worker
productivity that are three to five times those of other
investments, according to a study being published today. But the
study also concluded that the information technology industry
itself was unlikely to be a big source of new jobs.

The 69-page report is a wide-ranging look at the role that
information technology plays in the economy, based on an assessment
of existing research and the authors' analysis. The study was done
by a year-old research organization, the Information Technology and
Innovation Foundation, whose work is supported by companies like
I.B.M., Cisco Systems and eBay, as well as by the Communications
Workers of America and foundation grants. It will be available at
www.itif.org.

The study concludes that the economic significance of information
technology is less in the technology itself than in the capacity of
computer hardware, software and services to transform other sectors
of the economy.

Policy, according to the study, should focus less on incentives to
use certain technology products or help particular companies than
on encouraging market forces to hasten the pace of technology-aided
change in industries.

In an interview, Robert D. Atkinson, the foundation president,
cited health care, electric utilities and transportation as sectors
that computing technology could benefit.

In health care, for example, the federal government has prodded
industry to set standards for sharing patient and treatment
information, as a step toward building a national health
information network. Medicare and industry groups are moving to
require hospitals and clinics to measure and report their
performance in meeting safety standards and in patient health
goals. To meet those standards, health care providers must
increasingly adopt modern computing tools.

"The policy issue is how do you get digital transformation in these
other sectors," Mr. Atkinson said. "This is not about tax breaks
for I.B.M. or Cisco or other technology companies."

Mr. Atkinson, a former project director at the Congressional Office
of Technology Assessment, most recently headed the technology
policy program at the Progressive Policy Institute, a centrist
Democratic research organization.

The report notes that employment in computing has recovered
somewhat, after falling sharply after the dot-com bubble burst in
2000, to account for 3.76 million jobs. Still, it says, the growth
potential is limited.

"Going forward," the report states, "it is unlikely that the I.T.
industry will be producing jobs gains out of line with its size. In
part this is because productivity in the I.T. industry itself has
been strong, allowing it to produce more output with fewer
workers."

Instead, the report contends, job gains will more and more come
from industries that use information technology intelligently, just
as in the 19th century employment in the railroad industry leveled
off but development of a transportation network led to the rise of
national retailers and other new industries.

The services sector, which employs 80 percent of the American work
force, is expected to generate most of the new jobs in the future.

The most provocative and controversial parts of the report,
"Digital Prosperity: Understanding the Economic Benefits of the
Information Technology Revolution," are its claim of extraordinary
productivity gains from investments in computing technology and its
policy focus on industry sectors.

The report cites studies to back its assertion of outsize
productivity benefits, but many economists are not convinced. "It
could be that investments here pay off more than other investments,
but the evidence is still not in, in my view," said Robert E.
Litan, an economist and director of research and policy at the
Ewing Marion Kauffman Foundation.

Economists also tend to be skeptical of industry-sector policies
because they are reminiscent of industrial policy initiatives in
Europe and elsewhere in the postwar years that are widely seen as
costly failures. "I am far more sympathetic with promoting
investment in general," Mr. Litan said, "and letting the chips --
pun intended -- fall where they may."