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To: Alomex who wrote (129547)	8/2/2001 7:10:48 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 164684

>>Oliner and Sichel find small but real contributions of computers to the economy<< nobody has denied this. notice the adjective - "small." in fact, this is exactly what the non hedonic pricing gdp measurement method showed. >>The authors explain the small contribution of computers by observing that computing-related inputs are a very small portion of total capital and labor, and have only recently grown large enough to have a measurable impact.<< not even measurable? just now becoming measurable? this is proof that gdp growth is properly doubled using hedonic pricing methods? this is proof that there is missing economic productivity somewhere? what? how does barely measurable turn into 50% of gdp growth? >>Every additional dollar of computer capital stock was associated with an increase in marginal output of 81 cents, and every additional dollar spent on IT-related labor was associated with an increase in marginal output of $2.62<< this impact was already included w/o using hedonic pricing. >>Banking products and services have proliferated with the use of EFT, ATM, telephone transactions, and automated credit and loan procedures.<< this is great. however, if it doesn't add to the economy in some measurable way (eg, more sales being made due to less standing in line) then why should economic productivity be concerned with it? if more sales are made then it was picked up without hedonic pricing. >>The qualitative improvement in customer convenience, ease, and scope of access to financial resources is reflected in the overall growth of electronic transactions.<< again, if these conveniences have no financial impact, please explain why economic productivity should concern itself with them? should the extra half hour of sleep i now have available really be measured in gdp and productivity? should gdp measure the fact i smile 150% more each day due the fact customer service has improved? >>Time and cost savings for the industry are also notable<< again, who cares unless their is an economic impact. >>By 1996, employment in the commercial banking industry was 100,000 employees below its historic peak in 1990. During the same period, the number of ATM transactions doubled to more than 10.5 billion.<< those 100k people are out creating revenue in different industries now. this benefit of it was already counted. alomex, this post proved my original point. computers helped productivity, but only by a little bit. that little bit was properly recorded under the old measurement methodology.

To: Alomex who wrote (129547)	8/4/2001 1:17:36 PM
From: GST	Read Replies (1) \| Respond to of 164684

Alomex: The issue for me is not the amount of money spent on computers -- it is the effectiveness of this spending. I believe that some companies use technology in a way that yields tremendous performance improvement in terms of cost and service -- but on the other hand there are investments in computers that yield nothing or negative returns. Buying and installing computers per se does not mean anything to me -- it just means that money was spent, and it is as likely to be spent unwisely as it is to be spent wisely. If your line of reasoning is that information technology CAN be used to make things far better, then I agree. If your reasoning is that this is mostly the case, I find it hard to see the evidence of this. As for SB's point, if chain weighted measures are indeed intended to fudge the results to make it look like computers are effectively used, even if there is no hard data, then i think he has a point. It is not helpful to "adjust" the data to suit your bias. <<<<Brynjolfsson and Hitt (1996) analyzed the impact of IT on marginal output using a new firm-level database and found large contributions of IT to marginal product for the firms in their study. Every additional dollar of computer capital stock was associated with an increase in marginal output of 81 cents, and every additional dollar spent on IT-related labor was associated with an increase in marginal output of $2.62. Their earlier work also demonstrates that firm-level factors account for half of the variability in IT's marginal product contributions (Brynjolfsson and Hitt 1995). In contrast, previous studies indicate that increases in IT are not associated with increases in marginal output; Morrison and Berndt (1990) found a negative relationship between IT spending and marginal output. The significance of IT emerges in areas of business impact other than conventionally measured productivity gains. Three types of effects are worth particular note: the expansion of banking products and services, time and cost savings, and competitive positioning>>>>