By Michael Baxter

“You can see the computer age everywhere but in the productivity statistics,” said the economist Robert Solow once. It’s odd. Did you know that if the family salon car from the 1960s had seen its top speed increase at a trajectory consistent with Moore’s Law, today it would be able to reach speeds in excess of the speed of light.

This article would not be sent by email, it could be hand delivered to every reader. Yet despite all that, there is precious little evidence of the revolution that is the computer age creating new wealth.

This has led some economists to argue that the modern day computer revolution is not great shakes.

One such economist is Robert J Gordon. He reckons there have been three industrial revolutions. The first once occurred between 1730 and 1830. The second one occurred in the late 19th century, and the third one began 50 years ago.

Of the three Gordon says the second was the most significant. Martin Wolf, the ‘FT’s’ guru on the economy, took a look at Gordon’s report, and paraphrasing him said: “Today’s information age is full of sound and fury signifying little. Many of the labour-saving benefits of computers occurred decades ago. There was an upsurge in productivity growth in the 1990s. But the effect petered out.”

Well, Mr Gordon makes some interesting points, but he just happens to be wrong.

The topic of this second industrial revolution has been covered here before. According to Vaclav Smil, in his book ‘Creating the Twentieth century: Technical innovations of 1867-1914 and their lasting impact’, the period between those two dates saw the foundation of nearly all of the 20th century’s innovations put in place. Smil says: “Neither the pre-1860 advances nor the recent diffusion and enthusiastic embrace of computers and the Internet are comparable with the epoch-making sweep and with the lasting impacts of that unique span of innovation that dominated the pre-WWI generations.” Smil calls this period the age of symmetry.

But Professor Gordon, Martin Wolf and perhaps Vaclav Smil overlook some pretty important issues.

Here are two points that get forgotten, Point one: the internet is the greatest tool for creating collaboration ever invented. Innovation occurs via collaboration, as ideas build upon ideas. Thanks to the internet, and providing patent law doesn’t get in the way, we are set to see a new revolution in innovation that will made Smil’s age of symmetry seem more like the age of the snail’s pace.

The second point is Moore’s Law. Computers are still doubling in speed every 18 months or so, see this article on the latest wonder material graphene, which could mean an acceleration in Moore’s Law.

Bandwidth speeds are rising at a similar pace. Breakthroughs in our studies of the genetic code are following a Moore’s Law type trajectory. Even solar energy is becoming more efficient all the time. The key thing here is to bear in mind that when something is doubling every 18 months to two years, we might not even notice it at first. The science fiction films and novels of the 1950s envisaged computers in the distant future that were less advanced than the computers with which we are all familiar today.

Double one pound and you only still only have two pounds. But double one pound twenty times and you have one million pounds. Double it 45 or so times, and you have a number which is greater than the world’s total GDP.

Cynics say technology is not creating growth, and the age of growth is near its end. They are as wrong as you can be.

See an example of how Moore’s Law works. Consider this interview with John Scully, the man who Steve Jobs recruited to run Apple, but who then fired Jobs.

Scully says that Jobs had this dream of a combining consumer electronics with computers. “In the 1990s,” said Scully, “with Moore’s Law and other things, the homogenization of technology, it became possible to begin to see what consumer products would look like but you couldn’t really build them. It really hasn’t been until the turn of the century that you sort of got the crossover between the cost of components, the commoditization and the miniaturization that you need for consumer products.”

In other words, Apple struggled, because technology was not powerful enough to realise Job’s dream. But when, thanks to Moore’s Law, that changed in a very short time frame Apple went from almost bust to being the largest company in the world.

See it in terms of a metaphor: the super cooling of water. It is generally assumed water freezes at zero. This is not true, rather ice melts at zero. Pure water can freeze at temperate round minus 48 degrees. But when it does freeze, it does so instantly.

Cynics say technology is not transforming the economy. But the point is that, thanks to Moore’s Law, within 18 months of technology leading to a modest rise of GDP, it will lead to a much bigger rise. Within five years of that moment, technology’s impact on the economy will be profound indeed.

Anyway, it was rather good to see an actual economist make a similar point. Looking at Robert Gordon’s report, Paul Ashworth, Chief US Economist at Capital Economics, said last week: "As far as the information processing revolution is concerned, Moore's Law provides us with a critical reason why we should expect the benefits and innovation in the second 50 years of this revolution to be much bigger than what we saw in the first 50 years...The constant doubling is deceptive because it is initially unremarkable, but there comes a point in the exponential progression when the information processing abilities of computers suddenly appear to explode, making it possible for computers to perform complex tasks that only a few years before still seemed like science fiction.”

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