Economists, politicians and business leaders are all singing the praise of computers, artificial intelligence and robots. But are these really revolutionising the economy?
There doesn't seem to be much evidence of that so far, according to Roger Josefsson, an economist with the Swedish data firm Macrobond. It’s “the modern productivity paradox,” he wrote recently in his blog.
The lack of productivity growth over the past 10 to 15 years has been a hot topic of discussion. Investment growth has been strongly concentrated in a few areas, while labor productivity - the key driver of profits and wages - hasn't grown much at all. As one of the founders of growth theory, Robert Solow, put it: "You can see the computer age everywhere but in the productivity statistics.”
Josefsson asks: Shouldn't at least investments in technologies or personnel in relevant sectors be increasing? Digging into the Conference Board’s Total Economy Database and the EU’s KLEMS database, he found several paradoxes.
For instance, the number of industrial robots is increasing rapidly, but shipment stats, a good indicator of investments, are showing only minor improvements. Labor’s contribution to output growth is also more or less the same as before the financial crisis. Another cause for concern is that the contribution from Information and Communication Technology-assets to GDP-growth and – even worse -- total factor productivity (i.e. from innovation), is falling behind.
“To be honest, most of the improvements in value-added growth seem to be purely cyclical,” he said.
Josefsson nevertheless found some cause for optimism.
Sectors that stand to benefit from robots, AI, machine learning and other ‘hot’ technologies are the wholesale sector, retail trade and recreational services. Here, total factor productivity is actually developing rather well.
But those are exceptions in an otherwise quite depressing set of numbers.
“So next time you hear economists talk about the productivity boost the robots are going to give us, make them show you the statistics. And then call me, because I want to know as well,” Josefsson said in a video published by EFN.se, a Swedish economic news website.