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3/13/2007
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IT Think Tank Thinks IT Is Good For The Economy

U.S. IT is responsible for two-thirds of total factor growth in productivity between 1995 and 2002 and virtually all of the growth in labor productivity, the group said.

Information technology not only improves the quality of life but drives economic growth, according to a study released Tuesday by the Information Technology and Innovation Foundation.

The ITIF identifies itself as "a nonprofit, nonpartisan public policy think tank committed to articulating and advancing a pro-productivity, pro-innovation and pro-technology public policy agenda internationally." It is funded in part by companies like Cisco, IBM, Microsoft, and Oracle that profit from the sale of information technology.

"The integration of IT into virtually all aspects of the economy and society is creating a digitally-enabled economy that is responsible for generating the lion's share of economic growth and prosperity," the study states. Specifically, it claims U.S. IT "was responsible for two-thirds of total factor growth in productivity between 1995 and 2002 and virtually all of the growth in labor productivity."

IT affects five major areas, according to the study: productivity, employment, market efficiency, the quality of goods, and innovation in products and services. But the effects of IT aren't always positive. The study identifies economic costs, risks to privacy, and IT-induced dislocations among the downsides of IT.

"My view is the upsides outweigh the downsides," says ITIF president Robert D. Atkinson. "But there are downsides. One of the downsides is clearly dislocation, so when you raise productivity, companies are able to do more with less and sometimes workers lose their jobs."

Today's low unemployment rate is evidence, says Atkinson, that high productivity doesn't mean high unemployment. However, he acknowledges that IT can cause dramatic shifts in specific sectors.

As an example, Atkinson points to a period around 2002 to 2004 where some 10% of travel agent jobs in the U.S. disappeared because of the adoption of Internet travel reservation sites. "That hurts travel agents," he says. "No question about that. It helps everybody else."

Other downsides include the cost of trying to keep computers and personal information secure and the view advanced by some that see the "IT-enabled economy as a dystopia where our actions will be tracked by corporate and/or government leviathans."

While the study allows that the cost of computer security is considerable (several hundred billion annually, based on articles published in InformationWeek), it is more dismissive of the privacy risks posed by IT. "Notwithstanding all the fear and gloom from privacy activists, there simply have not been widespread privacy violations, and of the data breaches that have occurred recently, many occurred precisely because the information was not in digital form," the study states. It's worth noting that the assistance AT&T is said to have provided to the government's alleged illegal effort to monitor communication traffic wasn't an instance of phone book sharing.

Be that as it may, Atkinson believes we could see another decade at least of IT-driven growth. "There are still a lot of IT innovations in the pipeline," explains Atkinson, though he cautions that public policy needs to keep up without getting in the way.

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