The dynamo and the computer: an historical perspective on the modern productivity paradox
Citation: David, P. A (1990) The dynamo and the computer: an historical perspective on the modern productivity paradox. The American Economic Review (Volume 80) (RSS)
Internet Archive Scholar (search for fulltext): The dynamo and the computer: an historical perspective on the modern productivity paradox
Download: http://elsa.berkeley.edu/~bhhall/e124/David90 dynamo.pdf
Tagged: Economics
(RSS) Economics (RSS), innovation (RSS), functional fixity (RSS), general purpose technology (RSS), productivity paradox (RSS)
Summary
David explores a puzzle: how could we see so little productivity gain given such a massive investment in information technology in recent years? While others (e.g. Brynjolfsson, 96) have since explored this using more traditional economic methods, David takes a historical perspective.
Specifically, he investigates the introduction of the dynamo (a general purpose technology) in factories that previously relied upon steam powered engines for their power. Davis essentially holds that managers' initial decisions regarding dynamos were driven by functional fixity: they installed a single massive dynamo in the center of their factories, merely replacing the massive steam engines. The new dynamo drove a massive camshaft which in turn rotated a number of belts which distributed power to the machines of production. Efficiency gains were minimal. New factories were built with this basic presumption of a single centralized mechanical power source. Davis claims that modern-day managers were likely doing the same thing vis à vis computers.
It was only once managers/organizations decided to attach a smaller dynamo to each piece of equipment that productivity gains skyrocketed. Factories were redesigned to take advantage of this flexibility, machines were rearranged so that production tasks were more streamlined. Again, Davis posits that managers have been and/or will soon find freedom from their computer-related functional fixity, and it will be then that we will more clearly "see" a return on our IT investment.
