Two economists project that the welfare benefits from Personal computers adds up to $1,700 per person annually. And this represents a tremendous growth from the previous years.
The Wall Street Journal Blog reports, (bold emphasis mine)
Despite all the wrenching change the computer age has brought, humanity is probably better off than it would have been if the PC had never been invented. Now, economists have taken a stab at figuring out exactly how much better off we are.
The economists — Karen Kopecky of the Federal Reserve Bank of Atlanta and Jeremy Greenwood of the University of Pennsylvania — traced the history of the computer market back to the introduction of the Apple II in 1977 to calculate how much value, or “utility”, American consumers derive from a given amount of computing power. They then looked at how much we actually paid for that computing power, in the form of desktop PCs, laptops, notebooks, software and so on. The difference, known as the “welfare gain”, is the benefit we get from personal computers above and beyond what we pay for them.
Back in the days of magnetic-tape memory, the annual benefit was pretty small — somewhere between zero and about $6 for the average American, adjusted for inflation, depending on the method of calculation. But by 2009, the price of computing power had fallen more than 99.8% and personal computers had become a lot better and more widely used. As a result, the welfare gain rose to somewhere between $1,300 and $2,100 per person, the economists’ estimates suggest. Ballpark average: $1,700.
That’s a massive benefit, adding up to about $500 billion, or 5% of total consumer spending in 2009.
To be sure, the economists’ estimates are based on some assumptions that, while common in the world of economics, are open to debate. For one, they assume that people are extremely rational, and always buy exactly the number of personal computers that maximizes their utility. To the extent that irrational impulses drive people to buy computers, or to the extent that the use of computers entails costs people don’t recognize (say, attention-span deficits or Internet addiction), then the actual benefit could be significantly smaller.
My comments:
First of all, I am flabbergasted that the article would resort to the word “probably” as to ascribe the personal computer’s benefit to mankind, as if such benefits have not been conspicuous.
Second, while I agree that the personal benefits from these computers have been immense, given that the article does not say how or what sort of utility had been measured or rated, I would posit that the figures had been vastly underestimated.
Had the PC been assessed solely from PC sales and turnover? How about time saving gains from added productivity and work process efficiency via diversified applications?
How about savings or value added derived from declining communication costs or from diminishing [Coase’s laws—search costs, contracting and coordination costs or otherwise known as] transaction costs, or the enhancement of business processes or even organizational capital (Garrett Jones)?
And how about the benefits of leisure (e.g. games, etc…) and other intangible gains such as real time connectivity with parents, relatives, friends and associates? Or how about the virtue or non-virtue of self-expression via social networking media?
Three, all these go to show why economists fall for the aggregate trap. They tend to quantify things even if they can’t.
Lastly, nonetheless the above only gives more proof that the world has been transitioning to the age of digitization or the information age, where more and more activities of our lives are becoming decentralized (Third Wave) enabled by technology.
Chart from Ray Kurzweil: Law of Accelerating Returns
I’d add that should the trend of innovations of applications and devices accelerate, this will even deepen and make this transition more widespread.
As Law Professor and author Butler Shaffer writes, “Decentralized technologies are causing us to rethink and redefine what we mean by "society."
The welfare gains of the PC are just signs of things to come.
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