Think of the economy as a couch. By one line of reasoning, we lost trillions of dollars between the cushions during the 1990s. Blame it on government productivity metrics — which, this thinking goes, skewed gross domestic product figures downward by as much as 2%.
It’s the intangibles that slip through the cracks, say academics and business types racing to quantify the financial impact of organizational capital, business processes, and other abstractions. Output divided by unit of work time doesn’t cut it when output is tough to fix and work time underrepresents the always-connected 50-hour workweek.
Erik Brynjolfsson, a professor at MIT’s Sloan School of Management, and his colleague Shinkyu Yang recalculated GDP data for a study on the effects of intangible assets on measurements of economic growth. The assets in this case are business processes such as online booksellers’ inventory systems, retailers’ supply chains, or manufacturers’ efficiency schemes that produce measurable output and increase market value.
Their result: an additional 1% to 2% increase in annual productivity over the 1990s. But in the past few years, Brynjolfsson notes, actual productivity may have been lower than reported, as companies burned through intangible assets. In any case, he says, “the economy has changed so [conventional] productivity statistics may be missing a bigger and bigger chunk of the real value.”
A wholesale revision of government statistics along these lines is highly unlikely. But groups such as the Information Work Productivity Council, whose sponsors include Microsoft, Cisco, and Intel, are hashing out their own methodologies. By fall, IWPC expects to have productivity benchmarks for the finance, retail, and manufacturing industries; a methodology for tracking information use and benefits; and equations to size up organizational capital, according to Susan Conway, the council’s executive director and Microsoft’s information work research director.
Even industry backers are cautious about the new approaches, and some economists are skeptical. “If you can’t see it and add it up — more precisely, if two people can’t both see it and add it up in the same way — then my view is, stay away from it,” says James K. Galbraith, a professor at the University of Texas at Austin. For now, all that change is still stuck in the couch.