Economic Statistics, the New Economy, and the Productivity Slowdown

From 1949-1973, the Bureau of Labor Statistics (BLS) estimates that non-farm multifactor productivity grew at 1.9 per cent per year. Following 1973, the comparable number is 0.2 per cent, despite the economy’s substantial investment in computing equipment, the growth of the information economy, and the many innovations that have come to be known as the “new economy.” Many economists believe that productivity must be growing more rapidly than the government numbers suggest. This article reviews two reasons—one wrong, I contend, and one more plausible—for believing that inadequate measurement of output in our economic statistics may be hiding essential developments in our economy.