The industrial-based economy has given way to a post-industrial order, making the Internet a crucial platform for commerce and communications. Evidence of this can be seen in a 2009 World Bank study of roughly 120 nations undertaken by Christine Qiang and Carlo Rossotto. The study estimated that each 10 percentage point increase in broadband penetration boosts gross domestic product (GDP) by 1.38 percent in developed nations and 1.21 percent in developing countries. Given this impact, it is vital, especially with our economy experiencing weak growth, that leaders pursue pro-innovation policies that improve productivity and entrepreneurship. Along these lines, Brookings released last week a paper by myself and my Brookings colleagues Allan Friedman and Walter Valdivia that outlined a robust domestic tech policy agenda for 2013 and beyond, which offered ideas for reforming our economy, improving public sector performance, and training people for 21st century jobs.
Lawmakers can start with implementing more relevant metrics for measuring worker productivity in today’s economy. In the case of GDP, current metrics miss important aspects of the digital economy. It focuses just on hours worked or total employment, which does not capture the many ways in which technology enables organizational reengineering on a large scale. Instituting more nuanced metrics, such as process improvements or ways digital technology creates economies of scale represent better ways to measure the economy and track operational efficiency in all phases of production.
There are also aspects of our economy that have not fully embraced or been transformed by technology. Education and health care represent two of the largest sectors that have not fully experienced the impact of transformational digital change. We continue to deliver education and health care in much the same way we did decades ago. In each area, there are policy barriers that stand in the way of adopting productivity-enhancing technologies. For example, many states still allocate K-12 dollars based on physical “seat-time” in the classroom, which discourages use of distance learning. We need to adopt smart policies and more flexible licensing requirements. Health care providers still are licensed on a state-by-state basis, which makes it difficult to promote cross-state telemedicine or health information technology that enables long-distance consultations. In order to promote greater innovation, we should overcome the limitations of geographically-based health care systems.