May 01, 2019

Digital networks at the nexus of productivity growth

  • Kamat S.
  • Prakash S.
  • Saniee I.
  • Weldon M.

This paper takes a fresh look at the debate over the relationship between digital technology and productivity. The argument of economic historian Robert J. Gordon is that digital technology will not lead to increases in productivity such as we saw in the last century, based on his analysis of the five “Great Inventions” in the fields of electricity, urban sanitation, chemicals, the internal combustion engine and communications. The authors of this paper argue that the key ingredient in these great inventions is actually the ability to diffuse their effects widely based on the creation of networks in transportation, health, energy and communications. It is this network effect that underlies the burst in productivity. We use this essential observation to propose that today’s digital technologies will replace the current physical networks with automated, augmented intelligence-driven digital networks, and create a fifth network in manufacturing based on reconfigurable robotic systems and additive manufacturing. In total, these five Great Digital Networks will combine to drive the fourth industrial revolution. By analyzing the effects of the previous Great Networks, we develop a model that can be used to predict when this industrial revolution will result in a productivity burst in the US, China and India.

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