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D7:   The Persistence of the Computer Paradox: A Critique of Efforts to Disprove the Computer Paradox
    By Paul A. Strassmann
    21 Pages
    Date Published: 12/2001

    Online Price: $4.95

Summary

What is known nowadays as the Computer Paradox has become the stimulus for ongoing debates about the economic benefits of computerization. Recent assertions that the Computer Paradox is not valid any more have been countered by arguments that it persists as an intrinsic characteristic of the U.S. economy. Meanwhile, a concerted effort to repeal the paradox was launched from academic as well as government sources. These have been largely motivated by the need to justify the enormous expansion of spending on computerization, especially in the period from 1990 through 2000. Nevertheless, this paper shows that the Computer Paradox as valid as an observation as it was in 1987.

The fact that contradictions about the financial benefits of the single largest share of business investments have been allowed to continue for more than a decade are a reflection on the inadequacies of economic analysis of how to assess national productivity gains. This paper describes the history, the arguments and the evidence that is available to support or deny the existence of the paradox.

Contents

5 - Origins of the Paradox
7 - Further Studies of the Paradox
9 - Labeling the Paradox
9 - Banishing the Paradox
12 - Proving that the Paradox Still Exists
14 - Computerization Did not Deliver Promised Results
16 - A Productivity Assessment
19 - Conclusions

Figures

11 - Figure 1 - Growth in Information Technology as Share of Total Business Investment
13 - Figure 2 - Firms with Negative Economic Profits as Related to the Prime Interest Rate
15 - Figure 3 - Assets Required to Support the Delivery of Corporate Revenues 1982-2000
15 - Figure 4 - Costs of Information Required to Support the Costs of Sales, 1982-2000
17 - Figure 5 - Box Plots Showing the Distribution of the Costs of Capital, 1982-2000
18 - Figure 6 - Information Productivity and Interest Rates, 1982-1999
19 - Figure 7 - Information Productivity Held at the 1999 Interest Rate


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