In the past, we’ve highlighted Robert Gordon’s theories that there is little reason to expect much productivity growth in the future from advanced economies, raising the prospects of decades of stagnation. In a post at VoxEu, GE economist Marco Annunziata takes exception:
The declining cost of [digital] instrumentation is beginning to enable a much wider use of sensors in machines ranging from jet engines to power generation turbines to medical devices. Software analytics can then leverage the enormous amount of data generated in order to optimise the performance of individual machines, fleets and networks. This means, for example, having a better insight in the performance of a jet engine and being able to anticipate mechanical failures so that maintenance can be performed in a pre-emptive way, minimising the delays that occur when the problem emerges shortly before take-off. It means being able to track the exact location of medical devices in a hospital and whether they are in use or idle, so that patient admissions and medical procedures can be scheduled more efficiently, yielding better health outcomes to more patients at lower cost. The potential benefits are sizeable. Just a 1% gain in fuel efficiency over fifteen years would yield $30 billion in savings in aviation and $66 billion in the power generation industry, while a 1% efficiency gain would yield $63 billion in the healthcare industry and $27 billion in the rail industry. . . .
. . . . Forecasting productivity is an extremely difficult exercise. But looking at the potential efficiency gains in individual industries, we feel it is not unreasonable to posit that the impact of the industrial internet might be comparable to the first wave of the internet revolution. In the US, if the industrial internet could accelerate annual labor productivity growth by 1-1.5 percentage points, bringing it back to its previous peaks, it could give a crucial boost to US economic growth.
So maybe there’s hope after all. The full post is here.