Digital Forces And The Other 70% Of The US Economy

For those feeling the need for a bracing dose of optimism about the prospects for US productivity growth, I recommend “The Coming Productivity Boom: Transforming the Physical Economy with Information,” written by Michael Mandel and Bret Swanson (March 2017), and published by the Technology CEO Council (which is more-or-less what it sounds like, a “public policy advocacy organization comprising Chief Executive Officers from America’s leading information technology companies, including Akamai, Dell, IBM, Intel, Micron, Oracle, Qualcomm and Xerox.”)

Mandel and Swanson split the US economy into two big chunk, which they call the “digital economy” and the “physical economy.” In the digital economy, which accounts for about 30% of US GDP, they argue that investment in information technology and productivity growth are doing fairly well. But in the physical economy, investment in information technology and productivity growth have been low. Thus, they argue that there is potential for rapid productivity growth in more than two-thirds of the US economy.

What are the industries in these two economic groupings? The digital economy is: “Computer and electronics production; publishing; movies, music, television, and other entertainment; telecom; Internet search and social media; professional and technical services (legal, accounting, computer programming, scientific research, management consulting, design, advertising); finance and insurance; management of companies and enterprises; administrative and support services.” The physical economy is: “All other industries, including agriculture; mining; construction; manufacturing (except computers and electronics); transportation and warehousing; wholesale and

retail trade; real estate; education; healthcare; accommodations and food services; recreation.” Obviously, their notion “physical” isn’t just material goods, but also includes a number of the biggest service industries like health care and education–as long as what is ultimately being delivered is not actually digital in nature.