The Dynamo and the Computer: An Historical Perspective On the Modern Productivity Paradox

Paul David – American Economic Review

This paper, published in 1990 and focused on events almost a hundred years earlier is probably the oldest entry in Strategic Reading. But it remains fresh in providing a powerful analogy for changes we have seen and continue to see in the workplaces of the 21st century.

The central point of the paper from that perspective is that workplace adaptation follows only with what can be a long lag from technology adoption. The example given is the introduction of electricity to factories which had previously relied on steam engines to power their activities. Steam engines are typically large and their power is distributed mechanically – and that was a strong determinant of the design of factories. When electric motors were first introduced, the model of a single central source of power survived for a surprisingly long time before a small number of very large motors started to be replaced by a large number of very much smaller ones. And that transition both prompted and was enabled by new approaches to designing factories – in a sense the pace of real innovation was driven by the rate of change of factory design, rather than the rate of change of power source.

That insight has long been valuable in understand the impact of more recent technological changes on work and workplaces (and more generally in understanding that the lag between cause and effect often needs to be measured in years, if not decades). It has taken on a fresh relevance in the shock to working arrangements (particularly in what was traditionally office-based work) caused by Covid and its aftermath. We have a fresh set of tools and a fresh set of opportunities those tools enable. But the organisation of work is still responding to that very unevenly. Perhaps we will all know how well it has gone a decade or a century from now.

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