2 (Computer Intelligence, 1997).
Ownership
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FIGURE 1.2 Real computer prices. The price of
computers has declined
relative to the costs of other types of producers' durable
equipment (PDE).
SOURCE: Brynjolfsson and Yang (1997), using data from the
U.S.
Department of Commerce.
patterns correlate strongly with age and income. About 20
percent of households with incomes between $10,000 and $20,000, but
more than 60 percent of households with incomes of $60,000 to
$75,000, have computers. Some of the largest annual gains in
computer ownership were found in middle-income groups. For example,
households in the $40,000 to $50,000 income group reached the 50
percent level, and there was a nearly 5 percent increase in
penetration in the $20,000 to $30,000 income group. Almost 60
percent of households with children own a computer today.
An earlier RAND analysis by Anderson et al. (1995) examined
computer ownership data from the 1993 Current Population Survey
conducted by the Bureau of the Census. They categorized computer
ownership according to income, education, race/ethnicity, age, sex,
and location of residence. This study found that income and
educational status were associated with significant differences
in
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FIGURE 1.3 Nominal and real computer investment.
SOURCE: Brynjolfsson
and Yang (1997) using data from the U.S. Bureau of Economic
Analysis.
computer ownership. For example, about 7 percent of the
lowest-income quartile of households had computers at home, whereas
nearly 55 percent of the highest-earning quartile had computers at
home.3 In 1993, about 13 percent of
individuals over the age of 15 who did not have a high school
diploma had a home computer, whereas 49 percent of college
graduates had a home computer.
1.1.3 Internet Use
The most reliable figure on Internet use is the number of
computer and network domains connected directly to the Internet,
all of which must have a public Internet address. According to
conservative estimates from a recently conducted Internet domain
survey (Network Wizards, 1998), the number of Internet host
computers grew from 1.313 million in January 1993 to almost 30
million in January 1998.4
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The number of individuals who use the Internet is very difficult
to measure, in part because the definition of users is somewhat
fuzzy. Users might be subscribers to a consumer Internet service or
other computer service that includes the Internet as a component,
or they might be potential users with access to the Internet at
their workplace. Matrix Information and Directory Services
(Quarterman, 1997) estimated that as of January 1997 about 71
million people worldwide had access to e-mail. When access to
information by file transfer protocol (FTP) or the World Wide Web
(WWW) was the criterion used, the figure was about 57 million
people worldwide.
Project 20005 at Vanderbilt
University has conducted several carefully designed surveys of
Internet and Web use. One study (Hoffman et al., 1996) examined
Internet use by age, education, and sex using a telephone sample of
3,785 respondents. It found significant differences in usage
patterns across these demographic groups. For example, only 13.5
percent of those with a high school diploma or less reported using
the Web once or more per week, whereas nearly 56 percent of those
with a college degree reported weekly use. Hoffman and Novak's most
recent estimates, based on Nielson Media Research's Spring 1997
Internet Demographic Study, showed that 45 million people in the
United States 16 years of age and older, or about 22 percent of the
population, had accessed the Web at least once (Hoffman et al.,
1997a).
Another study (CommerceNet/Nielsen Media Research, 1997), in
which 9,000 people were interviewed, estimated that 58 million
adults in the United States and Canada used the Internet on a
regular basis. More than half of the respondents said that they had
been online within 24 hours of the interview.
Although e-mail appears to be the most widely used Internet
service, the World Wide Web is one of the fastest growing services.
A Baruch College-Harris Poll (1997) survey of 1,000 U.S. households
conducted in the spring of 1997 indicated that the number of adult
Web users had nearly doubled—to 40 million people, or 21
percent of adults—from the previous year. About a quarter of
these were people in their forties.
According to Matrix Information and Directory Services
(Quarterman, 1997), about 36 million individuals worldwide have the
technical capability to distribute or publish information via FTP
or WWW. The Netcraft Web Server Survey found 525,915 publicly
accessible Web servers in an exhaustive search in November 1996; by
December 1997 the number had risen to more than 1.6 million
(Netcraft, 1996, 1997).
1.1.4 Global Connectivity
According to a study by the International Data Corporation, the
surge in Internet use is a global phenomenon (International Data
Corporation, 1997a). The study estimated a worldwide total of 91
million users as of November 1997,
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with 14 million users in the Asia/Pacific region, 20 million in
Europe, and around 1 million in both Africa and South America.
1.2 Some Major Challenges
The studies cited above are, of course, based on particular
samples and research methodologies; it is hard to appraise their
accuracy without more detailed investigation. Moreover, among the
variables that make measurement difficult and contribute to
inconsistent results are disparate definitions of "use" and
"access." However, these studies clearly indicate that computer and
Internet growth is a significant, widespread, and global
phenomenon. Although use of information technology is most
prevalent among businesses and highly educated, high-income, North
American households, all demographic groups in the developed world
show a pattern of significantly increasing use.
A phenomenon this ubiquitous and growing this rapidly is clearly
important. As the three examples below illustrate, social science
research can help policy makers and others to better understand and
shape the interactions between technology and society.
1.2.1 Productivity and Organizational
Change
In the long run productivity is the primary determinant of our
standard of living and the economic resources available to address
societal challenges and problems. Understanding whether and how
computers affect economic productivity is a critical issue for
policy makers as well as business leaders. In 1987, the economist
Robert Solow quipped, "We see the computer age everywhere except in
the productivity statistics" (Solow, 1987). Solow's comment
reflects the fact that, despite the tremendous advances in computer
power and affordability shown in Figures 1.1 to 1.3, the aggregate
statistics suggest that economic productivity has grown more slowly
since about 1973 than it did in the period from 1950 to 1973.
There are many possible explanations for the apparent slowdown
in productivity despite the advances made possible by
computerization.6 Analysis is
complicated by the fact that many of the benefits of the computer
age are not reflected in the official statistics on output and
productivity. Managers typically cite improved quality, variety,
timeliness, and customer service as important reasons for their
investments in computers, yet these aspects of output go largely
unmeasured.7 Furthermore, the growth
of productivity in the service sector is difficult if not
impossible to measure. Zvi Griliches, for example, has estimated
that the "unmeasurable" sectors of the economy grew from 53 percent
of the total in 1948 to about 74 percent in 1994 (Griliches, 1994).
Ironically, there is apparently less information in the information
age about the value of output than there was in the
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industrial era. New and better metrics clearly are needed to
help in understanding how productivity in the information age
should be gauged and evaluated.8
Another aspect of the productivity paradox may be
unrealistically high expectations about the potential of computers
to affect output. Investment in computerization is still a
relatively small share of the total economy, and so the possible
impact of computerization on the whole may be limited. Based on the
quantity of computer power purchased each year, it is possible to
calculate the expected contribution computers "should" be making to
economic growth under the assumption that capital investment in
computers is earning a "normal" rate of return. Various researchers
have undertaken such an exercise, and the estimates cluster around
0.3 to 4 percent of additional growth in the economy owing to
technological advances in computers each year.9 Perhaps, then, the measured slowdown
in productivity would have been even more pronounced had it not
been for the contributions made by computers.
A constant stream of new discoveries and advances is required
just to keep productivity growth from falling to zero, and part of
the promise of computers is their ability to engender such new
discoveries. In earlier decades, growth in productivity was the
result of innovations such as electricity, automobiles, the radio,
jet engines, plastics, and even corrugated cardboard (Denison,
1985). Today, new products and services, innovative business
processes and organizational forms, and even new industries can be
traced to advances in information technology. Moreover, like
earlier general-purpose technologies such as the steam engine and
electricity, computers have changed the nature of work in myriad
minor and major ways, thus magnifying their economic and social
impact.
David (1989, 1990) found that the electrification of factories
had its greatest effect after factories had been radically
reorganized (see section 2.3.3 for more details). Similarly, case
studies suggest that realizing the full benefit of computer
technologies also often requires a significant rethinking of how
business works. As a result, the ways in which computers are used
may be more important than the quantity of investment. In one
instance, a large medical products manufacturer found that
effective use of computerization required changes in two dozen work
practices and policies, including those related to inventory,
incentive systems, worker training, job responsibilities, and
hiring criteria. Initially, productivity fell because the new
system did not work smoothly. However, by focusing on the
interactions among the work practices, the company was able
eventually to reap substantial rewards from use of the technology
(Brynjolfsson et al., 1997).
Understanding exactly which work policies and practices need to
be changed and which changes are most important in various
contexts—for example, what frequency and amount of training
are required for workers to adapt to new technologies—are
critical research issues. Collection of further case studies can
help, but there is a particular need for analysis leading to
broader insights that can be generalized across numerous companies
and situations. Here again, lack of good
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data on how businesses are changing has hampered progress.
Section 2.3.3, "Organizations and Processes," discusses these
issues in more detail.
1.2.2 Information Technology and Wage
Inequality
For more than 20 years, the gap separating high-wage earners
from low-wage earners has continued to increase in the United
States. For example, the ratio of the wages earned by males at the
75th percentile of the distribution to those at the 25th percentile
has grown from 1.75 to 1 in the 1970s to 2.25 to 1 in the early
1990s, and the wages of those at the more extreme percentiles have
moved farther from the median (Murphy and Welch, 1993). By some
measures, the poorest members of society are worse off than they
were a generation ago. Most economists attribute much of the
increase in inequality to an increase in the demand for skilled
labor and also link that shift in demand to technical change. For
example, Autor et al. (1997) showed that the increase in inequality
was largest in those industries that were the heaviest users of
information technology. However, it remains unclear how use
of IT changes labor markets. Thus, it is difficult to predict
whether the growth in wage inequality will continue and what policy
makers can do about it.
Is the growth of inequality a temporary phenomenon that will
correct itself? Should society invest more heavily in education to
dampen the negative effects of technological change? What is the
role of corporate reorganization in changing the demand for
different types of workers? These are some of the important
questions that can be addressed only by further research on the
economic and social impacts of computing and communications.
Section 2.3.2, "Labor and Information Technology," discusses this
subject in more detail.
1.2.3 Design of Technology and
Standards Setting
Social science has much to contribute to the design of
appropriate technology. Today the question facing many
technologists is not, How do we do it? but, What should we do? As
determinants of technology development, design issues involving
human-computer interfaces (see Box 1.2), pricing and "versioning"
(the provision of different qualities or versions of a good that
sell at different prices), evaluation, and product life cycles have
become more important than the traditional engineering concerns.
Social scientists can help to design the questionnaires, marketing
studies, pricing policies, and interfaces necessary to develop
successful information technology.
Standards development is another aspect of technology design in
which social science can play a very useful role. Technical
standards are the basis for interconnection and communication among
information technology systems. However, an important aspect of
standards is that once adopted, they can be very difficult to
change because of their highly distributed nature and the
consequent
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