Saturday, October 1, 2011

Is Information Technology Beneficial?

We often assume that information technology is beneficial to society, however, this is rarely backed by empirical evidence. Last week in our cooperation reading group, we discussed a fascinating paper by Jeremiah Dittmar that examines the link between information technology and economic growth. Despite the title, the paper is not about the Internet or even computers, it is about the printing press. The author used data from the fourteenth and  fifteenth centuries to show how that the printing press indeed had a positive effect on economic growth.
The paper uses the distance to the birthplace of the printing press as an instrumental variable to assess the effect of  the printing press on the economy. I did not know about this approach, but if I understood  Jérôme and Mako’s explanation, instrumental variables are used to claim cause-and-effect relationships when an experiment cannot easily be done. Using instrumental variables requires a leap of faith though. For example, the Wikipedia article for instrumental variables mentions that tobacco taxes can be used as an instrumental variable for assessing the effect of smoking on health. One has to believe that tobacco taxes “only affect health because they affect smoking.” In the paper, distance to Mainz was used as the instrumental variable. The author provides very convincing evidence that distance to Mainz only affects economic growth because of its relationship to being the birthplace of the printing press. The paper also assumes that economic growth is correlated with population size. Here are some of the observations made by the group:
  • Impressive data! It must have taken a lot of work to collect.
  • Someone pointed out that  the paper could have mentioned the effect of distance on deaths due to disease. Mainz is in the center of Europe, far from the ports, where presumably disease was more common. Could it be that the farther from the sea, the more growth on population due to less disease?
  • Do the findings transfer to digital technologies?  The Internet is both about information distribution and the dissemination of the tools for information production.
  • We wondered how one might go about studying the effect of programs like the One Laptop Per Child given that in some countries, the laptops are given to some villages and not others. Could it be used as a natural experiment?

Dittmar, Jeremiah E. 2011. “Information Technology and Economic Change: The Impact of The Printing Press.” The Quarterly Journal of Economics 126(3):1133 -1172.

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