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Issue No.03 - July-September (1997 vol.19)
pp: 27-40
ABSTRACT
<p><it>This article argues that it would have become very difficult for computers to have come into being, and subsequently be adopted by businesses, if the U.S. economy were not large and healthy. The author demonstrates that there were characteristics of the economy that facilitated the development and use of computers in the United States, beginning in the 1950s and continuing down to the present.</it></p>
CITATION
James W. Cortada, "Economic Preconditions That Made Possible Application of Commercial Computing in the United States", IEEE Annals of the History of Computing, vol.19, no. 3, pp. 27-40, July-September 1997, doi:10.1109/85.601734
REFERENCES
1. The issue is well-treated by K. Flamm, Creating the Computer.Washington, D.C.: Brookings Institution, 1988; and extended down to the contemporary period by A.L. Norberg and J.E. O'Neill, Transforming Computer Technology: Information Processing for the Pentagon, 1962-1986. Baltimore: Johns Hopkins Univ. Press, 1996; and by economists as early as W.F. Sharpe, The Economics of Computers. New York: Columbia Univ. Press, 1969.
2. J.W. Cortada, "Commercial Applications of the Digital Computer in American Corporations," IEEE Annals of the History of Computing, vol. 18, no. 2, pp. 18-29, 1996.
3. This relationship between technology and economics has been widely recognized. See, for example, D.S. Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe From 1750 to the Present.Cambridge, England: Cambridge Univ. Press, 1969; C. Pursell, The Machine in America. Baltimore: Johns Hopkins Univ. Press, 1995; M.R. Smith and L. Marx, eds., Does Technology Drive History? Cambridge, Mass.: MIT Press, 1994.
4. The literature is vast. For a sampling, see E.R. Dulberger, "The Application of Hedonic Model to a Quality Adjusted Price Index for Computer Processors," D.W. Jorgenson and R. Landau, eds., Technology and Capital Formation.Cambridge, Mass.: MIT Press, 1989, pp. 37-75.
5. K. Flamm, Targeting the Computer: Government Support and International Competition.Washington, D.C.: Brookings Institution, 1987, p. 7. J. Huxley, Scientific Research and Social Needs.London: Watts&Co., 1934, p. 255.
6. J.W. Cortada, The Computer in the United States: From Laboratory to Market, 1930 to 1960.Amonk, N.Y.: M.E. Sharpe, 1993.
7. J.W. Cortada, "Commercial Applications of the Digital Computer in American Corporations," IEEE Annals of the History of Computing, vol. 18, no. 2, pp. 18-29, 1996.
8. J.L. McKenney, Waves of Change: Business Evolution through Information Technology, Harvard Business School Press, Boston, 1995; and for a framework, examples, and bibliography, see J.W. Cortada, "Commercial Applications of the Digital Computer in American Corporations, 1945-1995," IEEE Annals of the History of Computing, vol. 18, no. 2, 1996, pp. 16-27.
9. For an example of this process at work, see D.F. Noble, Forces of Production: A Social History of Industrial Automation.New York: Oxford Univ. Press, 1984.
10. U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States: Colonial Times to 1970.Washington, D.C.: Government Printing Office, 1975, vol. 1, p. 224.
11. See, for example, U.S. Department of Commerce, Bureau of Economic Analysis, The National Income and Product Accounts of the United States, 1929-82.Washington, D.C.: Government Printing Office, 1986, pp. 252-255.
12. S. Ratner, J.H. Soltow, and R. Sylla, The Evolution of the American Economy: Growth, Welfare, and Decision Making.New York: Basic Books, 1979, p. 403; F.M. Scherer, Industrial Market Structure and Economic Performance. Chicago: Rand McNally, 1973. J.W. Kendrick's classic remains relevant, Postwar Productivity Trends in the United States, 1948-1969. New York: National Bureau of Economic Research, 1973; but see also material cited elsewhere in the References to this paper.
13. U.S. Department of Commerce, Historical Statistics of the United States, vol. 1, p. 225.
14. M. Campbell-Kelly, ICL, a Business and Technical History.Oxford, England: Oxford Univ. Press, 1989.
15. U.S. Department of Commerce, Historical Statistics of the United States, vol. 1, p. 225; and W.J. Baumol, S.A.B. Blackman, and E.N. Wolff, Productivity and American Leadership: The Long View. Cambridge, Mass.: MIT Press, 1989, perform extensive short-term and long-term comparisons of productivity between the United States and Japan, arguing that over a longer period of time, one might expect Japanese economic behavior to mirror that of other industrialized nations.
16. The best source today from an economist is Flamm, Creating the Computer; and Targeting the Computer; but see also F.M. Fisher, J.W. McKie, and R.B. Mancke, IBM and the U.S. Data Processing Industry: An Economic History. New York: Praeger, 1983, pp. 3-26.
17. Flamm, Targeting the Computer, pp. 93-106.
18. Ibid.; but see also data in M. Phister, Jr. Data Processing Technology and Economics. Santa Monica, Calif.: Santa Monica Publishing Co., 1976, an extraordinarily detailed source of information on the 1950s and 1960s.
19. Flamm, Creating the Computer, pp. 29-79 and his Targeting the Computer, pp. 107-110; E.W. Pugh, Building IBM: Shaping an Industry and Its Technology. Cambridge, Mass.: MIT Press, 1995, pp. 117-144.
20. Ratner, The Evolution of the American Economy, p. 403.
21. Ibid.
22. U.S. Department of Commerce, Bureau of the Census, Historical Statistics of the United States: Colonial Times to 1957.Washington, D.C.: Government Printing Office, 1961, p. 139.
23. U.S. Department of Commerce, Historical Statistics of the United States: vol. 1, p. 127; Ratner, The Evolution of the American Economy, p. 479.
24. Ibid., p. 75.
25. B.V. Bowden ed., Faster Than Thought.London: Pitman, 1953, p. 247.
26. Baumol, Productivity and American Leadership, p. 119; on why this was so, see E. Ginsberg, "The Mechanization of Work," The Mechanization of Work. San Francisco: W.H. Freeman, 1982, pp. 3-11.
27. W. Buckingham, Automation: Its Impact on Business and People.New York: Harper&Brothers, 1961, pp. 91-92; but see also for a contemporary analysis, H. Maurer, Great Enterprise. New York: Macmillan, 1955.
28. A.D. Chandler, The Visible Hand: The Management Revolution in American Business.Cambridge, Mass.: Harvard Univ. Press, 1977, pp. 482-483.
29. T.K. Landauer, The Trouble with Computers: Usefulness, Usability, and Productivity, MIT Press, Cambridge, Mass., 1995.
30. F. Machlup, The Production and Distribution of Knowledge in the United States.Princeton, N.J.: Princeton Univ. Press, 1962.
31. Ibid., p. 33."
32. F. Machlup, Knowledge: Its Creation, Distribution, and Economic Significance, three vols. Princeton, N.J.: Princeton Univ. Press, 1981-1984; vol. 3 is particularly relevant, The Economics of Information and Human Capital. For a serious, modern account of intellectual capital and the knowledge-based organization, see J.B. Quinn, Intelligent Enterprise: A Knowledge and Service Based Paradigm for Industry. New York: Free Press, 1992; for a collection of best practices in this area, see IBM Consulting Group and the Economist Intelligence Unit, The Learning Organization: Managing Knowledge for Business Success. New York: Economist Intelligence Unit, 1996.
33. Machlup, The Production and Distribution of Knowledge in the United States, also see G. Burok, "Knowledge: The Biggest Growth Industry of Them All," Fortune, Nov. 1964, pp. 128-131.
34. J. Marschak, "Economics of Inquiring, Communicating, and Deciding," Amer. Economic Rev., vol. 58, no. 2, pp. 1-8, 1968. A most thorough work on this subject is by M.U. Porat, The Information Economy: Definition and Measurement. Washington, D.C.: Office of Telecommunications, U.S. Department of Commerce, 1977. His definition of jobs differs from Machlup's; however, he makes the same points. Porat defines a "primary information" organization as a firm that produces information goods and services as output that he defines as owning 25.1 percent of the GNP and a "secondary information" sector made up of bureaucracies of noninformation enterprises, with this sector owning 21.2 percent of the GNP, bringing the total for both to 46.2 percent of the U.S. GNP.
35. Baumol, Productivity and American Leadership, pp. 149-150.
36. J.R. Schement and T. Curtis, Tendencies and Tensions of the Information AgeNew Brunswick, N.J.: Transactions Publishers, 1995, pp. 82-84.
37. Ibid., p. 156. He also makes the point that "The shift in output demand toward knowledge-intensive products was of negligible importance during the 1960s, while during the 1970s it actually served to depress the demand for knowledge workers," p. 156.
38. For a summary, Laundauer, The Trouble With Computers, pp. 9-46, 73-78.
39. Cortada, "Commercial Applications of the Digital Computer in American Corporations," pp. 16-27
40. J.R. Schement and T. Curtis, Tendencies and Tensions of the Information AgeNew Brunswick, N.J.: Transactions Publishers, 1995, pp. 82-84.
41. Beniger, The Control Revolution, pp. 426-427.
42. Ibid., p. 427."
43. J.R. Schement and T. Curtis, Tendencies and Tensions of the Information AgeNew Brunswick, N.J.: Transactions Publishers, 1995, pp. 82-84.
44. Compare to previous generations, e.g., Cortada, Before the Computer.
45. M. Phister, Jr., "Computer Industry," A. Ralston and E.D. Reilly, Jr., eds., "Computer Industry," A. Ralston and E. D. Reilly, Jr., eds., Encyclopedia of Computer Science and Engineering.New York: Van Nostrand Reinhold, 1983, p. 335.
46. J.W. Cortada, Information Technology as Business History: Issues in the History and Management of Computers, Greenwood Press, Westport, Conn., 1996.
47. M. Campbell-Kelly and W. Aspray, Computer: A History of the Information Machine, Basic Books, New York, 1996, p. 117.
48. I have cataloged a small percentage of this material in A Bibliographic Guide to the History of Computer Applications, 1950-1990, Greenwood Press, Westport, Conn., 1996.
49. On IBM's personal computer, see J. Chposky and T. Leonsis, Blue Magic: The People, Power and Politics Behind the IBM Personal Computer.New York: Facts on File, 1988; on the Apple, see M. Moritz, The Little Kingdom: The Private Story of Apple Computer. New York: William Morrow, 1984; and J.S. Young, Steve Jobs: The Journey Is the Reward. Glenview, Ill.: Scott, Foresman, 1987, pp. 77-167; and for broader accounts, see A. Goldberg, ed., A History of Personal Workstations. New York: Addison Wesley, 1988; and for the best short and balanced account, see Campbell-Kelly and Aspray, A History of the Information Machine, pp. 233-300.
50. J. Diebold's thoughts appeared in Banking, Apr. 1958, p. 42
51. G.M. Smith, Office Automation and White Collar Employment.New Brunswick, N.J.: Inst. of Management and Labor Relations, Rutgers—The State University, no date [1960?]), p. 4.
52. M.S. Mahoney, "The History of Computing in the History of Technology," Annals of the History of Computing, vol. 10, pp. 113-125, 1988.
53. Montgomery Phister, Jr., Data Processing Technology and Economics.Santa Monica Calif.: Santa Monica Publishing Company, 1976, pp. 318-330.
54. B. Gilchrist and R.E. Weber, The State of the Computer Industry in the United States: Data for 1971 and Projections for 1976.Montvale, N.J.: AFIPS, 1973, p. 30.
55. Ibid., p. 28."
56. Ibid, for a short overview of the industry.
57. L. Albin and K.M. Gagne, eds., Information Processing in the United States: A Quantitative Summary.Reston, Va.: AFIPS, 1985, p. 4.
58. J. Musgrave, "Fixed Reproducible Tangible Wealth in the United States, 1982-1985," Survey of Current Business.Washington, D.C.: U.S. Department of Commerce, Bureau of Economic Analysis, Aug. 1986, whole issue.
59. S.D. Roach, "Economic Perspectives," Morgan Stanley, July14, 1988.
60. For a study of the volumes, see R. Kominski, "Computer Use in the United States: 1989," series P-23, no. 171. Washington, D.C.: U.S. Department of Commerce, Bureau of the Census, Current Population Reports, Mar. 1991.
61. Data drawn from a very detailed analysis of the U.S. information processing industry are in U.S. Department of Commerce, International Trade Administration, U.S. Industrial Outlook 1994.Washington, D.C.: Government Printing Office, 1994, pp. 26-1 to 26-2; 26-16; and 27-5
62. M.R. Rubin and M.T. Huber, The Knowledge Industry in the United States, 1960-1980.Princeton, N.J.: Princeton Univ. Press, 1986, pp. 170-171.
63. U.S Department of State, Bureau of Intelligence and Research Report.Washington, D.C. Government Printing Office, 1974. I have constructed a table of these data published in Cortada, Information Technology as Business History, p. 76.
64. Cortada The Computer in the United States, pp. 12-29, 102-124; Campbell-Kelly and Aspray, A History of the Information Machine, pp. 105-232.
65. D.A.C. McGill, Punched Cards.New York: McGraw-Hill, 1962, p. 147.
66. G. Burok, The Computer Age and Its Potential for Management.New York: Harper&Row, 1965, p. 22.
67. Rubin, The Knowledge Industry in the United States, p. 164.
68. T.K. Landauer, The Trouble with Computers: Usefulness, Usability, and Productivity, MIT Press, Cambridge, Mass., 1995.
69. Economic payback is critical to any analysis of technology. For an outstanding study of many technologies, including computers, see J.M. Utterback, Mastering the Dynamics of Innovation.Boston: HBS Press, 1994.
70. Baumol, Productivity and American Leadership, p. 29.
71. Ibid., p. 100.
72. Cortada, The Computer in the United States, p. 15.
73. Baumol, Productivity and American Leadership, p. 6.
74. Baumol's conclusions have been voiced by others looking at the issue of productivity, a topic with its own vast literature. The more notable studies are by W.H. Branson, "Industrial Policy and U.S. International Trade," M.L. Wachter and S.M. Wachter, eds., Towards a New U.S. Industrial Policy.Philadelphia: Univ. of Philadelphia Press, 1981, pp. 378-408; M. Darby, "The U.S. Productivity Slowdown: A Case of Statistical Myopia," Amer. Economic Rev., vol. 74, pp. 301-322, June 1984; V.R. Fuchs, "Economic Growth and the Rise of Service Employment," H. Giersch, ed., Towards an Explanation of Economic Growth: Symposium 1980. Tubingen, Germany: J.C.B. Mohr, 1981, pp. 221-242; J.F. Helliwell, P.H. Strum, and G. Salou, "International Comparisons of the Sources of Productivity Slowdown," European Economic Rev., vol. 28, pp. 157-191, 1985; R.Z. Lawrence, Can America Compete? Washington, D.C.: Brookings Institution, 1984; R.D. Norton, "Industrial Policy and American Renewal," J. Economic Literature, vol. 24, pp. 1-40, Mar. 1986; A. Singh, "Manufacturing and De-Industrialization," New Palgrave: A Dictionary of Economics. London: Macmillan, 1987, pp. 301-308; D. Tapscott and A. Caston, Paradigm Shift: The New Promise of Information Technology. New York: McGraw-Hill, 1993; McKinsey Global Institute, Service Sector Productivity. New York: McKinsey and Co., 1992.
75. See Rifkin I explore these issues in more detail in my book, Best Practices in Information Processing.Englewood Cliffs, N.J.: Prentice Hall, 1997.
76. Cortada, "Commercial Applications of the Digital Computer in American Corporations," pp. 21, 26-27.
77. D.F. Noble, Forces of Production: A Social History of Industrial Automaton.New York: Oxford Univ. Press, 1984, p. 330.
78. See especially three books by M. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors.New York: Free Press, 1980; Competitive Advantage: Creating and Sustaining Superior Performance. New York: Free Press, 1985; and The Competitive Advantage of Nations. New York: Free Press, 1990.
79. Porter, Competitive Advantage of Nations, pp. 306-307.
80. Ibid., p. 508.
81. Ibid., p. 522."
82. Ibid., p. 571."
83. C.W. Neuendorf, "New Dimensions in Management Information," Data Processing: Proceedings 1963.Detroit: Data Processing Managers Association, 1963, p. 42.
84. Ibid., p. 571.
85. R.W. Riche, "Impact of New Electronic Technology," reprinted from MLR (3/82), Bureau of Labor Statistics, U.S. Department of Labor, BLS Reader on Productivity, Bulletin 2171. Washington, D.C.: Government Printing Office, June 1983, p. 147.
86. P.R. Trapp, "Millwide MIS: Is It an Idea Whose Time Has Come?" Paper Trade J., pp. 32-34, June15, 1984.
87. M. Campbell-Kelly and W. Aspray, Computer: A History of the Information Machine, Basic Books, New York, 1996, p. 117.
88. These ideas are expanded in M.L. Ernst, "The Mechanization of Commerce," The Mechanization of Work, pp. 63-74.
89. Giuliano, "The Mechanization of Office Work," Ibid., p. 86.
90. This example is explained by W.W. Leontief, "The Distribution of Work and Income," Ibid., pp. 100-109.
91. A major point I explored in Before the Computer, pp. 5-12, 91-95, 144-148.
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