Since the arrival of the Motorola DynaTAC in 1973 (weighing in at 2.2 pounds), cell phones have gone from bulky contraptions capable of only the most straightforward communications functions to gee-whiz devices that allow users to do anything from finding directions to the nearest sushi joint to viewing Lady Gaga videos on the fly. Indeed, cell phone networks have evolved so rapidly and become so ubiquitous a part of global culture that it has been hard to get any perspective on their overall impact.
Gerry Faulhaber, Professor Emeritus of Business and Public Policy at the Wharton School, gives it a try. In “Mobile Telephony: Economic and Social Impact,” [Download Here] he argues that cell phones have become the dominant information technology, surpassing even the Internet in importance in daily life. There are 4.1 billion active mobile subscriptions worldwide – an astonishing 61 handsets for every 100 people on the planet.
Arguably the biggest unknown is how the technology is affecting the growth and distribution of global output. And here, Faulhaber is a technological optimist, noting that cell phone networks have sharply improved the efficiency of markets (especially in less developed countries) by increasing the effective size of markets and reducing information and transaction costs. Cell phones now do yeoman duty in isolated towns from India to Brazil, effectively breaking the monopolies of local suppliers and opening urban markets to local producers.
Quantifying the impact on economic growth – aggregating the impact of myriad small changes – is, of course, difficult. One 2005 study (see pages 10-23) by Leonard Waverman, Meloria Meschi, and Melvyn Fuss found that an additional 10 handsets per 100 people in low-income countries raises the pace of GDP growth by half a percentage point annually. In developed countries, where substitutes for hand-held communications are more readily available, adding 10 phones per 1,000 people raises the rate of GDP growth by a quarter of a percentage point. These are humongous numbers when one remembers that a mere 2 percent annual growth rate would increase GDP seven-fold in a century.
It’s a grim world out there in so many ways. But the combination of digital technology and the exponential impact of networks has a way of making optimists of us all.
[Written with a lot of help from Jill Scherer]