The world is debating Solow Paradox. Named after Nobel laureate in economics, it was stated by him thus: "You can see computer age everywhere these days, except in productivity statistics". The venerable economic magazine, "The Economist" in its issue dated July 24th, quotes no less venerable Professor Robert Gordon ("one of America's leading authorities on productivity") - p.20: "...the productivity performance of manufacturing sector of United States economy since 1995 has been abysmal rather than admirable. Not only has productivity growth in non-durable manufacturing decelerated in 1995-9 compared to 1972-95, but productivity growth in durable manufacturing stripped of computers has decelerated even more."

What should be held true - hype or dismal statistics? The answer to this question is of crucial importance to economies in transition. If investment in IT (information technology) actually RETARDS growth - then it should be avoided, at least until a functioning marketplace is there to counter its growth suppressing effects.

The notion that IT retards growth is counter-intuitive. It would seem that, at least, computers allow us to do more of same things faster. Typing, order processing, inventory management, production processes, number crunching are all managed more efficiently by computers. Added efficiency should translate into enhanced productivity. Put simply, same number of people can do more, faster, more cheaply with computers than they can without them. Yet reality begs to differ.

Two elements are often neglected in considering beneficial effects of IT.

The first is that concept of information technology comprises two very distinct economic activities: an all-purpose machine (the PC) and its enabling applications and a medium (the internet). Capital assets as distinct from media assets are governed by different economic principles, should be managed differently and be subject of different philosophical points of view.

Massive, double digit increases in productivity are feasible in manufacturing of computer hardware. The inevitable outcome is an exponential explosion in computing and networking power. The dual rules which govern IT - Moore's (a doubling of chip capacity and computing prowess every 18 months) and Metcalf's (the exponential increase in a network's processing ability as more computers connect to it) - also dictate a breathtaking pace of increased productivity in hardware cum software aspect of IT. This has been duly detected by Robert Gordon in his "Has 'New Economy' rendered productivity slowdown obsolete?".

But for this increased productivity to trickle down to rest of economy a few conditions have to be met.

The transition from old technologies to a new one (the computer renders many a technology obsolete) must not involve too much "creative destruction". The costs of getting rid of old hardware, software, of altering management techniques or adopting new ones, of shedding redundant manpower, of searching for new employees to replace unqualified or unqualifiable, of installing new hardware, software and of training new people in all levels of corporation are enormous. They must never exceed added benefits of newly introduced technology in long run. Hence crux of debate. Is IT more expensive to introduce, run and maintain than technologies that it so confidently aims to replace? Will new technologies be spun off core IT in a pace sufficient to compensate for disappearance of old ones? As technology mature, will it overcome its childhood maladies (lack of operational reliability, bad design, non-specificity, immaturity of first generation of computer users, absence of user friendliness and so on)?

Moreover, is IT an evolution or a veritable revolution? Does it merely allow us to do more of same only in a different way - or does it open up hitherto unheard of vistas for human imagination and creativity? The signals are mixed. IT did NOT succeed to do to human endeavour what electricity, internal combustion engine or even telegraph have done. It is also not clear at all that IT is a UNIVERSAL phenomenon suitable to all climes and mentalities. The penetration of both IT and medium it gave rise to (the internet) is not uniform throughout world even where purchasing power is similar and even among corporate class. Countries post communism should take all this into consideration. Their economies may be too obsolete and hidebound, poor and badly managed to absorb yet another critical change in form of IT. The introduction of IT into an ill-prepared market or corporation can be and often is counter-productive and growth-retarding.

The CYCLE OF THE INTERNET

Then, of course, there is Internet.

The internet runs on computers but it is related to them in same way that a TV show is related to a TV set. To bundle to two, as is often done today, obscures true picture and can often be very misleading. For instance: it is close to impossible to measure productivity in services sector, let alone is something as wildly informal and dynamic as internet. It is clear by now that internet is a medium and, as such, is subject to evolutionary cycle of its predecessors. Central and Eastern Europe has just entered this cycle while USA is most advanced.

The internet is simply latest in a series of networks which revolutionized our lives. A century before internet, telegraph and telephone have been similarly heralded as "global" and transforming.

So, what should CEE countries expect to happen to internet globally and, later, within their own territories? The issue here cannot be cast in terms of productivity. It is better to apply to it imagery of business cycle.

As we said, every medium of communications goes through same evolutionary cycle:

It starts with Anarchy - or The Public Phase.

At this stage, medium and resources attached to it are very cheap, accessible, under no regulatory constraints. The public sector steps in : higher education institutions, religious institutions, government, not for profit organizations, non governmental organizations (NGOs), trade unions, etc. Bedevilled by limited financial resources, they regard new medium as a cost effective way of disseminating their messages.

Objections to mode of presentation selected by Searle and to conclusions that he derived were almost immediately raised. Searle fought back effectively. But throughout these debates a few points seemed to have escaped most of those involved.

First, English speaker inside room himself is a conscious entity, replete and complete with mental states, cognition, awareness and emotional powers. Searle went to extent of introducing himself to Chinese Room (in his disputation). Whereas Searle would be hard pressed to prove (to himself) that English speaker in room is possessed of mental states – this is not case if he himself were in room. The Cartesian maxim holds: "Cogito, ergo sum". But this argument – though valid – is not strong. The English speaker (and Searle, for that matter) can easily be replaced in thought experiment by a Turing machine. His functions are recursive and mechanical.

But there is a much more serious objection. Whomever composed book of instructions must have been conscious, possessed of mental states and of cognitive processes. Moreover, he must also have had a perfect understanding of Chinese to have authored it. It must have been an entity capable of thinking, analysing, reasoning, theorizing and predicting in deepest senses of words. In other words: it must have been intelligent. So, intelligence (we will use it hitherto as a catchphrase for gamut of mental states) was present in Chinese Room. It was present in book of instructions and it was present in selection of input of Chinese messages and it was present when results were deciphered and understood. An intelligent someone must have judged results to have been coherent and "right". An intelligent agent must have fed English speaker with right input. A very intelligent, conscious, being with a multitude of cognitive mental states must have authored "program" (the book of instructions). Depending on content of correlated inputs and outputs, it is conceivable that this intelligent being was also possessed of emotions or an aesthetic attitude as we know it. In case of real life computers – this would be programmer.

But it is computer that Searle is talking about – not its programmer, or some other, external source of intelligence. The computer is devoid of intelligence, English speaker does not understand Chinese (="Mentalese")– not programmer (or who authored book of instructions). Yet, is SOURCE of intelligence that important? Shouldn't we emphasize LOCUS (site) of intelligence, where it is stored and used?