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Ben Kuhn's avatar

It's interesting to compare this to the software industry, which seems to share a lot of characteristics with construction (high dollar value, each project has unique conditions, many sequential dependencies, mistakes are often difficult to fix though maybe not as difficult as construction). My impression is that people come up with new/better ways of building software much more frequently.

I think this is good evidence for your idea that a less-fragmented construction industry might be more innovative: a lot of new software tools were pioneered inside one of the few largest tech companies.

(A large part of this is also obviously that the construction industry has existed for >100x longer than the software industry, so there's much more low-hanging fruit in software. Another relevant difference might be that it's easier to experiment with new software tools in a low-stakes way via side projects; I'd guess that the minimum practical size for a software project is much smaller than for a construction project?)

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Samuel Hammond's avatar

Great piece.

Robert Gordon finds that the construction industry recorded negative productivity growth from 1995-2005 in both the US and EU-10, owing entirely to declining multi-factor productivity, i.e. the residual that's supposed to capture output from new ideas and innovation.

See: "The Industry Anatomy of the Transatlantic Productivity Growth Slowdown" https://www.nber.org/papers/w25703

Construction productivity is notoriously hard to measure, but stipulate that these estimates are at least directionally correct. What drove the decline in construction MFP? Would you consider doing a post on why and how construction innovation is not just hard, but may even be somehow regressing?

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