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Lecture 6 - Lecture 6 Communications part 2 Twentieth...

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Lecture 6:  Communications part 2:  Twentieth century modifications The business of the twentieth century was to fill in the missing parts of the world-wide  communications network, building on the skeleton already in place by 1914.  World Wars I and II  and the Great Depression did not totally halt this process, and in fact the technological advances  that generally do occur in wartime probably advanced it in one sense, but most of the filling in  was done in the last half of the twentieth century, and the rate of improvement speeded up as the  end of the century approached.  I’ll briefly go through some of those changes and then discuss  their effects. Volumetric changes:   Originally, telephone calls required an operator’s intervention— you would lift your receiver, which would alert the operator that a call was being made, and she  would then ring the person you were trying to connect to.  This human intervention was later  automated at the local level, but intercity calls still required human operators on each end.  The  result was that long-distance calling was much more expensive than it is today—at least 20 times  as expensive in constant dollars, so that long-distance calling was not used any more than could  be helped.  The area code system arrived in the mid-twentieth century, automating long-distance  telephone calls and so bringing the price very far down; and as the price fell the volume of calls  rose.  There are now several hundred long-distance calls made for every one made fifty years  ago, yet fewer people are employed by the telephone company.  In short, the productivity of  telephone employees has risen by a factor of 1000; again, not 1000 percent, but a thousand times  as many calls per employee, while the price per call has fallen to the single-digit percent level as  compared with fifty years ago.  What this means is that the consumer is paying a tiny fraction of  the rates as of fifty years ago, yet the telephone companies are making more money. Last week, I mentioned two characteristics of the modern era: the substitution of the  made world for the natural world, and the very fast rate of change.   Here is a third: productivity  rises, prices fall and profits rise all at the same time.  This occurs because productivity increases  make possible the simultaneously falling prices and rising profits.   Even more dramatic falls took place in transcontinental communications. Two factors  made these calls expensive.  First, like domestic long-distance calls, they were labor-intensive,  requiring an operator at each end of the line to complete the call.  There was also a physical 
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