Are people more productive today, with their cell phones and videoconferences and Internet connections, than they were a decade or two ago?

Economists would love to know the answer, but measuring productivity is one of the most puzzling problems they face.

Although the concept of labor productivity is essentially straightforward the total output per hour of work measuring productivity is a controversial issue. And it’s one with important ramifications for understanding of structural changes in the economy.

“Productivity is one of the biggest mysteries of macroeconomics,” said Lisa Grobar, professor of economics at Cal State Long Beach. “From the early 1970s to just a few years ago, we had very low productivity growth in the U.S., and nobody knew exactly why. And the interesting thing is that this slowdown in productivity growth coincided with the computer revolution.”

How could that be? It strains credibility to think that improvements in technology have led to lower productivity. This has led to speculation that the Bureau of Labor Statistics has been understating productivity growth, particularly in the services sector.

“I’m sure that we mis-measure productivity grossly,” said Aris Protopapadakis, associate professor of finance and business economics at the USC Marshall School of Business. “The problem is the conversion of nominal output to real output. You have to estimate changes in (quality), and nobody has a clue how to do that adequately.”

Phyllis Otto, an economist with the Bureau of Labor Statistics, said that while it’s relatively easy to measure output vs. hours of work, it’s not so easy to measure improvements in the quality in the items produced.

In calculating non-farm business productivity, which is the most widely cited labor productivity number, the BLS adjusts the nominal gross domestic product for inflation and for changes in the quality of the output of goods and services.

Thus, if a factory builds a better car in the same amount of time as the old car, the value of that output should be adjusted to reflect the increased quality of the car. But how do you do that? You can’t necessarily base it on prices, because the manufacturer might not charge more or might even charge less than for the old model.

The result is that measuring improvements in quality often comes down to educated guesswork, economists say. And if that’s the case for manufactured products, it’s even more true for service industries such as banking and consulting. How do you measure better service in a bank?

Improper measurement is not the only explanation, however, for failing to get a better grasp of productivity. In recent years, productivity growth has picked up again, and some believe that it is only now that the full impact of the computer revolution is being seen.

“There is a time lag in the way technology changes productivity,” said Grobar. “Without the infrastructure of the Internet, the impact of computers was not showing. The same happened with the introduction of electricity earlier this century. Until there was an infrastructure in place to take advantage of this new innovation, its impact on the economy was muted.”

During the period from 1986 through 1995, productivity increased, on average, 0.9 percent a year. From 1996 though 1998, however, productivity growth averaged 1.9 percent per year.

This is noteworthy because the jump came after many years of economic expansion indicating that it is the result of the utilization of new technology rather than of underused capacity.

The increased productivity, which economists attribute to changes in information technology, is the main reason cited in theorizing that the economy can grow at a faster pace than was hitherto assumed.

In its policy statement last week explaining its decision to leave interest rates alone for now, the Federal Reserve Open Market Committee argued that, “Strengthening productivity growth has been fostering favorable trends in unit costs and prices, and much recent information suggests that these trends have been sustained.”

In other words, inflation is kept at bay because of increased productivity. And as long as workers keep cranking out more goods and services per hour, companies can remain profitable, in spite of increased labor costs, without having to raise prices.

The increase in productivity also has led to talk about a “new economy” and a “new paradigm,” suggesting that the old constraints on economic growth no longer apply. But not everybody buys it.

“I am very skeptical about this talk of a new economy and about any arguments that suggests there are no limits to the rate the economy can grow,” said Rajeev Dhawan, director of econometric forecasting at the UCLA Anderson Forecast. “This is what Wall Street analysts say when they are trying to sell people shares. Even if we have under-measured productivity growth in the past, so what? That doesn’t mean there is no speed limit to economic growth.”