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Does the "New Economy" Measure Up to the Great Inventions of the Past?

Author Info

Listed author(s):
  • Robert J. Gordon

Abstract

During the four years 1995-99 U.S. productivity growth experienced a strong revival and achieved growth rates exceeding that of the "golden age" of 1913-72. Accordingly many observers have declared the "New Economy" to be an Industrial Revolution even more important than the Second Industrial Revolution of 1860-1900, which made the golden age of productivity growth possible. This paper dissects the recent productivity revival, subtracts out a cyclical component, and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector. The paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.14.4.49
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Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 14 (2000)
Issue (Month): 4 (Fall)
Pages: 49-74

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Handle: RePEc:aea:jecper:v:14:y:2000:i:4:p:49-74
Note: DOI: 10.1257/jep.14.4.49
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Find related papers by JEL classification:
  • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
  • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
  • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
  • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

References listed on IDEAS
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  1. Dudley, Leonard, 1999. "Communications and economic growth," European Economic Review, Elsevier, vol. 43(3), pages 595-619, March.
  2. David, Paul A, 1990. "The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox," American Economic Review, American Economic Association, vol. 80(2), pages 355-361, May.
  3. Zvi Griliches, 1960. "Measuring Inputs in Agriculture: A Critical Survey," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 42(5), pages 1411-1427.
  4. Erik Brynjolfsson & Loren Hitt & Shinkyu Yang, 2002. "Intangible Assets: How the Interaction of Computers and Organizational Structure Affects Stock Market Valuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 33(1), pages 137-198.
  5. repec:ucp:bknber:9780226304557 is not listed on IDEAS
  6. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
  7. Susanto Basu, 1996. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 719-751.
  8. Robert J. Gordon, 1998. "Foundations of the Goldilocks Economy: Supply Shocks and the Time-Varying NAIRU," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 297-346.
  9. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: U.S. Economic Growth in the Information Age," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 125-236.
  10. Douglas Staiger & James H. Stock & Mark W. Watson, 1997. "The NAIRU, Unemployment and Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 33-49, Winter.
  11. repec:ucp:bknber:9780226074153 is not listed on IDEAS
  12. Erik Brynjolfsson & Lorin Hitt, 1996. "Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending," Management Science, INFORMS, vol. 42(4), pages 541-558, April.
  13. D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
  14. Daniel S. Hamermesh & Sharon M. Oster, 2002. "Tools or Toys? The Impact of High Technology on Scholarly Productivity," Economic Inquiry, Western Economic Association International, vol. 40(4), pages 539-555, October.
  15. Thor Hultgren, 1960. "Changes in Labor Cost During Cycles in Production and Business," NBER Books, National Bureau of Economic Research, Inc, number hult60-1, Enero-Jun.
  16. Robert J. Gordon, 1993. "The Jobless Recovery: Does It Signal a New Era of Productivity-led Growth?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 271-316.
  17. Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-191, April.
  18. Robert J. Gordon, 1999. "U.S. Economic Growth since 1870: One Big Wave?," American Economic Review, American Economic Association, vol. 89(2), pages 123-128, May.
  19. Alan Greenspan, 1999. "The American economy in a world context," Proceedings 637, Federal Reserve Bank of Chicago.
  20. Robert J. Gordon, 2000. "Interpreting the "One Big Wave" in U.S. Long-Term Productivity Growth," NBER Working Papers 7752, National Bureau of Economic Research, Inc.
  21. Joel Mokyr, 1997. "Are we living in the middle of an Industrial Revolution?," Economic Review, Federal Reserve Bank of Kansas City, issue Q II, pages 31-43.
  22. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538-538.
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