Does the 'New Economy' Measure up to the Great Inventions of the Past?
Many observers have declared the ‘New Economy’ to be an Industrial Revolution even more important than the Second Industrial Revolution of 1860-1900, and this Paper raises doubts about this comparison. It shows that the recent acceleration in productivity growth in the US economy can be attributed to a technological acceleration within durable manufacturing and to increased investment in computers in the rest of the economy. But there has been no acceleration of trend growth in US multi-factor productivity in the 88% of the economy outside of durable manufacturing. In comparison with the Great Inventions of 1860-1900, the ‘New Economy’ falls short. The rapid decline in the cost of computer power means that the marginal utility of computer characteristics like speed and memory has fallen rapidly as well, implying that the greatest contributions of computers lie in the past, not in the future. The Internet fails as a Great Invention because much of its use involves substitution of existing activities from one medium to another, because much Internet investment involves defence of market share rather than creation of something of social value, because much Internet activity duplicates existing activity like mail order catalogues, while the latter have not faded away, and finally because much Internet activity, like daytime e-trading, involves an increase in the fraction of work time involving consumption on the job.
|Date of creation:||Nov 2000|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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.
- repec:ucp:bknber:9780226304557 is not listed on IDEAS
- Susanto Basu, 1996.
"Procyclical Productivity: Increasing Returns or Cyclical Utilization?,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 111(3), pages 719-751.
- Susanto Basu, 1995. "Procyclical Productivity: Increasing Returns or Cyclical Utilization?," NBER Working Papers 5336, National Bureau of Economic Research, Inc.
- 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.
- Dudley, Leonard, 1999. "Communications and economic growth," European Economic Review, Elsevier, vol. 43(3), pages 595-619, March.
- Dudley, L., 1996. "Communication and Economic Growth," Cahiers de recherche 9620, Universite de Montreal, Departement de sciences economiques.
- Dudley, L., 1996. "Communication and Economic Growth," Cahiers de recherche 9620, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- 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.
- Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
- 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.
- Robert J. Gordon, 1996. "The Time-Varying NAIRU and its Implications for Economic Policy," NBER Working Papers 5735, National Bureau of Economic Research, Inc.
- Gordon, Robert J, 1996. "The Time-varying NAIRU and its Implications for Economic Policy," CEPR Discussion Papers 1492, C.E.P.R. Discussion Papers.
- D. W. Jorgenson & Z. Griliches, 1967. "The Explanation of Productivity Change," Review of Economic Studies, Oxford University Press, vol. 34(3), pages 249-283.
- Thor Hultgren, 1960. "Changes in Labor Cost During Cycles in Production and Business," NBER Books, National Bureau of Economic Research, Inc, number hult60-1.
- 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.
- 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.
- 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.
- 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.
- repec:ucp:bknber:9780226074153 is not listed on IDEAS
- 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.
- Brynjolfsson, Erik. & Hitt, Lorin M., 1995. "Paradox lost? : firm-level evidence on the returns to information systems spending," Working papers 3786-95., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- 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.
- Daniel S. Hamermesh & Sharon M. Oster, 1998. "Tools or Toys? The Impact of High Technology on Scholarly Productivity," NBER Working Papers 6761, National Bureau of Economic Research, Inc.
- 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.
- Stiroh, Kevin J, 1998. "Computers, Productivity, and Input Substitution," Economic Inquiry, Western Economic Association International, vol. 36(2), pages 175-191, April.
- 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.
- Alan Greenspan, 1999. "The American economy in a world context," Proceedings 637, Federal Reserve Bank of Chicago.
- Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538-538. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2607. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.