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

This article analyzes the effect of information technology on the U.S. economy as of November 2000. There is no dispute that the national economy is awash in computer investment, that productivity is revived, and that the late 1990s were extremely good years for the economy. The acceleration in the price decline of computers since 1995 has been accompanied by a revival of productivity growth in the aggregate company which is impressive in comparison with the U.S. historical record dating back more than a century. There are a number of differences between the computer and the great inventions of the Second Industrial Revolution, but perhaps the largest difference is the unprecedented rate of decline in the price of computer power. One of the reasons that computers run into diminishing returns is that there are real limitations to the replacement of human beings by computers. However, computers are actually less pervasive in the economy than is generally thought, because some tasks are resistant to replacement of human beings by computers. The benefits of electronic commerce include the provision of vast amounts of free information that was formerly expensive or inconvenient to obtain, including travel and sports schedules.