Does the "New Economy" Measure up to the Great Inventions of the Past? (0)
| Venue: | Journal of Economic Perspectives |
| Citations: | 135 - 0 self |
BibTeX
@ARTICLE{Gordon_doesthe,
author = {Robert J. Gordon},
title = {Does the "New Economy" Measure up to the Great Inventions of the Past?},
journal = {Journal of Economic Perspectives},
year = {},
volume = {14},
pages = {49--74}
}
Years of Citing Articles
OpenURL
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" (the Internet and the accompanying acceleration of technical change in computers and telecommunications) to be an Industrial Revolution equal in importance, or even more important, than the Second Industrial Revolution of 1860-1900 which gave us electricity, motor and air transport, motion pictures, radio, indoor plumbing, and made the golden age of productivity growth possible. This paper raises doubts about the validity of this comparison with the Great Inventions of the past. It dissects the recent productivity revival and separates the revival of 1.35 percentage points (comparing 1995-99 with 1972-95) into 0.54 of an unsustainable cyclical effect and 0.81 points of acceleration in trend growth. The entire trend acceleration is attributed to faster multi-factor productivity (MFP) growth in the durable manufacturing sector, consisting of computers, peripherals, telecommunications, and other types of durables. There is no revival of productivity growth in the 88 percent of the private economy lying outside of durables; in fact when the contribution of massive investment in computers in the nondurable economy is subtracted, MFP growth outside of durables has actually decelerated.







