The New Economy and the Revolution in Information Technology: Second Half.

3. Economic data since 1991, what do they mean? Recall that productivity rebounded in the late 1990s.

Recall also that productivity growth is one of two key factors in GDP growth. So how well did GDP grow during the late 1990s to the present?

Annual GDP from 1990 to 2001 in Real Terms.

GDP Growth Rates

GDP Growth Rates over Several Historical Periods in the Past Century

The recent slowdown in GDP growth rates has alarmed many people.

I think the questions everyone is asking regarding these kind of data are: 1. Does the general upturn represent the beginning of a new period of strong growth--that is, is this showing a shift in technology? 2. Does the very recent slowdown say to us that the hopes for the new technology were just a balloon that got popped?

First, take the second question: Does the recent slowdown suggest that the promise of a new golden age was a "bubble." The economist who claimed "what goes up must come down when it comes to the business cycle": Could he be right? The meaning of the NASDAQ crash, was this a bubble bursting?

Second, take the first question: The upturn brought frequent informal claims that this was so, that is, that the upturn in the late 1990s betokened the power of the new technology revolution. No research, academic article to my knowledge has ever made this claim--like they always say, the economy goes up and it goes down…

Part 4: Where are we headed in the future? If only Nostrademus were here, what would he tell us?

Are there fundamentals in place for technology to take economies forward? I believe so for these reasons: 1. Information technology has started a jump, a discrete change: I think diffusion of technology will be much more rapid from now on. Possibly innovation will be sped up, too. 2. Political structures seem very dependent on information or the control of it. I have got to believe that relationships of all kinds will become more democratic and that this will turn out to be more productive.

3. My hunch is that many more practical applications of IT will be discovered on the par with its applications to B2B trade, management of inventory to match production, and some consumer sales applications (my comparison point here is that all three of these applications have already proven themselves. 4. Young minds will "light up", particularly in the third world. 5. Little pools of human work and interaction will be radically changed forever and you and I may never even hear about them. My example is my own field of economics: the computer has been like a sideboard plow was to the farmer 300 years ago.

Perhaps I am over-optimistic, but to summarize my viewpoint or attitude let me quote the first words said to have been spoken in a "talkee" motion picture back in the late 1920s, and that would be: "You ain't heard nothing yet." Al Jolson. Perhaps you will live to see how all this turns out, but even so perhaps not.

Economists don't make estimates into the distant future (e.g. 25 years or more) One can only say that the possibility exists for another major shift in the productive capacity of mankind. The recent downturn probably betokens at most a new recognition by Nasdaq investors that they earlier estimates were too optimistic.

Professor Fogel's remarks: "We have already reached the stage of human development where material needs are provided adequately at least a basic level and that the distribution of material goods is already and vastly improved over the past. The more pressing need for humanity is now to improve the distribution of spiritual goods--especially the basic feeling that 'I am alive, I feel good, and I am worthwhile.'

But, if economics researchers can't come up with reliable answers to how technology will play out in the future, then I can only report uncertainties at this time. It follows that each of you may have the missing information to help to put this picture together?

Discussion questions: What paths will this technology revolution take during your lifetime do you think? Will your line of business exist in 50 years? What business do you think it would be smart to switch into right now? Will life be better because of the tech revolution? Will your life be better? What new technology is likely to come into being because of the information technology revolution?

Some summary comments by me and invited remarks by you.