A widespread belief seems to be emerging, at least in the popular press, that the U.S. economy is in the throes of a fundamental transformation, one which is wiping out the 1972–95 productivity slowdown, along with inflation, the budget deficit, and the business cycle. A typical recent comment, in a Wall Street Journal article, claimed that “when it comes to technology, even the most bearish analysts agree the microchip and Internet are changing almost everything in the economy” (Ip, 2000). Or as an article in Fortune (June 8, 1998, pp. 86–7) magazine put it, “The [computer] chip has transformed us at least as pervasively as the internal combustion engine or electric motor.” Alan Greenspan (1999) appears to be among the technological enthusiasts. He recently stated: “A perceptible quickening in the pace at which technological innovations are applied argues for the hypothesis that the recent acceleration in labor productivity is not just a cyclical phenomenon or a statistical aberration, but reflects, at least in part, a more deep-seated, still developing, shift in our economic landscape.” The true enthusiasts treat the New Economy as a fundamental industrial revolution as great or greater in importance than the concurrence of inventions, particularly electricity and the internal combustion engine, which transformed the world at the turn of the last century.

There is no dispute that the U.S. economy is awash in computer investment, that productivity has revived, and that the late 1990s were extremely good years for the U.S. economy.