U.S. Economic Growth in the Information Age

What’s New about the New Economy

DALE W. JORGENSON

U.S. Economic Growth in the Information Age

We’re beginning to understand what fueled growth in the late 1990s, but there is much remaining to be explored.

The resurgence of the U.S. economy from 1995 to 1999 outran all but the most optimistic expectations. It is not surprising that the unusual combination of more rapid growth and slower inflation touched off a strenuous debate among economists about whether improvements in U.S. economic performance can be sustained. This debate has been intensified by the recent growth slowdown, and the focus has shifted to how best to maintain economic momentum.

A consensus is building that the remarkable decline in information technology (IT) prices provides the key to the surge in U.S. economic growth. The IT price decline is rooted in developments in semiconductor technology that are widely understood by technologists and economists. This technology has found its broadest applications in computing and communications equipment, but has reduced the cost and improved the performance of aircraft, automobiles, scientific instruments, and a host of other products.