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New Economy Forum Briefing
J. Bradford DeLong
http://www.j-bradford-delong.net/
delong@econ.berkeley.edu
May 2000
Why Now? Three Factors That Together Have Made
Our Age the Age of the Computer Revolution
- Factor 1: The end of the Reagan-era federal
budget deficits
- The end of the Reagan-era federal budget
deficits has meant that an extra $400 billion a year of finance
is available for investment.
- Information technology consumes more than
half of new investment: in the alternative world in which Reagan's
policies were continued, information technology-investment is
lower by some $250 billion a year.
- $250 billion a year less of investment in
information technology means both a lower capital stock and
less experience at learning how to use information technology.
- At the start of 1995, Larry Summers asked:
"It's good that deficit reduction has given us an office
automation boom, but is there good reason to think that such
a boom will have large economic benefits?" The answer is
"yes."
- Factor 2: The internet and the open-sourcing
of http
- Early in this decade, economist and entrepreneur
Charles Ferguson concluded that the online services industry
was fundamentally broken
- lack of protocols for interconnection
- domains of information restricted to the
information offered by a single provider
- the fundamental mistake: try to make money
by charging a premium price for your premium service...
- Then Tim Berners-Lee of CERN open-sourced
his hypertext protocols--http and html--and the NCSA team built
Mosaic, the first browser to display images in-line.
- Never has any trans-national public investment
in science and technology yielded such a high social rate of
return
- And the world changed.
- What if we were still in the world of AOL/compuserve/delphi/DJNR/lexis-nexis/corporate
nets--all with incompatible protocols?
- Factor 3: the fruits of telecommunications
deregulation
- Nobody imagined that the existing voice network
would carry us so far.
- Suppose Baxter and company not broken up
AT&T in 1984--and AT&T had continued to charge premium
prices for data lines?
- It was competition and interconnection, Stanford
professor Francois Bar argues, that allowed the burst of experimentation
that created our present broad menu of telecommunications-based
data services.
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Professor
of Economics J. Bradford DeLong, 601 Evans Hall, #3880
University of California at Berkeley
Berkeley, CA 94720-3880
(510) 643-4027 phone (510) 642-6615 fax
delong@econ.berkeley.edu
http://www.j-bradford-delong.net/
This document: http://www.j-bradford-delong.net/OpEd/virtual/new_economy_forum.html
