August 01, 2003
Business Investment in Equipment

A durable, high productivity-growth, fast output growth recovery is unlikely without a boom in business investment. But so far business investment has been painfully, painfully slow to turn around:...

Posted by DeLong at 11:48 AM

September 12, 2002
Who Benefits Most from the High-Tech Revolution?

David Wessel writes about one of the secrets of the new economy: the principal productivity gains and cost reductions are found not in IT-making but IT-using industries. Indeed, given the fierceness of competition in (most) IT-making industries, not just the productivity gains but the profits are likely to be found in IT-using industries, both here and abroad. - Capital: ...Ireland is proudly turning itself into the Silicon Isle. The Philippines and Thailand boast of their electronics exports. But one of the biggest beneficiaries from information technology is Australia, which hasn't any high-tech industry at all. Yet it is one of the few economies to have enjoyed a 1990s surge in productivity (or output for each hour of work) as impressive as the one the U.S. has seen. Its secret: import high-tech gear that others make. As in the U.S., the spread of bar-coding, scanning and inventory-management systems is making Australian wholesalers much more efficient, and that is paying economywide dividends. Compared to its population, Australia has more secure servers, the sort used in e-commerce, than anyone else besides the U.S. and Iceland (that is another story). "Australia is far better off being an importer of information- and communications-technology equipment...

Posted by DeLong at 01:48 AM

September 06, 2002
High-Tech Investment

High-Tech Investment If you read your business pages, you might well think that business purchases of computers are way down. Guess what? They're not. This year it looks like America's businesses are going to buy 13% more in the way of quality-adjusted computers and peripherals than in any previous year. In 2001--the only year in which real investment in computers and peripherals fell--quality-adjusted purchases fell by only 3%. Spending on computers and peripherals has indeed fallen. But that's because computers have become cheaper--a lot cheaper--not because American business is installing less computer power this year than in the past. Things look less bright if you aggregate up all high-tech investment--not just real investment in computers, but also software and "other": real investment in this broader category this year will be 4 percent below its year-2000 peak--but still higher than in any year other than 2000. Why the different pattern? The falloff in telecom investment. We are no longer spending a fortune digging holes and stuffing large quantities of fiber optic cables down them....

Posted by DeLong at 05:34 PM

July 03, 2002
The Boom in IT Investment

Real gross investment in IT relative to real GDP. The series is in chained 1996 dollars, so the relative levels are equal to nominal spending levels in 1996. We could choose an earlier base year, and blow up the apparent salience of IT investment today. We could choose a later base year, and reduce somewhat the salience of IT investment today. The first thing to note--the thing that is invariant to the choice of base year--is the extroardinary rise in the relative salience of IT, and how quickly it was accomplished. The second thing to note is how small the real decline in IT investment in the current recession has been. It erased less than two years' growth in relative real IT investment. Real Investment in Information Technology Equipment and Software Divided by Real GDP From the National Income and Product Accounts prepared by the Commerce Department's Bureau of Economic Analysis. Real gross private investment in information technology and software divided by real gross domestic product [GDP]. Note that this is not a "share": it is just two series of numbers, one divided by the other....

Posted by DeLong at 02:30 PM

The Upward Shift in Gross Investment in America

Before the 1990s there was some evidence for a long, slowly-moving upward trend in the volume of investment relative to GDP. Many Republican politicians (and a few analysts) thought that the Reagan tax cuts of the early 1980s had generated an investment breakthrough: they looked at the rise in investment from 1982 to its 1984 peak, projected this rise forward, and forecast rapid economic growth as it was "morning in America." But whatever supply-side incentives did in the mid- and late-1980s to boost demand for investment funds, the large federal deficits (and the swing in the balance of payments back toward zero) did more to drain the pool of savings and reduce the supply of potential investment funds. Anomalously, the later 1984-1989 stage of the 1980s expansion saw not rising but falling investment relative to GDP. The 1990s, by contrast, saw a stunning explosion of investment in America. A fall in private savings was greatly outweighed by a combination of the Clinton administration's successful commitment to deficit reduction, the return of foreigners' willingness--nay, eagerness--to invest in America, and stunning declines in the relative prices of high-tech investment goods that gave firms undertaking investment projects much more bang for the buck....

Posted by DeLong at 01:12 PM