new or old?
size & shape
a 'new economy'?
This page considers questions about the 'new economy'
as an introduction to examination of specific issues and
sectors in later pages of the guide.
It covers -
Are we living in a 'new economy', one in which the business
cycle is finito, government is redundant, new technologies
(in particular IT and the web) will result in significant
productivity growth and global prosperity? Is the new
economy so unique that we can, like Alexandre Kojeve and
Francis Fukuyama, talk of the 'end of history'?
The answer is, alas, no. By and large, money still has
to be made the old-fashioned way: worked for. Reports
of the death of the business cycle are at best premature.
Government still has a role, despite protestations
that the web is uniquely averse to regulation.
And there are fundamental questions about both the real
value of much IT investment and the 'exceptional' nature
of current economic development, which from a historical
perspective appears to be merely the latest of a series
of waves since the mid 1700s or before.
information, society and economy
Since the publication of Daniel Bell's
The Coming of Post-Industrial Society: A Venture in
Social Forecasting (New York: Basic 1973) and Fritz
Production & Distribution of Knowledge in the United
States (Princeton: Princeton Uni Press 1962) we've
been living in a 'post-industrial' 'information society'.
That's one in which information is a primary commodity,
data processing and communications technology is of fundamental
importance, and 'knowledge workers' drive growth in a
global economy marked by volatility and constant innovation.
As Frank Webster points out in Theories of the Information
Society (London: Routledge 1995) many have come to
see the information society and information economy as
synonymous. That's evident in major programs within the
EU, Canadian and US governments or Australia's National
Office for the Information Economy (NOIE).
One of our less generous staff refers to it as the "just
add bandwidth & stir" school.
It's resulted in a concentration on communications infrastructure
rather than how it is used, acutely analysed in The
Social Life of Information (Boston: Harvard Business
School Press 2000) by John Seely Brown & Paul Duguid
and in Brian Arthur's Myths & Realities of the
High-Tech Economy (PDF).
Those works are complemented by the 2002 paper by John
Simon & Sharon Wardrop on Australian Use of Information
Technology and its Contribution to Growth (PDF)
It has also resulted in a sort of digital cargo
cult: going online will not readily solve fundamental
problems in regional Australia, for example, or level
the playing field for many small businesses.
In practice things are a bit more complicated. For a perspective
we recommend A Nation Transformed By Information
(New York: Oxford Uni Press 2000), edited by Alfred Chandler
& James Cortada, Rise of the Knowledge Worker
(Boston: Butterworth-Heinemann 1998) edited by Cortada,
along with The Knowledge Economy and The
Economic Impact of Knowledge - both edited by Dale
by US economist Robert Gordon is also of interest.
Mapping the new economy is proving to be contentious.
We've highlighted particular studies in the following
page of this guide. A starting point is provided by the
invaluable Understanding the Digital Economy: Data,
Tools & Research (Cambridge: MIT Press 2000),
edited by Erik Brynjolfsson & Brian Kahin, by The
Economic & Social Impact of Electronic Commerce: Preliminary
Findings & Research Agenda (Washington: Brookings
Institution Press 2000) by Andrew Wyckoff & Alessandra
Colechia, The Internet Upheaval (Cambridge: MIT
Press 2001) edited by Ingo Vogelsang, and by Robert Shiller's
Irrational Exuberance (Princeton: Princeton Uni
a new millennium?
Writings by Chandler,
Cortada and others do serious violence to the notion that
the 'new economy' is indeed all that new or unprecedented.
For examples of digital eschatology
consult Kevin Kelly's New Rules For The New Economy
(New York: Viking 1998), George Gilder's Telecosm:
How Infinite Bandwidth Will Revolutionise Our World
(New York: Free Press 2000), Virginia Postrel's The
Future & Its Enemies: The Growing Conflict Over Creativity,
Enterprise & Progress (New York: Free Press 1998)
Charles Fine's Clockspeed (New York: Little Brown 1998),
Blown to Bits: How the New Economics of Information
Transforms Strategy (Boston: Harvard Business School
1999) by Philip Evans & Thomas Wurster, The Great
Disruption (New York: Simon & Schuster 1999) by Francis
Fukuyama or Future Wealth (Boston: Harvard
Business School Press 2000) by Stan Davis & Christopher
The evaporation of many dot coms in 2000 - and the (unsurprising)
resilience of 'dinosaurs on the information highway',
ie businesses based on skills rather than mantras, addressing
real markets, even using tangible assets - suggest that
business fundamentals remain of significance.
There's a lucid introduction to what's old, what's new
and what's merely silly in Information Rules: A Strategic
Guide to the Network Economy (Boston: Harvard Business
School Press 1999) by Hal Varian & Carl Shapiro or
in Christine Borgman's First Monday article
on The Premise & Promise of A Global Information
In contrast to the futurists
considered in our Digital guide, they argue that we're
all living in the same world and same economy: the expression
might vary but the economic fundamentals remain the same.
- like the Harvard Information Infrastructure Project
- has pointers to a range of US government and academic
publications. For a discussion of the economics of network
effects we recommend Oz Shy's The Economics of Network
Industries (Cambridge: Cambridge Uni Press 2001).
Estimates of spending on information technology are
problematical. However, it's likely that in 2000 business
spent over US$1 trillion on IT, with the US accounting
for around half of the spending. Did that investment produce
Conventional wisdom says yes: IT is both the basis of
the new economy and, like bandwidth, something of which
you can never have too much. An example is the rosy-eyed
view in Leveraging the New Infrastructure: How Market
Leaders Capitalize on Information Technology (Boston:
Harvard Business School Press 1998) by Peter Weill &
Marianne Broadbent and Victor Forester's Computers
in the Human Context: Information Technology, Productivity
& People (Cambridge: MIT Press 1989) or many of
the 'dot com' books highlighted later in this guide.
Dissenting views come from Thomas Landauer in The Trouble
with Computers: Usefulness, Usability & Productivity
(Cambridge, MIT Press 1995) and Andrew Sichel
in The Computer Revolution: An Economic Perspective
(Washington: Brookings Institution 1997).
The acerbic Paul Strassmann in The Squandered Computer
- Evaluating the Business Alignment of Information Technologies
(New Canaan, Information Economics Press 1997) and
Information Productivity: Assessing the Information Management
Costs of US Industrial Corporations (New Canaan: Information
Economics Press 99) offers answers to questions such as
does business get its money's worth, can you really
measure white-collar productivity and what are the real
causes of success/failure in corporate information management?
The 1998 US report
on Fostering Research on the Economic &
Social Impacts of Information Technology (Washington:
National Academies Press 1998) encapsulates many of the
California's economy is significantly larger than most
nations. It has sand, sushi and Silicon Valley. It's also
used as an illustration of what critics have somewhat
unfairly characterised as the 'Californian Ideology',
a curious blend of millenarian faith in technology and
markets bringing together the counter-culture and business
All in all, a heady mix, whether encountered in the 1994
Cyberspace & the American Dream: A Magna Carta
for the Knowledge Age (Dream)
from George Gilder, Alvin Toffler & Esther Dyson,
in the famous Being Digital (New York: Knopf 1995)
by guru Nicholas Negroponte, in Dyson's more moderate
cyberspace Release 2.1: A Design for Living in the
Digital Age (London: Penguin 1998) or John Perry Barlow's
A Declaration of the Independence of Cyberspace
As a dogma it largely set the terms of debate about the
nature of the economy, future directions, the role of
government and the rights (although frequently not the
responsibilities) of citizens.
That debate has been reflected in disagreement about the
role and operation of bodies such as ICANN
or auDA and more broadly
in debate about the governance
of cyberspace. It's also reflected in tensions within
governments and advocacy groups regarding the economy,
both at a macro-economic level and in dealing with specific
issues such as national/international approaches to privacy
A key contention of this site is that the net is fast
becoming mainstream, involving millions of consumers and
businesses. That 'normalisation' drives demands for cyberspace
to be treated like other 'spaces'. It also makes cyberspace
susceptible to regulation: while information may be intangible
the networks on which it exists are located in real jurisdictions,
used by real businesses and consumers, and owned by real
corporations, all subject to government or community suasion.
left or merely left behind?
The Digital Environment guide elsewhere on this site points
to the equally fashionable neo-Luddites, romantics such
as Sven Birkerts lamenting that the 'new' economy and
its technologies erode the community and the cosmos ...
core fear is that we, as a culture, as a species, are
becoming shallower; that we have turned from depth--from
the Judeo-Christian premise of unfathomable mystery--and
are adapting ourselves to the ersatz security of a vast
about the erosive impact of new media and the behaviour
of teenagers have been a feature of every era, as noted
in the profile on
past communications revolutions. Scope for turning the
clock back appears to be limited.
Tony Smith's Technology & Capital in the Age of
Lean Production: A Marxian Critique of the New Economy
(Albany: State Uni of NY Press 2000) is a fashionably
retro assessment. There is more bite in Geoffrey Mulgan's
Communication & Control: Networks & the New
Economies of Communication (New York: Guilford Press
1991) and Unconventional Wisdom: Alternative Perspectives
on the New Economy (New York: Century Foundation 2000)
edited by Jeff Madrick.
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