That's excellent by the standards post-1973. But if you look at a little longer period, it's basically back to what productivity growth was in the '50s and '60s.
Feinman: But that would be a heck of an accomplishment. It's just a huge range of differences. It can't be emphasized enough. You know, even a few tenths of a percentage point, when sustained and compounded over many years, make an enormous difference in people's standard of living.
McCulley: We've structurally reduced our natural rate of unemployment and that, in textbook terms, is empirical evidence that we have had a positive productivity shock. And we're sitting down here at around 4% unemployment now. We're talking about a cyclical peak, perhaps, of maybe 5%. But for me, the poster child for the notion that we've had a structural productivity shock is that we've reduced what economists call the natural rate of unemployment, and that is unmitigated good news for society, for the fiscal affairs and just in general. So I'm a buyer of the fact that we've got a New Economy. I'm just not a buyer of a notion that 1997 through early 2000 defined the New Economy.
Simonoff: That's good. Brian, do you think that a lot has really changed in the economy, that this is a New Economy, even if we can't expect stocks to go up 10% a month forever?
Horrigan: Ten percent a year would be remarkable. I think that there's been a lot of unjustifiable hype about the so-called New Economy. It's one of the constants of American history, that every 30 years we discover we have a new economy. And actually, I think the current wave of technology is definitely second fiddle to the earlier waves of technical change in the early 19th century and then in the late 19th century and early 20th century. So we're doing well, but we should not be, I think, boastful or arrogant that we have somehow launched the greatest thing that ever happened; we haven't. And that kind of hype associated with this recent wave of technology has played a role, I think, in getting artificially inflated stock prices. The belief that stock prices could go up, like they never had before, because things were new. Well, we've been down that road before. We were down that road in the 1920s, for example.
Simonoff: What do you think of the idea that some people were holding out that the Internet was the biggest advance in business since the industrial revolution?
Horrigan: The trouble with the New Economy is: Are people talking about the entire wave of innovation in semiconductors or are they just talking about the Internet in itself? Those are two different things. The changes wrought by the semiconductor and the way it has allowed thousands of important inventions have changed the entire economy. There's no question about that. It's a major invention. But remember, we've had things like airplanes and automobiles or antibiotics or the telephone and the radio, and the railroad, steam engines, which have had fantastic transformations, too, in past years and also with comparable bubbles in the stock market. But if you talk about just the Internet in itself, I think there's a great deal of hype involved there. The electronic revolution would have had and would have great consequences, even if the Internet was never invented.
Feinman: There have been some very important and profound improvements in the economy, wrought by some of these new technologies. But like with most things, expectations and such often get carried away, beyond the fundamentals, and I think that clearly happened, too.
I doubt that this technological revolution will have as profound and long-lasting implications for productivity as some of the earlier ones that were cited.
Simonoff: In recent weeks, New York tabloids have started describing the stock market's behavior as "Mad Dow Disease," and a lot of money has been destroyed. The wealth effect now seems to be moving in the reverse at a time when more Americans than ever have been in the stock market. What do you see as some of the implications for the economy?