Distinguished Lecture on Economics in Government: The New Economy: Post Mortem or Second Wind?

There was an acceleration of U.S. productivity after 1995. Investment in information technology hardware and software contributed importantly to this, but was not its sole cause. In part, heavy IT investment, perhaps overinvestment, was the result of the booming economy and cheap capital. Besides IT, the expansion of productive firms boosted productivity, together with the competitive pressure this put on other firms to innovate and improve. Productivity growth has been surprisingly strong in 2001, and the likely trend for the future is in the range of 2.2 to 2.7 percent a year. The economy should get a second wind.