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 -

• introduction
• information, society and economy
• a new millennium?
• information technology
• internet exceptionalism
• left or merely left behind

     information

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 Machlup's The 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 Neef. Writing 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 Press 2000).

     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 Meyer.

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 Infrastructure.

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. Varian's site - like the Harvard Information Infrastructure Project (HIIP) - 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).

     information technology

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 commensurate results? 

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 research questions.

     internet exceptionalism

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 free-marketers. 

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 (DIC). 

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 protection. 

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 ...

My 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 lateral connectedness.

Laments 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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