When confronted with a period of structural change, our policy actions must be based, in large part, on identifying emerging trends from surprises and anomalies in the data and then carefully drawing their implications. It would be folly to cling to an antiquated model in the face of contradictory information.
Some who question the economic implications of the spread of innovation and the step-up in productivity growth hypothesize that the gains are largely confined to the so-called new economy, with little effect on efficiency in the old economy. But this notion fails to capture the dynamics of the marketplace. To be sure, a significant segment of our economy’s growth reflects output of high-tech equipment.