The second feature of high-tech equipment that sets it apart from other classes of capital is the sensitivity of demand to fluctuations in the cost of capital. For decades, economists have debated the magnitude of cost-of-capital effects on traditional capital goods. A past consensus was that the cost-of-capital effect was small and difficult to identify empirically.
But a somewhat different conclusion has arisen lately when the same basic models of investment are applied to spending on computers alone. The latest research suggests that the demand for computers is quite sensitive to movements in the cost of capital.