Does the “New Economy” Measure up to the Great Inventions of the Past?

During the four years 1995-99 U.S. productivity growth experienced a strong revival and achieved growth rates exceeding that of the “golden age” of 1913-72. Accordingly many observers have declared the “New Economy” to be an Industrial Revolution even more important than the Second Industrial Revolution of 1860-1900, which made the golden age of productivity growth possible. This paper dissects the recent productivity revival, subtracts out a cyclical component, and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector. The paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past.