“New Economy” Bleg
| Peter Klein |
The heady dot-com days of the late 1990s brought breathy pronouncements from journalists and some academics that the “new economy” had changed all the old rules. Intellectual capital, not physical capital, is the source of value, so plant and equipment is irrelevant. Information goods are produced at zero marginal cost so firms should give away, rather than sell, their products. Profits don’t matter, only installed base counts. Managerial hierarchy is obsolete; cost curves are flat; supply-and-demand analysis is passé; even opportunity costs don’t matter anymore. The dot-com crash and subsequent shakeout brought many people back to their senses, but even today we continue to hear hyperbolic claims about the newness of the new economy.
I’d like to include some of these wildly exaggerated claims in my talk next week at the GMU/Microsoft forum. Can readers supply some quotes I can use (the more outrageous the better)? Like this:
[W]hen it comes to technology, even the most bearish analysts agree the microchip and Internet are changing almost everything in the economy.
— Greg Ip, WSJ, 18 January 2000
One curious aspect of the Network Economy would astound a citizen living in 1897: The very best gets cheaper each year. This rule of thumb is so ingrained in our contemporary lifestyle that we bank on it without marveling at it. But marvel we should, because this paradox is a major engine of the new economy. . . . Through most of the industrial age, consumers experienced slight improvements in quality for slight increases in price. But the arrival of the microprocessor flipped the price equation. In the information age, consumers quickly came to count on drastically superior quality for less price over time. The price and quality curves diverge so dramatically that it sometimes seems as if the better something is, the cheaper it will cost.
— Kevin Kelly, New Rules for the New Economy, 1998
Once a marketing gimmick, free has emerged as a full-fledged economy. . . . The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.
— Chris Anderson, Wired, February 2008
Why have [stock] exchanges at all? Certainly not to help investors. Exchanges are at last being exposed as anachronisms, sustained by inertia and by the desire of incumbents, with help from regulators, to keep raking in monopoly rents. But the curtain is coming down.
— James Glassman, WSJ, 8 May 2000
I’m sure there are much more colorful statements (i.e., straw men for me to knock down) out there. Any suggestions?