Because the New Economy is so intertwined with Information and Communications Technology, we are primed to think of New Economy developments as nothing more than technology-driven, productivity improving changes on the supply side. We then want New Economy developments to do what all technical progress has historically done. And we emerge disappointed when we find productivity has not skyrocketed, inflation has not forever disappeared, business downturns have not permanently vanished, and financial markets have not remained stratospheric.
This paper argues that the most profound changes in the New Economy are not productivity or supply-side improvements, but instead consumption or demand side changes. The paper summarizes the case for the importance of technical progress in economic growth, argues why the New Economy differs, and draws lessons from economic history to highlight potential pitfalls and dangers as the New Economy continues to evolve.