Policy and Development Challenges of the Internet Economy

There are two approaches to assessing the impact of the Internet. Cyber-optimists claim that the Internet is one of the most important innovations of the last century (or ever!) and will revolutionize the U.S. and world economies. Cyber-optimists tend to live in places like Silicon Valley, Austin, Texas, near Route 128 around Boston and in the Dulles Access corridor near my home in Washington, D.C. By and large, cyber-optimists are already plugged into the Internet world, and they think that if you are not also then you are not “with it”.

At the other end of the spectrum are the Internet skeptics, those who believe that the Internet is important, but no more important than any other part of the much larger telecommunications and computer revolution. One of the best known skeptics is Professor Robert Gordon of Northwestern, who has written a number of very influential papers. The most recent, which is scheduled for publication in the winter issue of the Journal of Economic Perspectives (in fact already published at the time this talk has been edited), argues that one cannot yet detect the impact of the Internet in the economic growth figures. Moreover, looking to the future, Gordon is skeptical that the Net will make that much of a contribution to productivity growth – certainly not as much as electricity, the automobile, or air conditioning, to name a few of the many other innovations of the past century that he deems to be more important.

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