Is the New Economy a Useful Concept?

Paris 1 CNRS ISYS Working Paper No. 2000-5

39 Pages Posted: 23 Feb 2001

See all articles by Bernard E. Paulre

Bernard E. Paulre

Université Paris I Panthéon-Sorbonne - MATISSE-ISYS

Date Written: September 2000


This paper examines the meaning and usefulness of the concept of a New Economy. This construct, which first began to appear in the media in the mid-1990s, is utilised today with a variety of definitions and intentions. Having identified three possible denotations or orientations relating to its current usage, we suggest that the original meaning, and the language that is associated with it, express an extremely optimistic view of the future of the U.S. economy, and are best classified as being utopian. We also examine the validity and significance of the theses developed by the radical proponents of the New Economy concept by testing them against a certain number of facts and statistical studies concerning the state of the U.S. economy for the past ten years. By studying the substance of these New Economy theses, we discover an inconsistency between one of the concept's basic principles (the advance of technological progress, driven by the information and communications technologies that are allegedly diffusing throughout the whole economic system) and that which we already know about the evolution of two different forms of productivity (the productivity of labour and total factor productivity) - including the way in which they have diverged in the various economic sectors. We mention a few alternative approaches that can be used to analyse the ongoing economic growth in the U.S. Until now, macroeconomic growth models have provided the theoretical underpinnings for most debates on the origins of the particular economic growth and productivity gains that have taken place in the current environment. However, the present study shows that given the nature of the issues that need to be resolved, we should also be taking a look at problems that are more global in nature, i.e., the existence of quantum leaps in technology, and hence the theory of long-term technological change. Our conclusions emphasise the confusion that the New Economy concept can cause, and we evoke Solow's Paradox, which we see as still being applicable in today's situation, albeit in a modified form.

Keywords: New Economy, U.S. economy, Solow's paradox, productivity in U.S.A., economic effects of information and communication technologies (ICT), macroeconomic growth, technological change, general purpose technologies (GPT)

JEL Classification: E6, E32, O30, O47, D24, N1

Suggested Citation

Paulre, Bernard E., Is the New Economy a Useful Concept? (September 2000). Paris 1 CNRS ISYS Working Paper No. 2000-5, Available at SSRN: or

Bernard E. Paulre (Contact Author)

Université Paris I Panthéon-Sorbonne - MATISSE-ISYS ( email )

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