Technological Progress And The U.S New Economy

One of the economic growth sources is technological progress. Thedevelopment and deployment of information technology is the foundation ofthe American economy resurgence and New Economy after 1996. This essayattempts to analyze the U.S. New Economy from the perspective oftechnological progress, and look forward to the lasting tendency further.The essay includes five parts.The first part is preface. The U.S. economy had a boom in 1990s andhatched "New Economy"since the last half of the 1990s, while Japan, thesecond largest economy of the world, encountered a bubble evaporation andrecession in the same period. There were many debates about the existence of"New Economy",was it just a media hype or a fundamental structure changeof U.S. economy? This essay will proceed to analyze New Economy and tosee how the technological progress attributes to the economic growth,expecting to answer the questions above.The second part briefly reviews the main theories of the economic growth.Firstly, this part introduces the concepts of technological progress,technological innovation and the difference between them. Secondly, itintroduces Schumpeter's innovation thoughts, Adam Smith and DavidRicardo's classical growth theory, the neoclassical growth theory representedby Robert Solow and new growth theory represented by David Romer.Economists'understanding of economic growth is a long course fromperceptual to reason. At first only a few economists paid an attention toinnovation, but now, most economists believe that technological progress isthe main reason of economic growth. The researching results also offeredimportant references to the government.The third part presents the development of information tech-nology and technological progress in the United States. Informationtechnology developed in a high speed from 1940s to 1990s, especially in thepast decade. Within this period, information technology industry appeared anddeveloped accordingly. The impact of the information technology is no lessthan a revolution. When knowledge has become a new key element ineconomic development, not only enterprises but also the Federal Governmentadjusted instantly and consequently. American information technology is thetop among the whole world. In the 1990s, "innovative cluster"appeared in theUnited States, including a large number of technological innovations brieflyrepresented by information technology and institution evolution brought by thetechnological innovation(the market innovation and institution innovation).They act on each other and get promoted mutually, driving to produce overalltechnological progress.The fourth part is about technological progress and the U.S. NewEconomy. The U.S.A experienced the longest economic rising period in itshistory from 1991 to 2001, lasting for 120 months. While growing at a highspeed, U.S. also kept low inflation rate and unemployment rate. In 1996, theU.S. GDP growth rate exceeded the Speed Limit that people generally agreedby about two percent, while the rate of unemployment dropped to underNAIRU (not accelerating the inflation's unemployment rate). Philips' curvelost its explanation even in short-time. This characteristic of economic growthis difficult to be illuminated with the traditional economic theory, therefore, ahot discussion started in the United States. In the end of 1996, the formulationof New Economy appeared in one essay of "Business Week", the writerclaimed economic growth had entered a brand-new stage presently, and thereasons were informationization and globalization. In 1997, the U.S.government acknowledged the existence of New Economy, OECD also putforward the concept of knowledge economy almost at the meantime. Thescholars of China began to research on New Economy too. Up to now, theeconomists haven't formed a unanimous definition on New Economy yet. Inmy opinion, as regards of the U.S. economic phenomena, the U.S. Economyhas stepped into a brand-new period full of new products, new technologiesand new markets. The essence of the U.S. New Economy can be described asfollows: in the environment of globalization, driven by Hi-Tech industry,represented by information technology, the U.S. Economy has gone through aneconomics paradigm transition and institutional evolution. I think that it is theconstant development of information technology and technological progressthat changed the existing development route and rhythm of the U.S. Economyand demonstrated a series of new characteristics since the middle of 1990s.The last part is a summary and enlightenment of the full essay. As theresult of the economic paradigm transformation and institutional evolution, theNew Economy accords the laws of human social development, so itsdevelopment is sustainable. New Economy doesn't change economic cycles,so we can't deny the existence of it only because it encountered an adjustmentperiod. In the future, technological innovation and technological progress will...