System Innovation And The U.s. "new Economy"

The American economy has taken on a new look as New Economy since 1990s. New Economy Which is characterised as Internet Economy has high content of knowl- edge. It has cha]lenged the mles of Traditional Economy, and has made the Amencan economy different from every period in history. My article puts emphasis on analysing the effects of institutional innovations when ascertaining the causes of New Economy. As is well known to all, the improvement of science and technology have great impacts on the economy development. But D. North claimed that institutions played a very important role in the economy development, and could ensure to get more assets. From the history of the economy development in the de- veloped countries ,we can see that the transformation from technological knowledge into productivity mainly depends on coordinated subdivissiton of effective institutions, even though science and technology are the first productivity. That is, the development of technology demands for high level instioutions. Since 1990s, the ratio of cost to revenue under former institutions has changed with Technology Improvement and Economy Globlization in the U. S. , and resulted in strong demand for institutional innovations. These innovations have accelerated the development of New Economy and made the American economy attune to Technology Improvement and Economy Globlization swift ly. There are still two other items I would like to point out. Firstly, the prerequisite of the innovations?producing prosperity is that the changes of institutions for developing economy are practical and realistic. The consequences of blind innovations are worse than anything imaginable. Secondly, the law of Increasing marginal Revenue acts only in some high ?tech areas where the representative industry is information industry. The law doesn?t replace, but only reduces the scope where the law of Derninishing Marginal Revenue acts.