Economics and the New Economy: The Invisible Hand Meets Creative Destruction

July/August 2000

Business Review — As the third millennium begins, the buzzwords “new economy” and “new paradigm” are invoked repeatedly to explain the U.S. economy. In general, these words refer to a view that high-tech innovations and the globalization of world markets have changed our economy enough that we need to think about it and operate within it differently.

Perhaps what we notice most is a new Zeitgeist of accelerating change in the worlds of work and knowledge, change that’s emphasized in books with titles like Blur (Davis and Meyer) and Faster: The Acceleration of Just About Everything (Gleick). Unsurprisingly, economists by no means agree that there is a new economy or that there is a need for a new paradigm.

One sign that there has been a fundamental shift is that direct production of goods and services no longer absorbs the preponderance of workers’ time. In 1975, production of goods and services ceased being the occupation of the majority of U.S. workers. Never before had a society been so productive that it could afford to assign most of its workers to white-collar tasks such as management, paperwork, sales, and creativity.

This article appeared in the July/August 2000 edition of Business Review.

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