Referring to the earlier discussion of a possible point of inflection in 1995, he asked what had changed in the last five years. If there was indeed an increase in the pace of technical progress in hardware, could that have caused the upturn in productivity on the Internet? He thought this extraordinarily unlikely. There is too great a natural lag time between the application of new technology and realization of new value.
There were, however, important technical changes for business systems in 1995, notably the application of the Web browser. This permits the development of new applications. In particular, it solves what he and Dr. Greenstein have called the best of both worlds problem. That is, a browser permits the design of applications that are as easy to use as a personal computer but have the power of large systems. It allowed for the creation of a new class of applications for which the end user does not have to be technically trained. The application can be used only occasionally, and it can be distributed more broadly.
A second important development has been standard-space networking, which changes the environment for the development of business information systems. This is complementary to further advances in hardware, involving improved architectures and the openness and ubiquity that accompany cheaper hardware and permit the creation of more applications. A third change is a large increase in the volume of transactions and devices.
Turning to policy, he suggested strongly that infrastructure policy must be pro-innovation and, to the extent possible, supportive of change. It may be that intellectual property policy is now so protective of individual inventors as to be too protective and even anti-innovative. In addition, existing dominant firms should not be allowed to prevent innovation by blocking the entrance of new firms.
The last issue Dr. Bresnahan addressed was the tremendous increase in investment in business information systems, by which he meant primarily anything that is platforming, and an equally large increase in investment in application software. Are we sure, he asked, that macro-economic conditions played no role in those increases? The commonest explanation is that a technological boom set off a macro-economic boom, but it is difficult to determine which of those causes was primary. He closed by reminding his audience that the source of policy that may be most important for information technology industries is none other than the Federal Reserve in Washington.