MEASURING AND SUSTAINING THE NEW ECONOMY

SOFTWARE, GROWTH, AND THE FUTURE OF THE U.S. ECONOMY

Report of a Symposium

DALE W. JORGENSON AND CHARLES W. WESSNER, EDITORS

Committee on Software, Growth, and the Future of the U.S. Economy

Committee on Measuring and Sustaining the New Economy

Board on Science, Technology, and Economic Policy

Policy and Global Affairs

NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS
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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium MEASURING AND SUSTAINING THE NEW ECONOMY SOFTWARE, GROWTH, AND THE FUTURE OF THE U.S. ECONOMY Report of a Symposium DALE W. JORGENSON AND CHARLES W. WESSNER, EDITORS Committee on Software, Growth, and the Future of the U.S. Economy Committee on Measuring and Sustaining the New Economy Board on Science, Technology, and Economic Policy Policy and Global Affairs NATIONAL RESEARCH COUNCIL OF THE NATIONAL ACADEMIES THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by: Contract/Grant No. CMRC-50SBNB9C1080 between the National Academy of Sciences and the U.S. Department of Commerce; Contract/Grant No. NASW-99037, Task Order 103, between the National Academy of Sciences and the National Aeronautics and Space Administration; Contract/Grant No. CMRC-SB134105C0038 between the National Academy of Sciences and the U.S. Department of Commerce; OFED-13416 between the National Academy of Sciences and Sandia National Laboratories; Contract/Grant No. N00014-00-G-0230, DO #23, between the National Academy of Sciences and the Department of the Navy; Contract/Grant No. NSF-EIA-0119063 between the National Academy of Sciences and the National Science Foundation; and Contract/Grant No. DOE-DE-FG02-01ER30315 between the National Academy of Sciences and the U.S. Department of Energy. Additional support was provided by Intel Corporation. Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number 0-309-09950-1 Limited copies are available from Board on Science, Technology, and Economic Policy, National Research Council, 500 Fifth Street, N.W., W547, Washington, DC 20001; (202) 334-2200. Additional copies of this report are available from the National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu Copyright 2006 by the National Academy of Sciences. All rights reserved. Printed in the United States of America

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium THE NATIONAL ACADEMIES Advisers to the Nation on Science, Engineering, and Medicine The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Wm. A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Wm. A. Wulf are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Committee on Software, Growth, and the Future of the U.S. Economy* Dale W. Jorgenson, Chair Samuel W. Morris University Professor Harvard University Kenneth Flamm Dean Rusk Chair in International Affairs LBJ School of Public Affairs University of Texas at Austin Jack Harding Chairman, President, and CEO eSilicon Corporation Monica S. Lam Professor of Computer Science Stanford University William Raduchel Anthony E. Scott Chief Information Technology Officer General Motors William J. Spencer Chairman Emeritus, retired International SEMATECH Hal R. Varian Class of 1944 Professor School of Information Management and Systems University of California at Berkeley *   As of February 2004.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Committee on Measuring and Sustaining the New Economy* Dale Jorgenson, Chair Samuel W. Morris University Professor Harvard University M. Kathy Behrens Managing Director of Medical Technology Robertson Stephens Investment Management Kenneth Flamm Dean Rusk Chair in International Affairs LBJ School of Public Affairs University of Texas at Austin Bronwyn Hall Professor of Economics University of California at Berkeley James Heckman Henry Schultz Distinguished Service Professor of Economics University of Chicago Ralph Landau Consulting Professor of Economics Stanford University Richard Levin President Yale University William J. Spencer, Vice Chair Chairman Emeritus, retired International SEMATECH David T. Morgenthaler Founding Partner Morgenthaler Ventures Mark B. Myers Visiting Executive Professor of Management The Wharton School University of Pennsylvania Roger Noll Morris M. Doyle Centennial Professor of Economics Stanford University Edward E. Penhoet Chief Program Officer Science and Higher Education Gordon and Betty Moore Foundation William Raduchel Alan Wm. Wolff Managing Partner Dewey Ballantine *   As of February 2004.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Project Staff* Charles W. Wessner Study Director Sujai J. Shivakumar Program Officer Ken Jacobson Consultant McAlister T. Clabaugh Program Associate David E. Dierksheide Program Associate *   As of February 2004.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium For the National Research Council (NRC), this project was overseen by the Board on Science, Technology and Economic Policy (STEP), a standing board of the NRC established by the National Academies of Sciences and Engineering and the Institute of Medicine in 1991. The mandate of the STEP Board is to integrate understanding of scientific, technological, and economic elements in the formulation of national policies to promote the economic well-being of the United States. A distinctive characteristic of STEP’s approach is its frequent interactions with public- and private-sector decision makers. STEP bridges the disciplines of business management, engineering, economics, and the social sciences to bring diverse expertise to bear on pressing public policy questions. The members of the STEP Board* and the NRC staff are listed below: Dale Jorgenson, Chair Samuel W. Morris University Professor Harvard University M. Kathy Behrens Managing Director of Medical Technology Robertson Stephens Investment Management Bronwyn Hall Professor of Economics University of California at Berkeley James Heckman Henry Schultz Distinguished Service Professor of Economics University of Chicago Ralph Landau Consulting Professor of Economics Stanford University Richard Levin President Yale University William J. Spencer, Vice Chair Chairman Emeritus, retired International SEMATECH David T. Morgenthaler Founding Partner Morgenthaler Mark B. Myers Visiting Executive Professor of Management The Wharton School University of Pennsylvania Roger Noll Morris M. Doyle Centennial Professor of Economics Stanford University Edward E. Penhoet Chief Program Officer Science and Higher Education Gordon and Betty Moore Foundation William Raduchel Alan Wm. Wolff Managing Partner Dewey Ballantine *   As of February 2004.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium STEP Staff* Stephen A. Merrill Executive Director Russell Moy Senior Program Officer Craig M. Schultz Research Associate McAlister T. Clabaugh Program Associate Charles W. Wessner Program Director Sujai J. Shivakumar Program Officer David E. Dierksheide Program Associate *   As of February 2004.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Contents PREFACE   xv I. INTRODUCTION   3 II. PROCEEDINGS         Introduction Dale W. Jorgenson, Harvard University   31     The Economics of Software William J. Raduchel   36 Panel I:   The Role of Software—What Does Software Do? Moderator: Dale W. Jorgenson, Harvard University   47      Anthony Scott, General Motors   47 Panel II:   How Do We Make Software and Why Is It Unique? Moderators: Dale W. Jorgenson, Harvard University James Socas, Senate Committee on Banking   54      How Do We Make It? Monica Lam, Stanford University   54

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium      Open-Source Software Hal R. Varian, University of California at Berkeley   61      Making Software Secure and Reliable Kenneth Walker, SonicWALL   72 Panel III:   Software Measurement—What Do We Track Today? Moderator: Kenneth Flamm, University of Texas at Austin   82      Measuring Prices of Prepackaged Software Alan G. White, Analysis Group, Inc. Ernst R. Berndt, MIT Sloan School of Management   83      Accounting Rules: What Do They Capture and What Are the Problems? Shelly C. Luisi, Securities and Exchange Commission Greg Beams, Ernst & Young   89      A BEA Perspective: Private Fixed Software Investment David Wasshausen, Bureau of Economic Analysis   99      What Is in the OECD Accounts and How Good Is It? Dirk Pilat, Organisation for Economic Co-operation and Development   106 Panel IV:   Moving Offshore: The Software Labor Force and the U.S. Economy Moderator: Mark B. Myers, The Wharton School, University of Pennsylvania   118      Hiring Software Talent Wayne Rosing, Google   118      Current Trends and Implications: An Industry View Jack Harding, eSilicon Corporation   122      Implications of Offshoring and National Policy Ronil Hira, Rochester Institute of Technology   131      Offshoring Policy Options William B. Bonvillian, Office of Senator Joseph Lieberman   139

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Panel V:   Participants’ Roundtable—Where Do We Go from Here? Policy Issues? Moderator: William J. Raduchel Wayne Rosing, Google Kenneth Flamm, University of Texas at Austin Ernst R. Berndt, MIT Sloan School of Management James Socas, Senate Committee on Banking Ronil Hira, Rochester Institute of Technology   150      Concluding Remarks Dale W. Jorgenson, Harvard University   156 III. RESEARCH PAPER         The Economics of Software: Technology, Processes, and Policy Issues William J. Raduchel   161 IV. APPENDIXES     A.   Biographies of Speakers   179 B.   Participants List   189 C.   Selected Bibliography on Measuring and Sustaining the New Economy   194

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Preface Significant and sustained increases in semiconductor productivity, predicted by Moore’s Law, has ushered a revolution in communications, computing, and information management.1 This technological revolution is linked to a distinct rise in the mid 1990s of the long-term growth trajectory of the United States.2 Indeed, U.S. productivity growth has accelerated in recent years, despite a series of negative economic shocks. Analysis by Dale Jorgenson, Mun Ho, and Kevin Stiroh of the sources of this growth over the 1996 to 2003 period suggests that the production and use of information technology account for a large share of the gains. The authors go further to project that during the next decade, private-sector 1   This is especially so for the computer hardware sector and perhaps for the Internet as well, although there is insufficient empirical evidence on the degree to which the Internet may be responsible. For a discussion of the impact of the Internet on economic growth see, “A Thinker’s Guide,” The Economist, March 30, 2000. For a broad study of investment in technology-capital and its use in various sectors, see McKinsey Global Institute, U.S. Productivity Growth 1995-2000: Understanding the Contribution of Information Technology Relative to Other Factors, Washington, D.C.: McKinsey & Co., October 2001. 2   See Dale W. Jorgenson and Kevin J. Stiroh, “Raising the Speed Limit: U.S. Economic Growth in the Information Age,” in National Research Council, Measuring and Sustaining the New Economy, Dale W. Jorgenson and Charles W. Wessner, eds., Washington, D.C.: National Academy Press, 2002.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium productivity growth will continue at a rate of 2.6 percent per year.3 The New Economy is, thus, not a fad, but a long-term productivity shift of major significance.4 The idea of a “New Economy” brings together the technological innovations, structural changes, and public policy challenges associated with measuring and sustaining this remarkable economic phenomenon. Technological innovation—more accurately, the rapid rate of technological innovation in information technology (including computers, software, and telecommunications) and the rapid growth of the Internet—are now widely seen as underpinning the productivity gains that characterize the New Economy.5 These productivity gains derive from greater efficiencies in the production of computers from expanded use of information technologies.6 Many therefore believe that the productivity growth of the New Economy draws from the technological innovations found in information technology industries.7 Structural changes arise from a reconfiguration of knowledge networks and business patterns made possible by innovations in information technology. Phenomena, such as business-to-business e-commerce and Internet retailing, are altering how firms and individuals interact, enabling greater efficiency in pur- 3   Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh, “Will the U.S. Productivity Resurgence Continue?” FRBNY Current Issues in Economics and Finance, 10(1), 2004. 4   The introduction of advanced productivity-enhancing technologies obviously does not eliminate the business cycle. See Organisation for Economic Co-operation and Development, Is There a New Economy? A First Report on the OECD Growth Project, Paris: Organisation for Economic Cooperation and Development, June 2000, p. 17. See also, M.N. Baily and R.Z. Lawrence, “Do We Have an E-conomy?” NBER Working Paper 8243, April 23, 2001, at <http://www.nber.org/papers/w8243>. 5   Broader academic and policy recognition of the New Economy can be seen, for example, from the “Roundtable on the New Economy and Growth in the United States” at the 2003 annual meetings of the American Economic Association, held in Washington, D.C. Roundtable participants included Martin Baily, Martin Feldstein, Robert J. Gordon, Dale Jorgenson, Joseph Stiglitz, and Lawrence Summers. Even those who were initially skeptical about the New Economy phenomenon now find that the facts support the belief that faster productivity growth has proved more durable and has spread to other areas of the economy—e.g., retail, banking. See The Economist, “The new ‘new economy,’ ” September 11, 2003. 6   See, for example, Stephen Oliner and Daniel Sichel, “The Resurgence of Growth in the late 1990’s: Is Information Technology the Story?” Journal of Economic Perspectives, 14(4) Fall 2000. Oliner and Sichel estimate that improvements in the computer industry’s own productive processes account for about a quarter of the overall productivity increase. They also note that the use of information technology by all sorts of companies accounts for nearly half the rise in productivity. 7   See Alan Greenspan’s remarks before the White House Conference on the New Economy, Washington D.C., April 5, 2000, <http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2000/20000405.HTM>. For a historical perspective, see the Proceedings of this volume. Ken Flamm compares the economic impact of semiconductors today with the impact of railroads in the nineteenth century.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium chases, production processes, and inventory management.8 Offshore outsourcing of service production is another manifestation of structural changes made possible by new information and communications technologies. These structural changes are still emerging as the use and applications of the Internet continue to evolve. Public policy plays a major role at several levels. This includes the government’s role in fostering rules of interaction within the Internet9 and its discretion in setting and enforcing the rules by which technology firms, among others, compete.10 More familiarly, public policy concerns particular fiscal and regulatory choices that can affect the rate and focus of investments in sectors such as telecommunications. The government also plays a critical role within the innovation system.11 It provides national research capacities,12 incentives to promote education and training in critical disciplines, and funds most of the nation’s basic research.13 The government also plays a major role in stimulating innovation, most broadly through the patent system.14 Government procurement and awards 8   See, for example, Brookes Martin and Zaki Wahhaj, “The Shocking Economic Impact of B2B” Global Economic Paper, 37, Goldman Sachs, February 3, 2000. 9   Dr. Vint Cerf notes that the ability of individuals to interact in potentially useful ways within the infrastructure of the still expanding Internet rests on its basic rule architecture: “The reason it can function is that all the networks use the same set of protocols. An important point is these networks are run by different administrations, which must collaborate both technically and economically on a global scale.” See comments by Dr. Cerf in National Research Council, Measuring and Sustaining the New Economy, op. cit. Also in the same volume, see the presentation by Dr. Shane Greenstein on the evolution of the Internet from academic and government-related applications to the commercial world. 10   The relevance of competition policy to the New Economy is manifested by the intensity of interest in the antitrust case, United States versus Microsoft, and associated policy issues. 11   See Richard Nelson, ed., National Innovation Systems, New York: Oxford University Press, 1993. 12   The STEP Board has recently completed a major review of the role and operation of government-industry partnerships for the development of new technologies. See National Research Council, Government-Industry Partnerships for the Development of New Technologies: Summary Report, Charles W. Wessner, ed., Washington, D.C.: National Academies Press, 2002. 13   National Research Council, Trends in Federal Support of Research in Graduate Education, Stephen A. Merrill, ed., Washington, D.C.: National Academy Press, 2001. 14   In addition to government-funded research, intellectual property protection plays an essential role in the continued development of the biotechnology industry. See Wesley M. Cohen and John Walsh, “Public Research, Patents and Implications for Industrial R&D in the Drug, Biotechnology, Semiconductor and Computer Industries” in National Research Council, Capitalizing on New Needs and New Opportunities: Government-Industry Partnerships in Biotechnology and Information Technologies, Washington, D.C.: National Academy Press, 2001. There is a similar situation in information technology with respect to the combination of generally non-appropriable government-originated innovation and appropriable industry intellectual property creation. The economic rationale for government investment is based on the non-appropriablity of many significant information technology innovations, including the most widely used idiomatic data structures and algorithms, as well as design and architectural patterns. Also, the IT industry relies on a number of technical and process commonalities or standards such as the suite of Internet protocols, programming languages, core design patterns, and architectural styles.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium also encourage the development of new technologies to fulfill national missions in defense, health, and the environment.15 Collectively, these public policies play a central role in the development of the New Economy. Sustaining this New Economy will require public policy to remain relevant to the rapid technological and structural changes that characterize it. This is particularly important because of the “unbounded” nature of information technology that underpins the New Economy. Information technology and software production are not commodities that the United States can potentially afford to give up overseas suppliers but, as William Raduchel noted in his workshop presentation, a part of the economy’s production function. This characteristic means that a loss of U.S. leadership in information technology and software will damage, in an ongoing way, the nation’s future ability to compete in diverse industries, not least the information technology industry. Collateral consequences of a failure to develop adequate policies to sustain national leadership in information technology is likely to extend to a wide variety of sectors from financial services and health care to telecom and automobiles, with critical implications for our nation’s security and the well-being of our citizens. THE CONTEXT OF THIS REPORT Since 1991 the National Research Council’s Board on Science, Technology, and Economic Policy (STEP) has undertaken a program of activities to improve policy-makers’ understanding of the interconnections between science, technology, and economic policy and their importance to the American economy and its international competitive position. The Board’s interest in the New Economy and its underpinnings derive directly from its mandate. This mandate has previously been reflected in STEP’s widely cited volume, U.S. Industry in 2000, which assesses the determinants of competitive performance in a wide range of manufacturing and service industries, including those 15   For example, government support played a critical role in the early development of computers. See Kenneth Flamm, Creating the Computer, Washington, D.C.: The Brookings Institution, 1988. For an overview of government industry collaboration, see the introduction to the recent report on the Advanced Technology Program, National Research Council, The Advanced Technology Program: Assessing Outcomes, Charles W. Wessner, ed., Washington, D.C.: National Academy Press, 2001. The historical and technical case for government-funded research in IT is well documented in reports by the Computer Science and Telecommunications Board (CSTB) of the National Research Council. In particular, see National Research Council, Innovation in Information Technology, Washington, D.C.: National Academies Press, 2003. This volume provides an update of the “tire tracks” diagram first published in CSTB’s 1995 Brooks-Sutherland report, which depicts the critical role that government-funded university research has played in the development of the multibillion-dollar IT industry.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium relating to information technology.16 The Board also undertook a major study, chaired by Gordon Moore of Intel, on how government-industry partnerships can support growth-enhancing technologies.17 Reflecting a growing recognition of the importance of the surge in productivity since 1995, the Board launched a multifaceted assessment, exploring the sources of growth, measurement challenges, and the policy framework required to sustain the New Economy. The first exploratory volume was published in 2002.18 Subsequent workshops and ensuing reports in this series include Productivity and Cyclicality in the Semiconductor Industry and Deconstructing the Computer. The present report, Software, Growth, and the Future of the U.S. Economy, examines the role of software and its importance to U.S. productivity growth; how software is made and why it is unique; the measurement of software in national and business accounts; the implications of the movement of the U.S. software industry offshore; and related policy issues. SYMPOSIUM AND DISCUSSIONS Believing that increased productivity in the semiconductor, computer component, and software industries plays a key role in sustaining the New Economy, the Committee on Measuring and Sustaining the New Economy, under the auspices of the STEP Board, convened a symposium February 20, 2004, at the National Academy of Sciences, Washington, D.C. The symposium on Software, Growth, and the Future of the U.S. Economy drew together expertise from leading academics, national accountants, and innovators in the information technology sector (Appendix B lists these individuals). The “Proceedings” chapter of this volume contains summaries of their workshop presentations and discussions. Also included in this volume is a paper by William Raduchel on “The Economics of Software,” which was presented at the symposium. Given the quality and the number of presentations, summarizing the workshop proceedings has been a challenge. We have made every effort to capture the main points made during the presentations and the ensuing discussions. We apologize for any inadvertent errors or omissions in our summary of the proceedings. The lessons from this symposium and others in this series will contribute to the Committee’s final consensus report on Measuring and Sustaining the New Economy. 16   National Research Council, U.S. Industry in 2000: Studies in Competitive Performance, David C. Mowery, ed., Washington, D.C.: National Academy Press, 1999. 17   For a summary of this multi-volume study, See National Research, Government-Industry Partnerships for the Development of New Technologies: Summary Report, op. cit. 18   National Research Council, Measuring and Sustaining the New Economy: Report of a Workshop, op. cit.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium ACKNOWLEDGMENTS There is considerable interest in the policy community in developing a better understanding of the technological drivers and appropriate regulatory framework for the New Economy, as well as in a better grasp of its operation. This interest is reflected in the support on the part of agencies that have played a role in the creation and development of the New Economy. We are grateful for the participation and the contributions of the National Aeronautical and Space Administration, the Department of Energy, the National Institute of Standards and Technology, the National Science Foundation, and Sandia National Laboratories. We are indebted to Ken Jacobson for his preparation of the meeting summary. Several members of the STEP staff also deserve recognition for their contributions to the preparation of this report. We wish to thank Sujai Shivakumar for his contributions to the introduction to the report. We are also indebted to McAlister Clabaugh and David Dierksheide for their role in preparing the conference and getting this report ready for publication. NRC REVIEW This report has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Academies’ Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for quality and objectivity. The review comments and draft manuscript remain confidential to protect the integrity of the process. We wish to thank the following individuals for their review of this report: Bruce Grimm, Bureau of Economic Analysis; Shane Greenstein, Northwestern University; David Messerschmitt, University of California, Berkeley; William Scherlis, Carnegie Mellon University; and Andrew Viterbi, Viterbi Group LLC. Although the reviewers listed above have provided many constructive comments and suggestions, they were not asked to endorse the content of the report, nor did they see the final draft before its release. The review of this report was overseen by Robert White, Carnegie Mellon University. Appointed by the National Academies, he was responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authors and the institution.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium STRUCTURE This report has three parts: an Introduction; a summary of the proceedings of the February 20, 2004, symposium; and a research paper by Dr. William Raduchel. Finally, a bibliography provides additional references. This report represents an important step in a major research effort by the Board on Science, Technology, and Economic Policy to advance our understanding of the factors shaping the New Economy, the metrics necessary to understand it better, and the policies best suited to sustaining the greater productivity and prosperity that it promises. Dale W. Jorgenson Charles W. Wessner

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