Software and the New Economy

The New Economy refers to a fundamental transformation in the United States economy as businesses and individuals capitalize on new technologies, new opportunities, and national investments in computing, information, and communications technologies. Use of this term reflects a growing conviction that widespread use of these technologies makes possible a sustained increase in the productivity and growth of the U.S. economy.1

Software is an encapsulation of knowledge in an executable form that allows for its repeated and automatic applications to new inputs.2 It is the means by which we interact with the hardware underpinning information and communications technologies. Software is increasingly an integral and essential part of most goods and services—whether it is a handheld device, a consumer appliance, or a retailer. The United States economy, today, is highly dependent on software with


In the context of this analysis, the New Economy does not refer to the boom economy of the late 1990s. The term is used in this context to describe the acceleration in U.S. productivity growth that emerged in the mid-1990s, in part as a result of the acceleration of Moore’s Law and the resulting expansion in the application of lower cost, higher performance information technologies. See Dale W. Jorgenson, Kevin J. Stiroh, Robert J. Gordon, and Daniel E. Sichel, “Raising the Speed Limit: U.S. Economic Growth in the Information Age,” Brookings Papers on Economic Activity, (1):125-235, 2000.


See the presentation by Monica Lam, summarized in the Proceedings section of this volume.

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