Overview of the Findings and Recommendations

Faster, better, and cheaper semiconductors and computers as well as software and telecommunications equipment have led to their widespread adoption and networked use. These innovations are creating fundamental changes to the means and speed with which knowledge is created, services are delivered, and goods are manufactured and distributed around the world. Information and communications technologies have transformed how individuals and corporate entities everywhere consume, work, interact, and transact. From the U.S. perspective, these changes are improving productivity and are raising the long-term growth trajectory of the U.S. economy.1 Sustaining this growth, in turn, requires new approaches to economic measurement and policy analysis.

The challenge discussed in this volume is threefold: (1) to understand the diverse sources of these growth-enhancing productivity gains; (2) to better measure the contributions of different elements of the “new economy” story—that is to say, semiconductors, computers, software, and telecommunications; and (3) to develop policies to (i) meet the needs of these growth-enhancing industries and thereby benefit from their positive effects on the rest of the economy, and (ii) enable the United States to remain an attractive location for these industries within an increasingly competitive global economy.

1

This gain in the growth rate appears to be robust, having survived the dot-com crash, the short recession of 2001, and the tragedy of 9/11. Since the end of the previous recession in 2001, productivity growth has been running at about two-tenths of a percentage point higher than in any recovery of the post-World War II period. See Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh, “Will the U.S. Productivity Resurgence Continue?” Federal Reserve Bank of New York Current Issues in Economics and Finance, 10(13), 2004.



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age Overview of the Findings and Recommendations Faster, better, and cheaper semiconductors and computers as well as software and telecommunications equipment have led to their widespread adoption and networked use. These innovations are creating fundamental changes to the means and speed with which knowledge is created, services are delivered, and goods are manufactured and distributed around the world. Information and communications technologies have transformed how individuals and corporate entities everywhere consume, work, interact, and transact. From the U.S. perspective, these changes are improving productivity and are raising the long-term growth trajectory of the U.S. economy.1 Sustaining this growth, in turn, requires new approaches to economic measurement and policy analysis. The challenge discussed in this volume is threefold: (1) to understand the diverse sources of these growth-enhancing productivity gains; (2) to better measure the contributions of different elements of the “new economy” story—that is to say, semiconductors, computers, software, and telecommunications; and (3) to develop policies to (i) meet the needs of these growth-enhancing industries and thereby benefit from their positive effects on the rest of the economy, and (ii) enable the United States to remain an attractive location for these industries within an increasingly competitive global economy. 1 This gain in the growth rate appears to be robust, having survived the dot-com crash, the short recession of 2001, and the tragedy of 9/11. Since the end of the previous recession in 2001, productivity growth has been running at about two-tenths of a percentage point higher than in any recovery of the post-World War II period. See Dale W. Jorgenson, Mun S. Ho, and Kevin J. Stiroh, “Will the U.S. Productivity Resurgence Continue?” Federal Reserve Bank of New York Current Issues in Economics and Finance, 10(13), 2004.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age This new global economy poses new opportunities as well as new challenges to the United States’ growth and competitiveness. To better understand these trends, and the conditions to sustain them, the National Academies’ Committee on Measuring and Sustaining the New Economy held a series of conferences since 2001 covering the semiconductor, computer component, software, and telecommunications sectors. Each of these conferences brought together industry leaders, economists, national accountants, and leading policy analysts to identify the data challenges and policies needed to sustain the advantages of this new technological and economic paradigm. This concluding report presents the Committee’s findings and recommendations on the steps required to better understand what is happening to the U.S. economy (through better measurement) and policy measures that are needed to measure and sustain the benefits of this “new economy” within each of these sectors. This overview draws together the common themes from these sector-specific findings and recommendations. SUSTAINING THE NEW ECONOMY Following the expectations set by Moore’s Law, semiconductors have been a driver of price-performance improvements in information technology. Declines in cost for electronics functionality embedded in semiconductors are the basis of improvements in price-performance in computers and communications equipment, which in turn has been a major factor in increasing the productivity and long-term growth performance of the U.S. economy.2 Parallel improvements in the capacity of communications equipment, described as Gilder’s Law, suggest that the maximum transmission rate for telecoms is tripling every year. Combined with Moore’s Law, which forecasts that computer power doubles every 18 months, Gilder’s Law implies that communications power doubles every 6 months. While not pretending to be deterministic, Moore’s formulation has endured in part by setting expectations among participants in the semiconductor industry of the pace of innovation and introduction of new products to market.3 In as far as each firm believes that its competitors will release the next technological version in an 18-month timeframe, each firm tends to accelerate the pace of its own 2 Jack E. Triplett, “High-Tech Productivity and Hedonic Price Indexes,” in Organisation for Economic Co-operation and Development, Industry Productivity, Paris: Organisation for Economic Co-operation and Development, 1996; Kenneth Flamm, “Technological Advance and Costs: Computers vs. Communications,” in Changing the Rules: Technological Change, International Competition, and Regulation in Communications, Robert C. Crandall and Kenneth Flamm, eds., Washington, D.C.: The Brookings Institution, 1989; Ana Aizcorbe, Kenneth Flamm, and Anjum Khurshid, “The Role of Semiconductor Inputs in IT Hardware Price Declines,” in Hard to Measure Goods and Services: Essays in Honor of Zvi Griliches, E. Berndt, ed., Chicago, IL: National Bureau of Economic Research, forthcoming. 3 These expectations are reflected in the International Technology Roadmap for Semiconductors. Accessed at <http://public.itrs.net/>.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age work—in effect making Moore’s Law a self-fulfilling prophecy.4 For Moore’s Law be self-fulfilling, competitors need to believe that potential technological “showstoppers” and other impediments can be effectively overcome in the near to intermediate term. While experts predict that it is possible to remain on the trajectory envisioned by Moore’s Law for another 10 to 15 years, this outcome is not inevitable.5 Sustaining Moore’s Law is important because the production and use of semiconductors are major contributors to the growth and dynamism of the U.S. economy. Semiconductor technologies underpin a variety of products ranging from electronic devices such as personal computers and mobile phones, to business solutions and services, to e-commerce through the Internet.6 Through their pervasive use and rapid improvement, semiconductors have become technological enablers, allowing major improvements in established products as well as new innovations from consumer electronics (like the iPod) to new medical technologies, to new business processes. The Committee’s focus on semiconductors is based on the central role semiconductors have played and continue to play in the rapid development and better performance of information technologies. Semiconductors are not only a key driver of the performance improvements in information technology, they are unusual in that these performance improvements continue even as costs of computers and other devices keep declining. This in turn has had a positive impact (though one that is hard to measure) on productivity in software development. To sustain benefits of the new, more productive economy, the Committee recommends a number of policy measures. They include: Retaining a Vibrant U.S. Information Technology Industry The structure of the semiconductor, computer, and software industries is changing, with some production as well as advanced R&D moving offshore, creating new opportunities but also new challenges for U.S. leadership. Globalization clearly offers many benefits such as 24/7 product development, high-quality and lower-cost R&D, and lower-cost manufacturing of components and final products. Yet, as more manufacturing and related research and development move outside the United States, the United States risks losing the critical mass necessary for its 4 Ana Aizcorbe, “Moore’s Law, Competition, and Intel’s Productivity in the Mid-1990s,” American Economic Review, 95:305-308, 2005. 5 See remarks by Robert Doering, “Physical Limits of Silicon CMOS Semiconductor Roadmap Predictions,” in National Research Council, Productivity and Cyclicality in Semiconductors: Trends, Implications, and Questions, Dale W. Jorgenson and Charles W. Wessner, eds., Washington, D.C.: The National Academies Press, 2004. 6 European Semiconductor Industry Association, The European Semiconductor Industry 2005 Competitiveness Report. Accessed at <http://www.eeca.org/pdf/final_comp_report.pdf>.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age leadership and autonomy in semiconductor and other information technologies and equipment.7 It is important to recognize that the movement of the high-technology industries offshore is not uniquely the result of market forces. While semiconductors and other information technologies are produced and traded in a globally integrated market, national policies often shape international competition. National policies play a major role in attracting investment (e.g., through major tax and R&D incentives) and by creating positive conditions to attract and retain such investment. The policies of other nations and regions may well pose challenges to U.S. leadership in the high-technology sector.8 While it is neither possible nor desirable to freeze the allocation of global production, if the United States is to participate successfully in this competition, the federal agencies and state governments will need to undertake measures that strengthen the attractiveness of the United States as a location for the semiconductor, software, and other high-technology research and production, including renewed attention to encouraging and retaining a capable high-tech workforce.9 Expanding Research Funding To sustain the technology trajectory envisaged by Moore’s Law requires advanced research to overcome emerging technological “brick walls.” Substantial public funding in semiconductor research is necessary if we are to continue to reap the benefits of remaining on the trajectory set out by Moore’s Law and for the United States to remain a robust global center for the research, development, and production of semiconductors. To maintain the innovative pace of the semiconductor industry, with the attendant benefits for the U.S. economy, national investments in university research programs that explore and develop promising technologies are needed. Additional government investments in university research for programs that support and move promising technologies closer to 7 President’s Council of Advisors on Science and Technology, Sustaining the Nation’s Innovation Ecosystems, Washington, D.C., 2004, pp. 9 and 14. 8 National Research Council, Securing the Future: Regional and National Programs to Support the Semiconductor Industry, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2003. 9 George Scalise, “Industry Perspective on Semiconductors,” in National Research Council, Securing the Future: Regional and National Programs to Support the Semiconductor Industry, op. cit., pp. 35-42. Google’s Wayne Rosing reiterated this need at the Committee’s workshop on software. See National Research Council, Software Growth, and the Future of the U.S. Economy, Dale Jorgenson and Charles Wessner, eds., Washington, D.C.: The National Academies Press, 2006. See also remarks by Craig Barrett at a Semiconductor Industry Association event commemorating the 40th anniversary of Moore’s Law. Accessed news release at <http://www.sia-online.org/pre_release.cfm?ID=355>.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age commercialization are increasingly important to maintain the innovative pace of the information technology industry.10 Investing in a Trained Workforce National investments in a trained workforce that is well grounded in the relevant disciplines—especially physics, chemistry, mathematics, computer science, and engineering—is necessary for world-class research and manufacturing in the semiconductor, computer component, and software industries.11 Developing the basis for a better-trained workforce begins with strengthening K-12 education. At the secondary level and beyond, scholarships are needed to attract more U.S. students, including women and minorities, to pursue training in computer science and related fields.12 In addition to fostering home-born talent, continual progress is also necessary in visa processing in order to attract and retain qualified foreign engineers and scientists. This includes increases in the number of H-1B visas; automatic visa extensions for international students who receive advanced degrees in science, technology, engineering, mathematics, and other fields of national need from U.S. institutions; as well as more permanent opportunities for science and engineering graduates to remain and contribute to the United States economy.13 Compensation 10 Previous analysis by the Board on Science, Technology, and Economic Policy (STEP) has underscored the importance of innovation partnerships such as the Small Business Innovation Research (SBIR) Program and the Advanced Technology Program in contributing to the development of new technologies. See National Research Council, The Advanced Technology Program: Assessing Outcomes, Charles W. Wessner, ed., Washington, D.C.: National Academy Press, 2001, p. 39. See also National Research Council, The Small Business Innovation Research Program: An Assessment of the Department of Defense Fast Track Initiative, Charles W. Wessner, ed., Washington, D.C.: National Academy Press, 2000. 11 Previous analysis by the STEP Board of trends in federal research funding found that “there has been a significant reduction in federal funding in certain of the physical science and engineering fields. These include fields whose earlier advances contributed to the surge in productivity and economic growth of the late 1990s and fields that underlie progress in energy production and conservation, pollution abatement, medical diagnosis and treatment, and other national priorities.” National Research Council, Trends in Federal Support of Research and Graduate Education, Stephen A. Merrill, ed., Washington, D.C.: National Academy Press, 2001. 12 See the recommendations in the recent report by the National Academy of Sciences, National Academy of Engineering, and the Institute of Medicine, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Future, Washington, D.C.: The National Academies Press, 2007 Forthcoming, Chapter 5. Legislation reflecting these recommendations is now pending before Congress. 13 The need for these actions is emphasized in the recent Congressionally mandated NAS/NAE/IOM study, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future, op. cit. See in particular Actions C-4 through C-6, which call for continuing improvements in visa processing for international students, providing a one-year automatic visa extension to international students who receive doctorates or the equivalent in fields of national need, and the institution of a new skills-based, preferential immigration option that would significantly raise the chances of an applicant with doctoral-level education in science and engineering.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age packages for technology workers are also a factor for remaining competitive in attracting and retaining qualified scientists and engineers in the globally competitive information technology industry.14 Fostering Public-Private Partnerships Public-private partnerships, involving cooperative research and development activities among industry, universities, and government laboratories can play an instrumental role in accelerating the development of new technologies and products.15 Semiconductor industry leaders believe that such partnerships provide the most promising strategy for sustaining Moore’s Law, given that the semiconductor industry’s ability to make smaller, faster, and cheaper integrated circuits is limited by the growing inability of each firm to pay on its own for the highly expensive research needed to achieve needed innovations.16 In addition to pre-competitive research partnerships at the horizontal level (e.g., among semiconductor device manufacturers), vertical partnerships focused on integrated capacities along the supply chain are seen as increasingly important. The objective of the vertical partnerships is to ensure competitiveness across the development and production chain through synergistic relations among suppliers, manufacturers, and users of new advanced technologies.17 Developing Industry Roadmaps Wider adoption of road-mapping exercises by the computer and computer component industries (along the lines of the pre-competitive research charted by the International Technology Roadmap for Semiconductors) can contribute to the ability of information technology industries to remain on a rapid growth 14 National Research Council, Building a Workforce for the Information Economy, Washington, D.C.: National Academy Press, 2001, pp. 69-79. 15 National Research Council, Government-Industry Partnerships for the Development of New Technologies: Summary Report, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2003. 16 A recent study by SEMI estimates that research required for continued scaling of integrated circuit devices, even without another wafer size increase, will cost some $16.2 billion by 2010. However, the equipment and materials suppliers, to whom the burden of research has shifted from chipmakers, are predicted to be able to afford an annual R&D budget of $10.4 billion, creating a $6 billion gap. SEMI, “Semiconductor Equipment and Materials: Funding the Future,” October 2005. Accessed at <http://content.semi.org/cms/groups/public/documents/homepervasive/p036611.pdf>. See also Phil LoPiccolo, “The Six Billion Dollar Gap,” Solid State Technology, February 2006; and Robert Haavind, “Chipmaking’s Tough Economic Road Ahead.” Solid State Technology, March 2006. 17 European Semiconductor Industry Association, The European Semiconductor Industry: 2005 Competitiveness Report, op. cit., Executive Summary, p. 51.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age path, like that predicted by Moore’s Law, accelerating the pace of innovation and growth.18 Setting International Standards The economic stakes of standard setting are of great consequence. The use of relevant technical standards, such as for software and wireless devices, is an important element in sustaining the success of the United States in the global economy. Conversely, uncertainty created by a multiplicity of standards and a lack of clarity in regulatory policy can retard progress, as seen in the U.S. broadband gap.19 Some nations and regions see standards as a competitive tool and devote substantial resources to this end. The role and resources of the National Institute of Standards and Technology have to be seen in this light. The standard-making process must be recognized as a key component of U.S. competitiveness and provided commensurate resources and policy attention. Revising Outdated Telecom Regulation Although massive investments in the nation’s high-capacity Internet backbone have created excess capacity in long-haul facilities, a variety of factors—regulation among them—have slowed the build-out of the crucial last mile. Indeed, by creating highly technology-specific industry rules and by attempting to promote competition by requiring incumbents to share the local loops of their network with rivals, the Telecommunications Act of 1996 may have, according to some experts, inadvertently inhibited investment needed to provide high-bandwidth access over the last mile.20 This broadband bottleneck inhibits a fuller capitalization of substantial investments in information technology (IT) and infrastructure, limiting the potential for sustained growth in the economy. Some fear that over time, this slow pace of broadband build-out may result in a competitive disadvantage for the United States, although emerging wireless technological standards 18 An example is the roadmap exercise by the U.S. Display Consortium, which develops platform technologies for flat-panel displays. See <http://www.usdc.org/> for additional information. 19 See Action D-4 on ensuring ubiquitous broadband Internet access in NAS/NAE/IOM, Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Future, op. cit. 20 Robert Litan and Roger G. Noll, “The Uncertain Future of the Telecommunications Industry,” Brookings Working Paper, Washington, D.C.: The Brookings Institution, December 3, 2003. Interpretations vary on the impact of the 1996 Telecommunications Act. Some experts believe that competition for the provision of broadband was already taking place in most major downtown areas in many of the largest cities of the United States before the Telecommunications Act. See Glenn Woroch, “Local Network Competition,” in Handbook of Telecommunications Economics, Martin Cave, Sumit Majumdar, and Ingo Vogelsang, eds., New York, NY: Elsevier, 2002. Others believe that the act did not deter the build-out of the nation’s cable network. For example, see Jonathan E. Nuechterlein and Philip J. Weiser, Digital Crossroads: American Telecommunications Policy in the Internet Age, Cambridge, MA: The MIT Press, 2005.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age such as WiMAX may help overcome some of the limitations associated with traditional wired broadband.21 Developing a New Architecture for U.S. National Accounts Originally constructed to deal with economic stabilization arising from the Great Depression of the 1930s, the basic architecture of the national accounts has not been substantially altered in 50 years. In the meantime, the policy focus has shifted from stabilization of the economy to enhancing the economy’s growth potential. The U.S. national accounts require a new architecture to inform policy makers confronting new challenges arising from rapid changes in technology and globalization. Additional resources should be made available to further explore this call for a new architecture. The drivers of the U.S. economy have evolved, indeed shifted quite dramatically, and it is essential that a new architecture for the national accounts be put into place to better capture this new reality. MEASURING THE NEW ECONOMY Given the benefits of rapid technical innovation, the measurement issues associated with this change should be addressed on a systematic basis by the responsible agencies of the federal government in a coordinated fashion. Swiftly falling IT prices provide powerful economic incentives for the diffusion of information technology. Given that the rate of the IT price decline is a key component of the cost of capital, it is essential to develop constant quality indexes, such as those for computers, for use in the U.S. National Income and Product Accounts (NIPA). The development of quality-adjusted prices is necessary for all types of investment, not just IT investment. Other types of investment have also benefited from technological progress and a failure to implement quality adjustments for all products will eventually lead to biased statistics. Additional resources to develop price indexes and related analyses are needed to understand the sources of productivity growth in the economy and to develop the policies to sustain it. Developing a Forecasting Model for the Semiconductor Industry Although information technology is altering product markets and business organizations, a fully satisfactory model of the semiconductor industry remains to be developed. Such a model would derive the demand for semiconductors from investments in information technology in response to rapidly falling IT prices. An 21 For a variety of views on closing the putative broadband gap, see National Research Council, The Telecommunications Challenge: Changing Technologies and Evolving Policies, Charles W. Wessner, ed., Washington, D.C.: The National Academies Press, 2006.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age important objective is to determine the product cycle for successive generations of new semiconductors endogenously. Developing Constant Quality Price Indexes for Computers and Computer Components Economists require accurate measures of the performance of computers and computer components in order to understand their contributions to economic growth. The computer component industry has developed a variety of formal and informal measures to gauge the relative performance of its products. Further development of these measures (using the Hedonic method22) and subsequent incorporation into the National Income and Product Accounts should enable improved analysis and policies to sustain the contributions of computers and computer components to economic growth. Developing Constant Quality Price Indexes for Software Software price indexes, especially for own-account and custom software, must be upgraded to hold software performance constant. Without adjustment for quality, these indexes present a distorted picture of software prices as well as software output and investment. To this end, advances in developing software price indexes, including current work by the Bureau of Economic Analysis (BEA) on function points, hedonic techniques, and other methodologies, should be supported.23 These advances can improve statistical information on firm investments in customized software applications such as own-account and custom 22 Hedonic price indexes provide a proven method for adjusting for quality differences in computers across time. Using this method requires improved performance measures for computers and computer components. Gregory Chow pioneered the use of hedonic techniques for constructing a constant quality index of computer prices in research conducted at IBM. See Gregory C. Chow, “Technological Change and the Demand for Computers,” American Economic Review, 57(5):117-130, December 1967. In 1985, BEA incorporated constant quality price indexes for computers and peripheral equipment constructed by IBM into the National Income and Product Accounts (NIPA). The economic interpretation of these indexes by Jack Triplett brought the rapid decline of computer prices to the attention of a very broad audience. See Jack Triplett, “The Economic Interpretation of Hedonic Methods,” Survey of Current Business, 66(1):36-40, January 1986. Triplett has also provided exhaustive surveys of research on hedonic price indexes for computers. See, for example, Jack Triplett, Handbook on Hedonic Indexes and Quality Adjustments in Price Indexes: Special Application to Information Technology Products. Paris: Organisation for Economic Co-operation and Development, 2004. 23 BEA has recently launched a software pricing project for custom and own-account software using function points. Work by Q/P Management Group and the Analysis Group is expected to produce new price indexes for custom and own-account software for the U.S. national accounts. A function point metric is a means of measuring software size and productivity. It uses functional, logical entities such as inputs, outputs, and inquiries that tend to relate more closely to the functions performed by the software. See John J. Marciniak, ed., Encyclopedia of Software Engineering, New York, NY: John Wiley & Sons, pp. 518-524, 1994.

OCR for page 1
Measuring and Sustaining the New Economy: Enhancing Productivity Growth in the Information Age software.24 Furthermore, the adoption of common standards across the Organisation for Economic Co-operation and Development (OECD) and beyond should also be encouraged. Wider use of standards can improve our knowledge about investments in software in what is a global industry and facilitate the tracking of software outsourcing.25 Developing Constant Quality Price Indexes for Telecommunications The varying complexity and rates of technical innovation make the contribution of telecommunications equipment to productivity growth a challenge to measure. Current BEA methodologies for making inter-temporal comparisons in price and quality understate true price declines in communications equipment because they do not fully track evolving technological changes.26 While the Producer Price Index has tried to address some of these changes using hedonic techniques, data that consistently identify important current period product characteristics and transaction prices are not yet readily available.27 Research into alternative quality valuation techniques and improved data transparency is required to respond to the technological changes in telecommunications equipment. BEA and other statistical agencies require increased funding to follow evolving trends in the communications arena with more accuracy. Gauging the Scope of Globalization Although the offshoring phenomenon—particularly the offshoring of service-sector jobs—is a topic of much currency, the scope of the phenomenon remains to be adequately documented. Despite the media attention, there is relatively little hard information about the causes and impact of offshoring on manufacturing and service-sector employment in the United States or on other related economic and structural developments. A sustained effort to measure the dimensions and implications of offshoring is necessary for informed policy making. The necessary resources should be made available to provide better information both to policy makers and to the general public. 24 David Wasshausen, “A BEA Perspective: Private Fixed Software Investment,” in National Research Council, Software, Growth, and the Future of the U.S. Economy, op. cit. 25 See comments by Dirk Pilat, “What is in the OECD Accounts and How Good is it?” in National Research Council, Software, Growth, and the Future of the U.S. Economy, op. cit. 26 BEA estimated that prices for communications gear fell an average of 3.2 percent per year between 1994 and 2000. Recent analysis by Marc Doms however suggests that communications equipment prices actually fell about 8 to 10 percent over that period. Mark Doms, “Communications Equipment: What Has Happened to Prices?” Federal Reserve Bank of San Francisco Working Paper 2003-15. 27 For additional perspective on the types of technological changes in telecom equipment that, at least conceptually, could be valued in a hedonic model, see Michael Holdway, “Confronting the Challenge of Estimating Constant Quality Price Indexes for Telecommunications Equipment in the Producer Price Index,” Working Paper, Washington, D.C.: Bureau of Economic Analysis, 2002.