Beyond the Dot.Coms: The Economic Promise of the Internet

• Authors: Robert E. Litan;Alice M. Rivlin
• Venue: Beyond the Dot.Coms: The Economic Promise of the Internet
• Year: 2001

From the Publisher:In the few years since its public launching, the Internet has proved to be a cheap, convenient, quick, and flexible means of communication for millions of people engaged in all kinds of activities. In the late 1990s the media predicted that information technology (IT) and the Internet would create a new economy in which incomes would grow, stock values would soar, and recessions would be mild and infrequent. Confidence in the future of electronic commerce produced an explosion of new companies -- dot.coms -- that attracted optimistic investors and turned young entrepreneurs into instant millionaires, at least on paper. Skeptics urged caution, but confidence in the future of the Internet ran high, and the stocks of dot.com companies soared -- for a time. Then the bubble burst. Investors lost confidence in Internet companies with vague prospects but no profits. Dot.com stocks plummeted, and many went bankrupt. Skeptics crowed, and some voices predicted prolonged distress in the world economy caused by the Internet bust in the United States. In these pages, two leading economists look beyond the dot.coms to examine the Internet's true impact on the economy. By focusing on its potential effect on productivity growth across a wide range of existing "old economy" sectors, Robert Litan and Alice Rivlin predict that the impact of the Internet revolution is likely to be positive, significant, and sustained. The book draws on the work of the Brookings Task Force on the Internet, a group of experts from leading business schools and universities. Their findings suggest that the most significant impact of the Internet revolution will be felt not in e-commerce, but in productivity enhancements that lower transaction costs and improve efficiency in businesses such as automobile manufacturing and sales, general manufacturing, education, financial services, government, health care, retailing, and trucking. The resulting productivity growth could translate into significantly higher average living standards for consumers over the next five years. Litan and Rivlin also envision economic benefits that will not show up in productivity statistics -- such as increased convenience, a wider range of choices, and the opportunity to acquire products customized to their specifications. They conclude that it is a mistake to equate the benefits of the Internet with the economic health of the dot.coms, and they see far more light than darkness in the years ahead.