Emily Liu
March 5, 2004
The term “new economy” has diverse meanings depending on the view of economists. Productivity is the key evidence for macro-economists to consider the existence of new economy. It includes labour and total factor productivity. Some economists have doubts regarding the existence of new economy in periods of slow productivity growth. They believe new economy takes place when there is enhancement in new products and services along with increasing productivity. Robert Gordon came up with an aggregate production model suggesting a relation between technological and productivity change. However, this model soon gives rises to economists when the rate of change in technology and productivity are not the same. A different view from microeconomists eliminates the concern of such model. They perceive the new economy with the influence of technological revolution on society. Micro-economists are concerned in the effect of the information and communications technologies (ICT) revolution on economic, political and social systems. Technologies involve with computers, lasers, satellites, and other communication technologies take decades to be improved and implemented through the whole economy.
The impacts of ICT on products, processes and organizational forms have already created a new economy three decades ago and it is still growing. There are countless changes on goods (G) and services (S) occurred ever since the technological revolution.
It is not so difficult to see ICT revolution has a greater impact on services than goods.
The following are some of the examples:
Process technologies
 Automated systems replaced most of the high-paying, low-skilled positions
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 in car manufacture companies. (G)
Computerized surgery is becoming more common and expecting distant surgery that allows specialists to help patients all over the world. (S)
Teleconferencing between lawyers and Supreme Court of Canada great reduced the amount of time involved. (S)
Able to do all kinds of complex calculations which were impossible before for researches on different areas such as astronomy and economics. (S)
Organizational technologies
 Firms disintegrating their operations, producing less and less physical products. (G)
 People find it to be more convenient to do work at home rather than in the
 office. (S)
Manufacture products in lower developed countries (LDC) creating new opportunities for both developed and developing nations. (G & S)
Changed movie industry with digitalized special effects. (S) 

Product technologies
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Cars will be implemented with danger warning systems (G)
ATMs have become one of the essentials around the world. (S)
E-mail and instant messages replaced the traditional mail, made distant communications possible in matter of seconds. (S)
Aggregate Production Model
Inputs Aggregate Production Performance
This model suggests technological change is associated with productivity. It fails to demonstrate the existence of fast technological change and slow productivity growth.
Structuralist-evolutionary Model
Technological Knowledge
Inputs Facilitating Structure Performance
Policy Structure
Policy
This model provides a clear distinction between technological knowledge and facilitating structure (human experience). Yet, the facilitating structure is influenced by technological knowledge and public policy.
Six reasons to believe rate of technological change the productivity growth are not the same.
1.) New general purpose technology (GPT) can not ensure to have greater effects on productivity than the existing ones. No evidence has shown that the average rate of productivity growth will be higher from one GPT to the next, changes are mostly minimal.
2.) Newer GPT may take longer to immerse into the economy, therefore showing smaller gains each year.
3.) According to the structuralist-evolutionary model, technological changes in the facilitating and policy structures do not have direct impact on performance
(productivity).
4.) If the number of technological developments decreases, the productivity would also diminish.
5.) Have to allow decades for new GPT to reach its highest efficiency, thus slowing down the productivity.
6.) Technological changes were not taken into account of traditional measures of productivity.