By Arnold Kling
Over 30 years after the introduction of minicomputers and more than 20 years after the introduction of microcomputers, the mainframe remains an important category. Total worldwide revenues of large-scale computer processors (or mainframes) amounted to $16 billion in 1997 compared to $16.2 billion in 1982. But because total demand grew from $38 billion to $183 billion, mainframes’ share of the total computer market dropped considerably, from 42% to about 9%.
He argues that new products and services tend to satisfy new wants rather than immediately displacing existing goods. He says that this complicates issues of macroeconomic theory and policy.
The new want machine, which has an excellent record, does not however create jobs at exactly the same rate as increases in efficiency and outsourcing, or cyclical downturns, causes traditional industries to shed them…
No one can predict when new industries will start adding jobs faster than old industries shed them. Standard macro-economic policies cannot speed things up. Tax cuts and easy money might stimulate ‘old’ economy demand for automobiles and housing, but they cannot overcome the unwillingness of U.S. consumers to use Short Messaging Services on their cell phones.
Thanks to Timothy Taylor in the Journal of Economic Perspectives for the pointer. The Summer 2005 issue of that journal is filled with articles on institutional economics, behavioral economics, and freakonomics. For those of us who believe that the mathematical paradigm has gone well past the point of diminishing returns, this journal seems to offer a better way forward.