cover image THE NEW ECONOMY

THE NEW ECONOMY

Roger Alcaly, . . Farrar, Straus & Giroux, $25 (336pp) ISBN 978-0-374-28893-8

The term "new economy" is shorthand for a wide range of changes in business and financial practices resulting from innovations in computers and communication. Before the Internet crash of 2000, many people argued the new economy was already here and would forever banish unpleasant things like recessions, inflation, stock market declines, boring jobs, bad customer service and authoritarian governments. New York Review of Books contributor Alcaly considers previous cycles of technological change and economic reaction, such as the invention of steam power and later electric power, the development of the internal combustion engine and adoption of mass production techniques in automobiles and steel. He argues that such changes do create new economies that are qualitatively better than the economies they replace, but more slowly and erratically than people expect at the time and with bigger problems along the way. Comparing innovations in semiconductors, software and communications technology with those of earlier periods suggests the traumas of the last few years, including the Internet boom and crash, are predictable growing pains. We will experience many of the advantages technophiles promised, says Alcaly, but it will take longer than the optimistic ones expected. This is thought-provoking stuff, but Alcaly doesn't defend this thesis systematically. Instead, the book's seven chapters are independent essays on different, narrow aspects of the question, some of which (like a history of the Federal Reserve and a chapter on junk bonds) are only tangentially related. Alcaly presents a wealth of interesting material, but doesn't integrate it into a satisfying whole. (June)