The continued strength and vitality of the U.S. economy continue to astonish economic forecasters.1 A consensus is now emerging that something fundamental has changed, with "new economy" proponents pointing to information technology (IT) as the causal factor behind the strong performance. In this view, technology is profoundly altering the nature of business, leading to permanently higher productivity growth throughout the economy. Skeptics remain, however, arguing that the recent success reflects a series of favorable, but temporary, shocks. This argument is buttressed by the view that the U.S. economy [End Page 125] behaves rather differently than envisioned by the "new economy" advocates.2