The New Economy Remains With Us

If you uttered the phrase "New Economy" at a cocktail party in 1999, you would see heads nodding in solemn approval. Utter that phrase today, and you would hear snickers. Joel Mokyr still believes the New Economy is alive and well -- it's just not exactly what people thought it was.

Mokyr, a professor in economic history at Northwestern University and author of "The Gifts of Athena: Historical Origins of the Knowledge Economy," argues that a new, knowledge-driven economy is emerging with the Internet. Despite the collapse of technology stocks over the past three years, Mokyr believes that the Internet revolution remains with us and will continue to reshape all aspects of our economy and society.

While that may be comforting for weary tech investors, take heed: Mokyr also sincerely believes that "technological innovation is great for human society, but it's also a most wasteful enterprise." With the badly beaten tech stocks rising out of the ashes of the bear market the past few months, investors would be well-served reading Mokyr's thoughts before deciding a great new investing age is upon us.

Our weekly 10 Questions usually highlights a mutual fund manager, but we wanted to get a broader perspective on the question: Is the recent rebound in technology and telecom stocks viable? (For the record, the visionary Peter Bernstein recommended Mokyr for insights on that question.)

Want to ponder the fate of the Googles, Amazons, Microsofts and Dells of the world? Read on.

1. Most people think the notion of a "New Economy" was bunk. Why do you disagree?

With the Internet revolution, I sincerely believe that the New Economy that people talked about is still with us. The notion that it slowed down because the Nasdaq lost two-thirds of its value doesn't mean diddly to me. That's just a measure of how companies can capitalize on the technology, and what investors believe about the companies.

The markets were filled with silly notions about the financial prospects of some of this technology. The Blue Mountain Arts paradox was the greatest example: This company never actually sold anything! They simply gave everything away. Another company [Excite@Home] bought them for about $800 million.

But the Internet is still with us; it's deeper and broader and wider every day. People are shopping, as well as acquiring more information.