There are times when we wake up and notice that technological change has transformed and is transforming nearly all of economy and society. We today may well be living through such a moment--the transition to a new economy.

The new economy is based on a new--and likely soon to be dominant--source of value added: information technology. Information technology multiplies brain power in a manner analogous to the way in which the classic technology of the industrial revolution multiplied muscle power. 

In multiplying brain power information technology delivers a quantum leap in our ability to collect data, process the data into a form in which we can understand it, remember what we have learned, and communicate what we have learned to others. Information technology provides us with a set of tools for thought--the most all-purpose tools ever.

The new economy is not about permanently rising stock prices, permanently low rates of unemployment, or permanently stable prices: it is not the Goldilocks economy. The new economy is not just a standard episode of economic growth driven by a leading sector, in the way that air transport was a leading sector in the 1950s or organic chemical manufacture was a leading sector in the 1890s. There has been and is extraordinary technological innovation in semiconductors, computers, and communications: integrated circuits, microprocessors, lasers, fiber optics, software, the broadband internet. But computing-and-communications seen as a leading sector is only the foundation of the new economy.

The core of the new economy, however, is where and how this technology-driven amplification of brain power is used for. It is about the changes in business organization, market structures, government regulations, legal procedures, and human experience that enable experimentation, further development, and the deployment of these technologies. It is about new uses, lots of them, with easy-to-see benefits from laproscopic microsurgery (which saves days spent in hospitals and eliminates great pain and suffering) to hyper-efficient retailing (which saves on inventory and enables the rapid distribution to users of exactly that commodity that most closely matches their requirements). It includes farmers who can substantially increase yields while cutting back on polluting insecticides and fertilizers. It includes students in small schools in Indiana (or India) who suddenly have instant access to oceans more of information than found in their local public or school library (if they have a local or school library). It reaches to new ways of searching for new pharmaceuticals, to better ways of managing a wireless phone network, the remote monitoring on the workings of cardiac pacemakers, and dramatically cheaper ways to shop for insurance, cars, books, toys, groceries--just about everything.

The new economy is driven by entrepreneurial companies. None of us know what the most valuable applications of these technologies that expand our brain power are. The best way to find out is not to have senior vice presidents of large companies deciding to spend $2 billion on sector X rather than on sector Y, but to have a multitude of entrepreneurial companies spotting potential new opportunities and taking enormous risks to develop new applications of information technology. And the United States--high-tech--Silicon Valley--has social and economic institutions that are uniquely effective in recruiting risk-loving innovators willing to bear the risks in return for the potential rewards. The new economy can develop only with open competition in major industries that use information technology--finance, air travel, pharmaceutical development, retailing--that experiment with new technologies to gain competitive advantage, and thereby lanch the mass use and production of the technologies. 

Without these actors--and without the systems of public and governance that enable them to move quickly--there is no new economy: there is just a set of new technologies confined to specific economic sectors (and a bunch of curious gadgets for the rest of us).

The new economy will see the creation of entirely new and powerful activities--impossible before this great amplification of brain power--such as bio-medicine and bio-technology, themselves huge and transformative new technologies. We don't know how the new economy will change our jobs, businesses, process of education, and the rest of our lives: forecasts of the future uses of new technologies have always gone far awry. But it is certain that the enormous increase in our power to process and communicate information will generate more and more innovation. And it is certain that the new economy will continue to be an environment of flux and transformation that will demand flexibility and reward adaptability.

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The purpose of this white paper is to set this transformation into perspective so that policy makers and opinion leaders will have better knowledge of the forces, the structures, and the collossal stakes at play. Policy makers are for the most part so far removed from the revolution in technology--and its consequences for users. ADDITONAL STUFF ON IGNORANCE OF POLITICIANS AND OPINION LEADERS AND THE NEED FOR A FRAMEWORK

Policy--actions taken and not taken--by the U.S. government will, as much as anything else, shape America's transformation into a new economy.  It already has... END OF PARAGRAPH NEEDED

America is well on its way into the new economy. We can't turn back: the genie is out of the bottle. America can continue, as we have to our great advantage, to lead the world into the new economy. Or we can mess up--stunt and stifle the development of the new economy because its development does disrupt traditional patterns of business and employment and other vested interests. But the onset of a new economy will not stop: other nations would then run with the change that will shape and dominate their future, and probably our future as well.