My Earliest Forecast of the Late-1990s Boom: May 18, 1994: I was performing semi-random keyword searches of my hard disk when I found this: my first forecast of the late-1990s new-economy boom. It was made on May 18, 1994--much longer ago than I had remembered.
Of course, it was a hesitant and uncertain forecast: I clearly didn't believe what the numbers were telling me. And in order to understand what I am saying, you have to know that Larry Summers and I wrote a series of articles back around the start of the 1990s showing that the cross-country pattern of economic growth suggested a remarkable role for private-sector investment--equipment investment--as a cause or carrier or perhaps simply as an indicator of rapid forthcoming productivity growth.
Nevertheless, the speed with which investment in high-tech and other forms of equipment jumped as the Clinton administration deficit-reduction program began to take hold is truly astonishing.
UNITED STATES TREASURY
May 18, 1994
MEMORANDUM FOR ASSISTANT SECRETARY FOR ECONOMIC POLICY ALICIA MUNNELL
From: Brad DeLong, Deputy Assistant Secretary, Economic Policy
Subject: EQUIPMENT INVESTMENT BOOM
Isnt this remarkable? I should figure out how much of it simply the falling price of computers coupled with the 1987 base year. But if we do not see a substantial acceleration of U.S. potential output growth over the next few years, Larry Summers and I will have a lot of explaining to do...