Have the U.S. and the global economy entered a totally new era in which the old signposts are irrelevant to the needs of forecasters? Or are we still in an extremely lucky old economy, where luck could give out?

Champions of the new economy theory base their projections on the rise of information technology and the Internet -- where computer chips immeasurably expand the possibilities for progress through higher productivity.

That leap in productivity has fueled unparalleled prosperity -- which has had profound social implications, they say.

• Squeaky-tight labor markets have facilitated welfare reform and reduced poverty, crime and minority unemployment.

• The collapse of communism, socialism and protectionism brought many new countries, their workers and consumers into the market economy.

• Deregulation, privatization and consolidation -- with the promise of even greater productivity -- have spread.

• Worldwide, cheap labor and capital are coming together -- bypassing national capacity constraints.

Measuring productivity in a service economy is difficult. Even after its recent rise due to a calculation adjustment, the productivity gauge is no doubt still understated, experts believe. Many of the fruits of high-tech -- especially biotech -- raise living standards but do not show up in the numbers. The Internet has replaced or made many activities easier, probably contributing more to gross domestic product than economic indicators show.

Source: Bob McTeer (president and CEO, Federal Reserve Bank of Dallas), "Believe Your Eyes. The New Economy Is Real," Wall Street Journal, November 18, 1999.

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