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Wednesday, May 19, 2004

Another thing to blame on Pres. Bush

This paper, just published by the San Francisco Fed, has some interesting facts about the IT market in the United States. First, is the trend of IT spending that ultimately declined significantly after 2000, leading (or following?) the dot-com bubble burst.

I am surprised that the democrats haven't tried to blame Pres. Bush for this. It is clear that after he "stole" the election, the IT spending spree shriveled up.

Another interesting tidbit was the trend line of processor speed improvement. Moore's law claims that processor speed should double every 18 months, which predicts a linear logartithmic expansion. However, in levels Moore's law predics a non-linear growth of processor speed. This picture suggests that Intel made greater gains in processor speed during the IT spending spree in the late 1990s and that since then Intel has been on the same processor-speed growth path as before the IT spending spree.

An interesting question is what caused what. Did Intel create faster processors during the late 1990s because there was more money in it, i.e., the investment in IT technology was sufficiently large to increase the rate of Intel's improvement. Or, is it the case that the IT investment spree was caused by Intel's technological improvements. This possibility would suggest the Intel found some returns to scale that was unique to the range of processor speeds produced in the late 1990s or there was something else unique to the time period that is not available today.

My bet is that the monetary benefits to improving processor speeds is what helped motivate Intel along. It would be a good dissertation topic to flesh this out.

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