TWO TECHNOLOGICAL REVOLUTIONS

The IPOs of the Electricity/Internal Combustion revolution created more lasting value than the IPOs of the IT revolution. Stock-market data point to two explanations for this. First, computer prices have been falling much faster than did those of electricity and internal combustion in the 1890-1930 period, and so the value of each generation of computer-intensive entrants is reduced by later entrants. And, second, the pre-1973 vintages reacted to the microcomputer relatively quickly, perhaps because the threat of being taken over is now higher than it was 70-100 years ago. (JEL: O3, N2)