Blinded by the hype?

In the same week that Dow Jones announced that high tech companies, in the form of Microsoft and Intel, are to be included in its highly regarded performance figures, The Economist has drawn together new information suggesting that technology may be an over-rated business area.

Studies from the US Department of Commerce and from Goldman Sachs both attempt to quantify the scale of the'Ôdigital economy' - a notoriously difficult exercise since what to add in and what to leave out is debatable, and the goalposts keep changing all the while.

Calculating IT's contribution to real economic growth is even harder, says The Economist. Goldman Sachs' best estimate puts business investment in computers at about 35% of total capital spending, but that includes replacement as well as new investment.

There is an interesting parallel from the past. The combined value of all IT shares is about the same as the US railways at their peak in the late 19th century - and they went on to bring fundamental change to the economy and transform productivity.

The Economist website is worth a visit: www.economist.com