Of course, it often takes time before a specific innovation manifests itself as an increase in measured productivity. Although some new technologies can be implemented quickly and have an immediate payoff, others may take years or even decades before achieving their full influence on productivity as new capital is put in place that can take advantage of these creations and their spillovers. Owing to advancing information capabilities and the resulting emergence of more accurate price signals and less costly price discovery, market participants have been able to detect and to respond to finely calibrated nuances in consumer demand. The process of capital reallocation has been assisted through a significant unbundling of risks made possible by the development of innovative financial products, not previously available. Every new innovation has suggested further possibilities to profitably meet increasingly sophisticated consumer demands.
Many ventures fail.
But the few that prosper enhance consumer choice. The newer technologies, as I indicated earlier, have facilitated a dramatic foreshortening of the lead-times on the delivery of capital equipment over the past decade. When lead times for capital equipment are long, firms must undertake capital spending that is adequate to deal with the plausible range of business needs likely to occur after these goods are delivered and installed. In essence, those capital investments must be sufficient to provide insurance against uncertain future demands. As lead times have declined, a consequence of newer technologies, firms' forecasts of future requirements have become somewhat less clouded, and the desired amount of lead-time insurance in the form of a reserve stock of capital has been reduced.