best positioned to know if capital is indeed excessive at the moment. however, as is often the case, reports from individual firms cover a wide range of situations. reports from high - tech companies at present are notable for the frequency with which talk of excess capital appears, and we hear reports of overhangs in some other industries as well. many firms, particularly in the high - tech sector, have been surprised by the slump in demand or by the entry of competitors or the introduction of new products. in many of these instances, capital spending plans have been shelved or delayed. but the anecdotal evidence does not all point in one direction. a recent survey from the national association for business economics showed that, at least among the companies that belong to that organization, the number of firms that perceive that they are still under - invested in high - tech equipment exceeds the number that have over - invested by a considerable margin. how those numbers translate into dollars is uncertain, of course, but the survey does remind us that we have to be cautious about the lessons we draw from the anecdotes. we also have to be a little cautious about the inferences we draw from the recent sluggishness in investment. in particular, a downturn in investment does not, by itself, imply that firms view their capital stocks as being too large. the rate of change in the stock of capital reflects both the spending on new capital – that is, gross investment – and the rate at which capital is being consumed, mainly through depreciation. even at rates well below those of a year ago, today's investment still likely exceeds by a significant margin the pace at which capital is depreciating. thus, the stock of capital, at least for the economy as a whole, probably is still expanding at a brisk pace. we can say with a reasonable degree of confidence that the investment cutback of recent quarters demonstrates that businesses did not want to continue adding to their capital stocks at quite the pace that they were a while back. but whether the stock itself is too large is a different question and one to which the answer is less clear. and because the composition of the capital stock is so enormously varied, the answer will no doubt be that some forms are held greatly in excess of desired levels, some well below desired levels, and others approximately at the desired levels. alternatively, one might turn to econometric modeling to estimate the magnitude of such an overhang. the economics

context of weaker - than - expected demand for their products, and hence weaker cash flow, businesses may decide that they prefer to hang onto their existing computer hardware, software, and communications equipment for longer than they otherwise might. accordingly, it might presently be the case that high - tech equipment is not as short - lived as we think it usually is. adding further to firms'willingness to hold on to their existing equipment through the current period is the apparent absence of new “ killer apps ”, break - through technological advances in applications such as e - mail and web browsers that in the past have spurred investment in software and in complementary goods like computers and communications equipment. a third reason for caution in assuming that the overhang will be worked off quickly is that even if hightech depreciation rates remain elevated, new investment could continue feeding into the capital stock because of planning lags, lengthy building times, or costly irreversibilities. for example, a national optical network can take years to roll out – longer than the average time to build a nonresidential structure. if demand falls below expectations, a firm might decide to persevere to completion of an investment project with a lengthy building time, but may be left with a capital good that is ill - suited to the conditions that prevail at the time of completion. lastly, the situation of the high - tech industries is also complicated by some considerations that are difficult to capture in the normal calculations of investment and depreciation. one such factor is the changing market structure of the high - tech sector. in the mid - 1990s, deregulation in the telecom industry and the rise of the internet led to a surge of entrants into the high - tech areas. these startups not only generated a good deal of spending on capital goods themselves, they also forced incumbent firms to invest and innovate to keep up, even as profits were eroding. survivor mentalities may have caused the competing firms to push capital outlays further than they might have otherwise, on the notion that the short - term losses recorded in stretching to expand market share could be made up later as competitors fell by the wayside. the creation of the long - haul fiber optic network, the part of the network that runs from city to city, provides perhaps the best illustration of the excesses that can develop as firms rush to establish their market positions. the creation of these networks may also indicate the complexities involved in determining the