new goods and services available to businesses and consumers. 4 for example, when smaller electric motors replaced single - power sources, such as steam or water power, in manufacturing facilities, it became feasible to reorganize the layouts of plants to optimize the flow of materials rather than the distribution of power. 5 and the advent of air conditioning significantly expanded opportunities for economic development in the warmer regions of the united states and the world. however, in all cases, these developments evolved over a long period and required firms to make collateral investments in research and development, organizational structure, and employee training. these investments in learning how to make the best use of new technologies have been dubbed intangible capital, to distinguish them from investments in physical goods like new machines or facilities. in the case of information and communication technologies, new economic research suggests that the investments in associated intangible capital - - figuring out what to do with the computer once it ’ s out of the box - - are quite important indeed. 6 in my view, important investments in intangible capital remain to be made, as much still remains to be learned about how to harness these technologies most effectively. thus, it should not be surprising that the benefits of these technologies have taken a long time to show up in the productivity statistics. this research also suggests that the current productivity revival still has some legs, as the full economic benefits of recent technological changes have not yet been completely realized. looking to the future as graduates of mit, you will be at the heart of this critical process of developing new technologies and taking them to the marketplace. we are in an age in which technology and its fruits will be a dominant force not only in our economic lives but in the cultural, social, political, and personal aspects of our lives as well. your training at mit equips each of you exceptionally well to take the fullest advantage of the professional and personal opportunities that technological innovation and change will create. each of you, because of your youth, your talent, your demonstrated commitment to learning, and your personal and intellectual attainments during your time at mit, will soon find - - to paraphrase shakespeare - - that the world is your oyster. i hope that you will contribute in some measure to economic progress, whether in the united states or elsewhere ; and i hope you find some measure of financial reward. but the world has a great deal more to offer than money, and a key question each of you will face repeatedly in your

and communication technologies may require extensive reorganization of work practices, reassignment and retraining of workers, and ultimately some reallocation of labor among firms and industries. regulations that raise the costs of hiring and firing workers and that reduce employers ’ ability to change work assignments - - like those in a number of european countries, for example - - may make such changes more difficult to achieve. likewise, in product markets, a high degree of competition and low barriers to the entry of new firms in most industries in the united states provide strong incentives for firms to find ways to cut costs and to improve their products. in some other countries, in contrast, the prominence of government - owned firms with a degree of monopoly power, together with a regulatory environment that protects large incumbent firms and makes the entry of new firms difficult, reduces the competitive pressure for innovation and the application of new ideas. competition is one of the key benefits of free and open trade ; companies that are exposed to global competition tend to be much more efficient and to produce goods of higher quality than companies that are sheltered from international competition. other economic factors have probably been important in translating technological change into material progress. 2 some observers point to the depth, liquidity, and sophistication of american financial markets as contributing to recent productivity gains. sizable markets for venture capital and ready access to equity financing facilitate start - up enterprises, which are often the best means of bringing new technologies to the market. the united states also benefits from its high - quality research universities, which have shown both the willingness and the ability to collaborate with the private sector and, in some cases, with the government as well, in the development and commercialization of new ideas. for example, intel was co - founded by an mit graduate, and mit graduates played key roles in designing and developing the internet. management practices also differ across countries, and these differences may also matter for productivity. a recent study found that business establishments in the united kingdom that are owned by u. s. multinationals get higher productivity from information technology than do other establishments, and it tied this differential to the management and organization of u. s. firms. 3 finally, relatively more positive attitudes toward competition and entrepreneurship in the united states - - a factor that spans economics and sociology - - may also stimulate innovation and its commercial application as well as economic policies that support innovation. of course, there are factors that may restrain both technological innovation and its commercialization in the united states as well : i would