of business investment raised the amount of capital per worker and thereby boosted productivity. about ½ percentage point of the increase in productivity growth over the 1995 - 99 period can be attributed to this so - called " capital deepening, " most of which reflected greater spending by businesses on computers, software, and communications equipment. the balance of the pickup reflected other factors, including technological innovations in the actual production of computer hardware and semiconductors as well as better management – perhaps assisted by these high - tech investments – of the nation's capital and labor resources. oliner and sichel estimate that the consolidated influences of information technology investments account for about two - thirds of the acceleration in productivity since 1995. this research supports the view that fundamental changes are under way in our economy. what's so special about this capital? that trend productivity has picked up and that high - tech investments are the source of the acceleration are important facts, but by now they are not new observations. perhaps at this stage it would be useful to explore in greater detail this positive " shock " to the ability of our economy to produce goods and services. what is so special about computers and other information technologies that they can have such a strong influence on our economy? let me highlight three special characteristics of high - tech equipment. first, computers and communications equipment depreciate at a very rapid pace. the current best estimate is that computers probably depreciate about 30 percent annually, although that estimate might be low, while other equipment probably depreciates at a rate of less than 15 percent annually. therefore, computers are retired, on average, after three years, and the useful life for other equipment is about seven years. firms must invest in computers at a faster rate than they do in other forms of capital just to maintain a given level of the capital stock. the rapid replacement of high - tech capital means that technological progress becomes " embodied " in the capital stock at a faster rate than is the case for longer - lived assets. the second feature of high - tech equipment that sets it apart from other classes of capital is the sensitivity of demand to fluctuations in the cost of capital. for decades, economists have debated the magnitude of cost - of - capital effects on traditional capital goods. a past consensus was that the cost - of - capital effect was small and difficult to identify empirically. but a somewhat different conclusion has arisen lately when the same basic models of investment are applied to spending on computers alone. the latest research suggests

may place insufficient value on systemic stability because material operational failures are low - probability events and difficult to anticipate. their assessment horizon may also be shorter than the social optimum. and, crucially, coordination failures may be a factor : users of a particular infrastructure, many of whom may compete in underlying markets, need to coordinate their actions if they are to influence decisions on the future strategy of the infrastructure provider. investment in the reduction of operational risk will be one such decision. difficulties in organising effective bargaining among users may leave them unable to coordinate, particularly in the face of differences in their information, expectations or preferences. potential welfare - increasing actions may, therefore, not be carried out. these market failures may justify intervention by the public authorities : either via a continuous oversight or regulatory regime ; via targeted intervention ; or maybe even via public ownership, as is often the case in respect of large - value payment systems and sometimes with securities settlement systems. an alternative strategy when faced with a monopoly provider might be to promote ( or even set up ) alternative, competing suppliers, to improve market contestability while ensuring adequate interoperability and substitutability across systems. of course, given the existence of network externalities and increasing returns to scale, the cost of this form of risk mitigation may well be higher than the cost of regulating a natural monopoly on an ongoing basis. most typically, public intervention would seek to address the vulnerability stemming from single points of failure by the imposition of minimum standards of resilience on monopoly ( or near - monopoly ) systems, either to reduce the probability of operational failure ; or to mitigate the impact of such failure by improving contingency arrangements – for instance, via increased investment in back - up facilities. steps might also be taken to improve general risk management practices and mitigate the risk of exit of a key infrastructure ; financial resilience and business risk is an important consideration here. a regulator or overseer might also ( or alternatively ) seek to narrow the gap between the choices of a monopoly provider and the social optimum by encouraging more effective and inclusive governance arrangements. user - as opposed to external - ownership might be promoted, though, as previously noted, this might not be enough. other measures might include steps to clarify the scope of the system ’ s activities, admissions criteria, voting rights, transparency, and the role of external stakeholders. for instance, in the uk, overall governance of payment systems is carried out via the newly - formed payments