. this is evidenced by the sharp increase in capital investment since early 1993, especially in hi - tech equipment, which has persisted and even accelerated in recent quarters. underlying this apparent bulge in expected profitability and rates of return, as i suggested in my july humphrey - hawkins testimony, may be a maturing of major technologies in recent years. the synergies of lasers and fiber optics have spurred large increases in communications investments. the continued extraordinary spread of computer - related applications, as costs of manipulating data and other information fall, has also been a major factor in increased investment outlays. the combination of advancing telecommunications and computer technologies have induced large investment outlays to support the internet and utilize it to realize efficiencies in purchasing, production, and marketing. this dramatic change in technology, as i pointed out in earlier testimony, has markedly shortened the lead times in bringing new production facilities on line to meet increased demand, and has accordingly significantly reduced longer - term bottlenecks and materials shortages, phenomena often leading to inflation in the past. indeed, this faster response of facility capacity, coupled with dramatic declines in transportation costs owing to a downsizing of products, has led to speculation that we are operating with a new “ paradigm, ” where price pressures need rarely ever arise because low - cost capacity, both here and abroad, can be brought on sufficiently rapidly when demand accelerates. before we go too far in this direction, however, we need to recall that it was just three years ago that we were confronted with bottlenecks in the industrial sector. though less extensive than in years past at similarly high levels of capacity utilization, they were nonetheless putting visible upward pressures on prices at early stages of the production chain. further strides toward greater flexibility of facilities have occurred since 1994, but this is clearly an evolutionary, not a revolutionary, process. at least for the foreseeable future, it will still take time to bring many types of new facilities into the production process, and productive capacity will still impose limits on meeting large unexpected increases in demand in a short period. more relevant, by far, however, is that technology and management changes have had only a limited effect on the ability of labor supply to respond to changes in demand. to be sure, individual firms have acquired additional flexibility through increased use of outsourcing and temporary workers. in addition, smaller work teams may be able to adapt more readily to variations in order flows. while these techniques put the right workers at the right spots to

a good out - of - sample forecasting model. economists in r & s and other divisions, as well as academics, have made progress on this front, but there is room for further improvement. in addition to the challenge of how to best use these tools and data at the fed, r & s faces the challenge of understanding what these new technologies mean for labor productivity and the economy. the other challenge i want to highlight is that of making decisions under uncertainty. this is not a new challenge, of course. john maynard keynes and frank knight provided book - length treatments of the subject a century ago ( keynes, 1921 ; knight, 1921 ). in addition, in 2003, alan greenspan observed, " uncertainty is not just an important feature of the monetary policy landscape ; it is the defining characteristic of that landscape " ( greenspan, 2003 ). the fact that uncertainty has been a challenge for so long makes me think that it will continue be a challenge going forward, and in the wake of the pandemic, it is highly salient. in 1967, william brainard argued that uncertainty about the power of monetary policy implied that policy should respond more cautiously to shocks than would be the case if this uncertainty did not exist ( brainard, 1967 ). brainard's attenuation principle is a classic example of what has come to be known as the bayesian approach to uncertainty and is often cited as the foundation for the gradualism in the adjustment of monetary policy. that said, methods based on theories of ambiguity aversion led to antiattenuation. in other words, to protect against uncertainty, the appropriate response may be a quick and strong monetary policy response. of course, the right response to uncertainty is probably context specific and thus varies over time. as chair powell mentioned in a speech in 2018, there are two particularly important cases in which doing too little when there is high uncertainty comes with higher costs than doing too much ( powell, 2018 ). the first case is when attempting to avoid severely adverse events such as a financial crisis. in this situation, words like " we will do whatever it takes " will likely be more effective than " we will take cautious steps. " the second case is when inflation expectations threaten to become unanchored. if 2 / 4 bis - central bankers'speeches expectations were to begin to drift, the reality or expectation of a weak monetary policy response would exacerbate the problem. 4 how to respond to uncertainty is a matter that