the downturn. telecommunications companies no doubt invested too much in long - haul fiber networks, as firms competed to establish the largest and most complete networks. ( i note, however, that economies of scale in laying fiber together with a low inground rate of physical depreciation imply that once a trench is dug, more fiber should be laid than will be needed for quite a while. ) too many startup internet companies bought too many servers and routers, and the failure of large numbers of high - tech companies contributed to a glut in office space, which is particularly evident in technology centers like san francisco and seattle. undoubtedly the current supply of commercial aircraft is excessive, though arguably much of this sector's overcapacity results from september 11 and structural problems specific to the airline industry rather than from a period of extensive overbuilding. however, the more pressing question is, how many of these putative sectoral overhangs remain relevant today? for high - technology equipment, in my view, overhang effects are probably by this time not of great quantitative importance. in communications, for example, though little additional long - haul fiber is needed at this point, there is probably scope for investment in the sophisticated equipment that transmits signals over the fiber, in the " last mile " of fiber network to customers'doorsteps, and in new wireless technologies and their applications. in the quantitatively important computers and software sector, a key factor is the relatively high rate of economic depreciation to which i alluded earlier. computer equipment purchased before the millennium date change is now four to five years old and may now or soon be in need of replacement. indeed, investment in high - tech equipment grew at more than 8 percent in real terms in 2002 ; investments in computers and software led this gain, but even investment in communications contributed a small part. continued growth in the high - tech equipment sector will be important in any investment recovery. in all likelihood, a continuing overhang exists in nonresidential structures, including some types of industrial structures as well as office buildings. ( prospects for other types of construction, including institutional buildings, utilities, and mining and drilling, appear somewhat better. ) vacancy rates in office buildings remain quite high in most cities, for example, and rents for many types of buildings have been falling. as a result, investment in these types of structures has been declining. two silver linings to this cloud, though faint and of little comfort to the heavy construction

the us economy. for policymakers, the most troubling aspect of this pessimism is our inability to ascertain its cause ( or causes ) : is it geopolitical uncertainty? the aftermath of the accounting scandals of last summer? concerns about the ultimate profitability of new technologies and products? the depressive side of keynesian animal spirits? this pessimism does matter, if for no other reason than because it has the potential to become self - fulfilling. for example, high - tech equipment and software will have to play an important part in any investment recovery this year ; and as we have seen, this category may be particularly sensitive to management beliefs and expectations. time will tell how pervasive these downbeat attitudes are and what effects, if any, they will have on investment and the economy. in any case, the clear lesson of recent experience is that forecasting investment requires close attention to the expectations of those responsible for making capital expenditures. understanding these expectations and their implications is yet another challenge that policymakers must face as we do our best to help the economy toward full recovery.