Mystery Solved.

Wall Street bulls held this as an article of faith: computers inspire us to work better, smarter, faster. Their conviction survived plagues of crashing servers and swarms of frozen cursors. They spoke of the computer and its sister "information technologies" as the key to the American "productivity miracle." Business best sellers foretold that IT would make "The Roaring 2000s" the "greatest boom in history." They hailed the Internet as the biggest technological advance since Gutenberg's printing press 500 years ago. They inspired us all, and took our money to the mountaintop. But since the crash in March, we don't hear their rousing sermons about the New Economy anymore.

"How ironic," says Brookings Institution economist Robert Litan. Almost at the moment of the market collapse, the profession of economists, who perhaps alone among us had never believed in the productive power of the computer, started to come around. Recent converts include professors emeritus at MIT and Harvard, and the Council of Economic Advisers, which issued a 400-page admiration of the IT-driven New Economy two weeks ago. Their message challenges our old faith: four decades after the first sale of a clunky mainframe computer to a private business (Nielsen, the TV ratings people) America's economy has only recently proven that it can put the computer to productive use on a broad scale.

As an economic force, the computer revolution is just beginning. The search for proof of its practical impact was on even before Nobel economist Robert Solow first articulated the "computer paradox" in 1987. Silicon Valley had been booming for more than a decade, yet productivity growth was in a mysterious rut. It was "embarrassing" to report, wrote Solow, that "what everyone feels to have been a technological revolution, a drastic change in our productive lives," had been accompanied by the opposite result. The nation can raise productivity by deploying more workers or more machines, or by finding better ways to work with the machines--and the computer industry had so far proved stunningly insignificant on all three counts. The paradox, wrote Solow, is that "We see computers everywhere but in the productivity numbers."

The revolution was missing something. In 1990 economist Paul David looked at the history of breakthrough technologies for answers, and found one in the electric motor. This machine did little to raise productivity until 40 years after it was invented in the 1880s. It took that long for industrialists to standardize the motor, rebuild factories around it, and hook it up to electric grids. Surely the computer would deliver, too, but only after businesses figured out how to rebuild around it.

In other words, the naive determinism of the computer faith was wrong: just buying computers was not enough to make businesses smarter. And the sensation of an all-pervasive "technological revolution" would prove statistically incorrect. As late as 1996 skeptics at Harvard and the Fed pointed out that less than five percent of all investment in machines was in computers--too small a total to accelerate the momentum of the economy.

For those outside of Silicon Valley, says economist Jack Triplett, there was another problem: "the Dilbert factor." Since the early 1990s American businesses had been pouring more money into information technology than any other kind of equipment, but often to no effect. Dilbert, the cartoon cubicle dweller, once commented that time lost waiting for Web pages to load had "canceled out all the productivity gains of the Information Age." As late as 1998 surveys showed that close to half of all IT projects were abandoned before completion. Computer rage spread. A telecom commercial now running on American TV presents comedians spoofing our plight: "My online service is down so often, I had to treat it for clinical depression," says one.

We are still learning the computer. Yet by 1995 the underlying picture was changing. U.S. productivity growth suddenly doubled to 3 percent, making possible the rare run of high growth, low inflation and high employment that defines our "Goldilocks economy." Mainstream economists found the productivity boom as mysterious as the doldrums from which it sprang, with one exception. "Alan Greenspan was perhaps the only one who believed it was IT-driven, and that's why he was able to keep the good times rolling," says Litan. "But he did it without evidence, on a hunch."