redeploying server farms

Brad DeLong delong at econ.Berkeley.EDU
Tue Apr 10 11:34:04 PDT 2001



>This paragraph appears in a story by Anya Schiffrin in The Industry Standard:
>
>>"Our new-economy capital stock is more flexible and so much less
>>vulnerable to the over-investment trap," says [Brad] DeLong. "A
>>chemical factory can only be used to make chemicals. But a server
>>farm and its fiber-optic cables can be used to organize and control
>>any component of the economy." If so, the economy this year will
>>finally show just how new it really is.
>
>Really? Can a server farm be redeployed so easily? And if the
>problem is just too much capacity, what good is redeployment?
>
>Doug

It depends on what it's redeployed too...

And I don't believe in "overcapacity" or "overinvestment". At a low enough real interest rate (and with low enough expected future real interest rates), every investment that you can think of as even marginally physically productive can be worth doing.

I do think there is a qualitative difference between a server farm and a steel mill with respect to the ease with which the capital can be redeployed to another industry.

Hal Varian agrees with me :-)

Brad DeLong



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