redeploying server farms

[Brad DeLong]

>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