FROM THE TIME WE ARE YOUNG CHILDREN, WE MEASURE OUR ACHIEVEMENTS AGAINST THOSE OF OUR PREDECESSORS. In matters both trivial and weighty--height, athletic prowess, grades, ability to tie a shoe--we contrast and compare, gaining status from each piece of evidence that we are progressing faster or raising the bar higher. As we get older, such comparisons often focus on how well we are managing to improve our standard of living.

Every so often, an individual or an industry or a nation bursts through in some way that leaves its contemporaries and historical counterparts in the dust. Can anyone explain the remarkable achievements of golfer Tiger Woods? Using the same equipment as his competitors and playing the same courses, Woods rather suddenly began charging past opponents, setting tournament scoring records and, consequently, establishing a much higher standard of living for himself. In economic terms, you might say he has been more productive.

Although the inputs Tiger Woods uses to win golf tournaments are rather specialized, conceptually they are similar to the production of goods and services economy-wide. Woods employs both physical capital (golf clubs, tees, balls, etc.) and labor (physical exertion and skills, knowledge of the course, etc.) in some combination. In the economy, the production of some goods, like cars or corn, is inherently capital intensive--workers depend heavily on machines to get the job done. In the more dominant services sector of the economy, physical labor is the more abundant input.

What caused Woods' surge in productivity? We don't really know. It's likely to be some combination of experience, practice, coaching and other intangibles--what economists call human capital. Without some obvious technological breakthrough, however, other golfers may be at a loss as to how to duplicate Woods' efforts.

Another example that better shows how technological breakthroughs can lead to a significant jump in productivity is laser eye surgery. For hundreds of years, eyeglasses were the only remedy for human sight impairment. In the 1940s, the development of contact lenses enabled many people to throw away their glasses. Contact lenses soon became the most rapidly growing means of vision correction.

Until recently, that is. In the 1970s, a breakthrough surgical procedure called radial keratotomy appeared in Russia. Combined with another breakthrough technology, the excimer laser, which was originally developed to etch computer chips, radial keratotomy revolutionized the field of eye surgery. Since FDA approval in 1998, such procedures are now so common that the advertising blitz for corrective laser eye surgery is quite impossible to avoid.

Still, such a specific technological change pales in comparison to an advance in what economists call a general-purpose technology. Clusters of new developments in these types of technologies characterized the major industrial revolutions, notably the British Industrial Revolution of the 18th and early 19th centuries and the so-called Second Industrial Revolution of the late 19th and early 20th centuries, in which the United States led the way. The British Industrial Revolution brought the introduction of the steam engine, mechanization of textile manufacturing, locomotive engines, chemical processes like bleaching, and numerous other important inventions with commercial applications. The late 19th century witnessed the introduction of the internal combustion engine, important advances in chemistry, medicine and engineering, and great strides in the generation, distribution and application of electric power.

Now at the dawn of the 21st century, many observers believe the U.S. economy has entered a new era, reflecting revolutionary technological advances associated with the microchip. These advances, some economists claim, permit the economy to grow faster and, hence, living standards to rise higher than they have in recent decades. Others are skeptical, contending that the recent productivity spurt will prove to be an aberration and that the sustainable pace of economic growth has not increased appreciably.

What is not up for debate is the economy's strength over the recent past. The United States entered its record-setting ninth consecutive year of economic expansion in 2000. Although the pace of economic activity slowed during the second half of 2000, productivity growth--the principal engine of long-term economic growth--remained strong. In fact, since the mid-1990s, the United States has enjoyed a remarkable increase in the growth of average labor productivity--an increase matched by few other countries.

Can the U.S. productivity surge be credited to the invention of the microchip and related technologies, as past eras benefited from their own major inventions? Are we in the midst of another industrial revolution that will generate years of rapid productivity increase and prosperity? Or are we riding a wave that will crest sooner than we think? On the following pages, we attempt to answer these questions by looking back at the past. First, we examine more closely the staggering productivity leap the United States has made over the past half decade.