With the resignation of Steve Case as chairman of AOL Time Warner (soon to be just plain Time Warner again, it seems) we can pronounce the “New Economy” officially dead. When the biggest merger in history was announced almost exactly three years ago (it seems like a century), I wrote

If the accounting numbers are taken at face value, AOL Time Warner will have a price-earnings ratio of about 350 to 1, modest by Internet standards. When options are taken into account, the ratio is more like 1000 to 1. It is difficult to see how an economy in which investment decisions are based on numbers like these can avoid some sort of financial catastrophe.

So is AOL Time Warner a super-profitable monopolist in the making or a jerry-built piece of financial engineering ? It can scarcely be both. But in the miraculous world of the New Economy, anything is possible.

Of course, as the blogworld and other phenomena show, the death of the New Economy has had almost no impact on the development of the Internet. For that matter, neither did its rise. In economic terms, the Internet has provided a source of modest but significant productivity gains in the market sector. However, the trillion dollars or so dissipated in the bubble has probably negated the impact of several years worth of Internet productivity growth.

Coming back to blogs, the big impact of the Internet has been in non-market services, of which email has been the paradigm example, but for which blogs are an even better illustration. Apart from the commodity service of ISPs providing the connection, no-one has ever made any significant money out of these things and, probably, no-one ever will. That doesn’t mean that they don’t count towards economic welfare, but the New Economy was never about economics.