Chief Executive, The: The new economy

You're right on the money regarding the "new economy" ("The New Economy, Really," Editor's Note, October), especially concerning outdated economic models, such as net vs. gross income. The main cost factor in this new services economy is people, and the best way to improve productivity is to reduce payroll for each unit of revenue. In this respect, higher unemployment is not all bad (however confounding it may be to old-line economists).

The other big factor you failed to discuss is the explosive growth of global private capital, especially as a percentage of global GDP. This means an ever greater amount of money chasing an ever smaller pool of equities, leading to more of a casino economy and less value-based pricing of equities. It also means more rapid and accentuated shifts between market sectors and regional markets, as indeed is the case. The old-line, efficient, market-economy model will be increasingly challenged.

Barry Naft

President & CEO

Environment International

Potomac, Md.