Yay! On Friday stocks continued to edge up, ending a week where their value increased by nearly 6 percent. I was surprised. No, I was delighted! I had been convinced that the week would end with traders taking their profits and running for the hills. Instead, the week made me hope that we may be seeing the end of a five-year low.

Equities seemed particularly sunny in our own world of technology. Microsoft rose 4 percent after posting earnings that more than doubled analysts' expectations. (Still, let's not get too excited: other technology shares, including Web security company Check Point Software Technologies, software maker Siebel Systems, and chip maker Broadcom sank on weak forecasts or analysts calls.)

But it makes you think, doesn't it? Why, despite all the bad news in corporate earnings and capital investment, is the American economy so healthy? For, despite moans from Cassandra-like pundits like the economist Paul Krugman (who thinks that the American economy risks sinking into Japanese stagflation), it is, it is.

Why? After some years of debate, economists have come to some degree of consensus--a rare enough thing among the dismal scientists. It's the benefits of productivity growth--specifically, productivity growth deriving from technology investment.

A recent piece on Slate magazine by Robert Shapiro argues that the U.S. economy is so innovative almost solely because of the technology industries. Mr. Shapiro writes, "U.S. productivity--the key to rising incomes and living standards--may be establishing a promising new pattern. In the last five years of the '90s boom, productivity grew nearly two-thirds faster than the average for the previous quarter-century. As that boom wore on, productivity did not, as usual, slow down. It stayed strong and even accelerated."

What I found most interesting about Mr. Shapiro's thesis, however, was his observation that productivity continued to rise even when the economy--and the stock market--collapsed last year. He adds, "And this year, despite the economy's troubles, productivity will grow at least another 4 percent and perhaps more. Unless unemployment skyrockets, these gains should guarantee reasonable growth."

What's so interesting about this is that capital investment in technology has--as every salesperson in Silicon Valley knows--almost stopped. Mr. Shapiro attributes this to two causes, one unlikely, the other more interesting.

The first is his hypothesis that while capital investment in technology is down, investment in capital services--making the stuff we have already bought work--is up. This would be news, perhaps, to everyone but IBM. But more interestingly, Mr. Shapiro argues that technology in America spurs new kinds of business processes because Americans respond to new technologies with a kind of creative exuberance. Now that I believe. This is "irrational exuberance" at its best. That's the kind of irrationality we want.