The bar graph shows the real growth of the Dow Jones Industrial Average taking inflation into account. The average shows overall growth with several peaks and valleys.

The real growth of the Dow Jones Industrial Average, compounding at 2 percent per year since 1915, is the green line. The growth at 10 percent since 1981 is the red line.

What is the explanation for the change in growth rate from 1981-2001? Alan Greenspan, Federal Reserve Chairman, credited "irrational exuberance." Other factors include expenditures on the "Y2K problem," enthusiasm about the future of dot.coms, federal tax policy, baby boomers saving for retirement, and economic fundamentals of increasing productivity, high employment and low inflation.

Source: The Dow Jones Averages, 1885-1985 from Dow Jones-Irwin, updated to 2002.

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