Companies in economically advanced nations continue to invest large amounts of money in the Internet. But economists at the Organisation for Economic Cooperation and Development (OECD), the well-known research and policy group based in Paris, have administered a dose of reality. In their view, even in the most optimistic scenario, revenue from electronic commerce would total no more than $1 trillion by 2005—only 0.5 percent of all retail sales in OECD countries. That is less than the annual sales flow of the US direct-mail business today.

The news may shock companies that have spent nearly $2.5 trillion to build Internet infrastructure around the world since 1994. Few of them will be excited if their reward is an increase of only 0.5 percent in their total retail revenue. Yet before they begin to pull the plug on this investment, they should consider the Internet’s effect on their activities more comprehensively.

For in truth, using direct retail sales transacted over the Internet as a proxy for its total impact on the world economy is akin to gauging the force of a hurricane by measuring only rainfall: many factors get left out of the equation. In the case of the Internet, they...