Salient to Investors:
College lectures join a growing pool of web-based goods and services being given away that are transforming the lives of consumers. Erik Brynjolfsson at MIT said GDP only tracks things people buy so underestimates the very promising progress made by the US economy in virtual goods, so we are going to have to reinvent the way we measure economic growth – GDP is not equal to what we get.
Brynjolfsson and JooHee Oh say virtual goods added an additional $34 billion to consumers’ welfare each year from 2002 to 2011, or an extra 0.26 percent to GDP.
IAB Europe and McKinsey & Co. said Americans in 2010 would have spent $42.9 billion above and beyond the cost of services they actually paid for and expenses associated with such things as advertising and privacy.
Boston Consulting estimates the surplus benefit in the US at $2,528 a year per person.
Steven Landefeld at the Bureau of Economic Analysis said economists do not believe there’s such a thing as a free lunch, and advertising revenue generated by no-cost sites and from selling information on consumers’ browsing habits all get included in growth estimates. Plus almost every item in GDP has an element of consumer surplus that is not reflected in the accounts.
IT industries accounted for 4.4 percent of the economy in 2012 versus 3.4 percent in 1987, so the widespread adoption of PCs, the Internet and mobile devices barely made a dent in the data because their production is often done in other countries, while those items made in the US have benefited from a surge in productivity that has brought down their costs, limiting their share in GDP.
Peter Klenow at Stanford said we are a long way from having a number that can compete with GDP, and higher quality and more variety are harder to measure than quantity.
Click here to receive free and immediate email alerts of the latest forecasts.