An economist explains how to value the internet

It is one the most commonly used measures of economic activity: gross domestic product (GDP), defined as the total market value of all final goods and services produced within a country in a given period.

But GDP misses out on huge chunks of value in the digital economy. When digital goods, whether Google Maps or Wikipedia, are available free of charge, they make no impact on GDP despite the value to their users.

This has major consequences. Without a valid tool to measure the value of the digital economy, policymakers are left scratching their heads over how to manage it. That led a group of economists at MIT to develop a new tool to measure the benefits of the digital economy.

At the World Economic Forum’s Annual Meeting in January 2019, we spoke to Erik Brynjolfson, Director of the MIT Initiative on the Digital Economy and Professor at MIT Sloan School about this new measure. Below is an edited transcript.

 
How does GDP count up the value of digital goods at the moment?

GDP is one of the great inventions of the 20th Century but it also has some weaknesses. In particular, anything with zero price has precisely zero weight in GDP: whether that’s Wikipedia, or the apps on your phone, or the air that we breathe. This was a design choice but it’s becoming a problem in the digital age.

Περισσότερα εδώ: www.weforum.org