...Remember too that output and productivity in the Internet economy aren’t easy to quantify. Gross domestic product measures output by what people pay for goods and services (or by what the products cost to make). Much of what people consume over the Internet is free. Google and Facebook reach hundreds of millions of people and deliver enormous value -- but what they produce requires relatively little labor and is supplied at no charge. As far as GDP is concerned, this output barely exists. That says more about the defects of GDP than about the shortcomings of digital innovation.
In “The Second Machine Age,” an excellent new book on technology’s economic impact, authorsErik Brynjolfsson and Andrew McAfee of the MIT Sloan School of Management emphasize this measurement problem: Something huge is happening, and the figures aren’t capturing it. They also argue persuasively that Gordon and other productivity pessimists seriously underestimate the power of innovation still to come. Digital technologies, they argue, are “general purpose technologies” -- like steam power and electricity. They’re “pervasive, improving over time, and able to spawn new innovations.”
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