After all, our lives have been made dramatically more productive thanks to Google, Wikipedia, Skype, Twitter, Facebook, YouTube, Waze, Yelp, Hipmunk, Pandora, and many other companies. But all deliver their services for free, which means that the benefits they provide are not counted in GDP.
As Edward Glaeser has argued, it is hard to believe that the median family in the United States, which supposedly is worse off than in 1970, would be willing to give up its cell phones, Internet access, and new health technologies in order to return to that halcyon era. Thus, the GDP numbers must be excluding much progress.
The fact that so much innovation is given away for free does not only create a measurement problem for economists; it is also a real problem for those trying to find investment opportunities. In the good old days of the post-World War II boom, if you wanted an air conditioner, a car, or a newspaper, you had to buy one, making it possible for producers to earn money by providing them.
Information-intensive products – typical of today’s technologically advanced economies – are different. Because the cost of providing an extra copy is almost nil, it is hard to charge for them.
Broadcast radio and television were the first to confront this problem, because they could not prevent those with a receiver from getting the signal. They had to develop an advertising-based model, making it possible for others to pay for the benefits received by the consumer.
Read more at http://www.project-syndicate.org/commentary/economic-stagnation-free-products-by-ricardo-hausmann-2015-03#3vKKbFQeFmd6SJue.99
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