Brynjolfsson et al. did a series of experiments in which they asked people how much money they would want in order to give up Facebook, or Wikipedia, or other hard-to-measure “free” services. The answers varied but they were able to calculate averages, which were surprisingly high. US consumers would want about $500 annually to give up Facebook—quite a bit more than Facebook generates in ad revenue.
That means Facebook, alone, would have added 0.11 percentage points per year to US GDP from 2004 through 2017. Add the consumer surplus for other free services and we could be undercounting growth by a full percentage point annually.
That doesn’t mean Facebook or Google are our economic saviors. The point is that our prime economic growth measure, GDP, is missing an enormous amount of “value” simply because it doesn’t fit the formula. This has consequences.
...In 1987, Nobel Prize-winning economist Robert Solow quipped that "you can see the computer age everywhere but in the productivity statistics." In the second half of the 1990s, this measurement puzzle was at the heart of monetary policymaking.
Chairman Alan Greenspan famously argued that the United States was experiencing the dawn of a new economy, and that potential and actual output were likely understated in official statistics. Where others saw capacity constraints and incipient inflation, Greenspan saw a productivity boom that would leave room for very low unemployment without inflation pressures.
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