At the New York Times, Patricia Cohen has written an interesting piece on how economic growth measures (e.g. Gross Domestic Product, or GDP) aren’t great at measuring some parts of the economy.
That’s because a country’s GDP doesn’t include goods or services which are ‘free’. For instance, a mother or father who doesn’t work and looks after their kid doesn’t add a dollar to GDP because they aren’t being paid — but they’re performing an immensely valuable service.
Another — increasingly important — GDP blackhole is free digital services:
The growing suspicion, however, is that in a digital world overflowing with free services like Facebook, Google and YouTube, price is an increasingly ill-suited proxy for value.
What is the worth of a free software update that protects against a nasty virus? Of the streaming service that enables you to watch shows on your computer instead of on a television? Of the hours and hours saved by looking up a fact on Wikipedia rather than having to go to a library? All have productive value but no price.
I’ve thought about this problem in relation to free/open source software too. The more people who are using open source software, the lower GDP goes, even if the user is happier than if they’d paid for propriety software.