Idea in Brief
The Problem
Though we spend a large and growing share of our waking lives online, digital goods and services go largely uncounted in GDP. That’s because the measure is based on what people pay for goods and services. If something has a price of zero, then it typically contributes zero to GDP.
The Impact
Policy makers use GDP data to make decisions about how to invest in everything from infrastructure and R&D to education and cyberdefense. Regulators use it to set policy that affects technology and other firms. Because the benefits of digitization are dramatically underestimated, those decisions and policies are being made with a poor understanding of reality.
A New Approach
GDP-B is an alternative metric that supplements the traditional GDP framework by quantifying contributions to consumer well-being from free goods.
Suppose we make you an offer. You give up access to Google search for one month, and we pay you $10. No? How about $100? $1,000? What would we need to pay you to forgo access to Wikipedia? Your answer can help us understand the value of the digital economy.