John Phipps: Internet's Impact on GDP

08:04AM Dec 09, 2019
John Phipps
The Internet has introduced new less detectable additions to our life satisfaction. John Phipps explains in John's World.
( Farm Journal )

Last week something happened in our home that illustrates one problem economists are having measuring economic progress. The go-to metric is the Gross Domestic Product (GDP) and we track it for all countries and analyze it endlessly. It totals up the value of all goods and services produced each year across the nation. For the most part, it reasonably reflects our well-being. If more stuff and services are being bought and sold, people tend to be doing better.

But the Internet has introduced new less detectable additions to our life satisfaction. In our case, we were hosting two great-nephews from college over Thanksgiving. One is an accomplished pianist, and as is normal for such cases, we prevailed upon him to play something for church on Sunday. As we discussed what he might play, he suggested an Advent hymn. Only simply marching through the hymnal version would be appreciated, but a specific piano arrangement would at least exploit his considerable talent better. To my surprise, it took me all of 5 minutes and Google to find a and download a free piano arrangement of “Come Thou Long-Expected Jesus” along with a recording of the piece. It was lovely and well appreciated the following morning.

How much did that small transfer of information add to our economy? We can’t say, because no money exchanged hands. It certainly added to our happiness and was virtually costless. Every minute of the day, people are gaining real, usable value just this way, by accessing the knowledge and skills of others around the world to add to their own and improve their lives. Most of us have learned a recipe, fixed a household headache, or discovered answers to problems that have plagued us for years by simply turning to the Internet.

This suggests that we are not measuring human progress completely and may be making ineffective policy decisions as a result. Accelerating the flow of knowledge of all kinds, from original intellectual property like the piano piece to how to replace a toilet valve saves us money and lifts our standard of living. It also threatens many occupations where such knowledge was the closely held product workers sold for income. The bottom line is mostly good news though: we’re probably underestimating our increasing well-being, and the people at the bottom of the economic ladder may be seeing the biggest boost from this unmeasured form of wealth.

John's World 12/07/19