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Techonomy: MIT's Brynjolfsson Says GDP Undervalues Web-Based Free Goods

This article is more than 10 years old.

The measurement of gross domestic product is increasingly inaccurate, as it fails to measure the value of free online goods like Wikipedia, YouTube, search engines...and blogs. That's according to Erik Brynjolfsson of the MIT Center for Digital Business, who addressed the topic Monday morning at a session at the Techonomy 2012 conference in Tucson, Arizona.

The issue is that GDP measures the amount spent on goods and services - and with free goods, the amount spent is zero. So you get zero contribution to GDP. He says the current measures of GDP miss the value of those services in the economy. He notes, for instance, that consumers have more music available than ever before, but the music industry in GDP statistics is shrinking.

Brynjolfsson notes that when you choose to spend time on something online, you are spending a limited commodity - your free time.

They assert that over the past 10 years, average welfare gain is over $300 billion, or about $1,400 per person. He estimates that is equal to about a quarter of all the productivity growth in the economy - and approaching half of all productivity growth.

He says they used the same model for television - and found it creates even more value for consumers than the Internet. People spend 30 hours a month on the Internet, and 30 hours a week on television.

The bottom line, he says, is that the value of free Internet goods in 2011 was about $300 billion - and increasing at a rate of about $40 billion a year, as user spend more time, and the hours spent become more valuable.