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Of course, there never were any economic tabulations, like GDP, that measure improvements to our lives, nor are there any objective measurements to tabulate an "ease of living" index, if that is the concern here.
I would like to measure how much knowledge and culture is passed to the next generation before they leave the nest. I'm sure it drops continuously as people approach subsistence-level employment, except in households that choose underemployment.
Evangelicals, for example, are a species distinctly different from homo econ0micus. They can't be understood through traditional economic statistics that presume economicus behaviors. GDP provides very little insight into their welfare.
Regardless of the boosts and drags to GDP associated with PCs, tablets, and smart phones, the economic gain can still be expressed in floating currency units (dollars, yen, ethereum, etc.) at each enterprise and GDP remains an objective measurement that has obvious implications to economic growth. We just need to remain conscious of its limits.
why not just the sum of reported pre-tax income?
Per capita average would then be an excellent measure.
Then throw some purchasing power parity in there.
As we get more granular and interested in solving problems and understanding the populace and their wants & needs, we should then try to start gathering and assessing for 'unrealized potential': A baby with a certain kind of upbringing and surrounding would be assessed the greatest potential, but also the smallest amount of unrealized potential (and pre-tax income) as would the 'perfect individual' at every path. As education, jobs, and purchasing accumulate so does potential values change, which is always compared against what could have been based on opportunity missed versus the 'perfect individual' of the same events.
1) Broken window fallacy - the money that goes to repairing the broken window simply replaces spending that would have otherwise occurred, resulting in no net benefit to GDP; rather the inefficient use of funds is actually a drag.
2) You argue on one hand that scrolling facebook/twitter etc is inefficiency in the workforce, and on the other that forthcoming corporate monitoring (which would offset the issue) would be a further cost. However, they could not occur simultaneously. Moreover, the spacing exercise that people engage in on social media may actually have some sort of efficiency benefit if it allows people a brief mental escape from their task (this is a flyer, granted, but on equal footing to your assertions, imo).
3) I completely agree that indoor plumbing and other physical advancements greatly increased human well-being; especially in overall health, however I don't think that these sorts of advancements are on par with the dynamism enabled by the internet (I think it is legitimate to say that some of these advancements lose a significant amount of value once people become accustomed to the new luxury). You use social media as the primary example for the uncaptured GDP produced by tech, but non-measured benefits are rippling through every aspect of modern life, business, and technology and has a compounding affect. In fact many of these advancements create a paper loss in GDP (1 example: the Amazon effect). Whether or not you believe in the ultimate value of Facebook is irrelevant if that is how people choose to spend their time. If mindless social media browsing wins in the free market of attention then its user value is by definition greater than whatever alternative that user would have pursued in a non-modern era.
Thus, I find your argument incomplete and in some ways contradictory.
A interesting topic nonetheless. However, regardless of your opinion on this issue I believe the there is always value in searching for a better methodology.
Watch out....GDP does not measure a man doing housework either.
GDP indeed. One way to measure this would be to put up permanent residencies for sale by each country. That residency cost index would be a measure of the desirability of being a citizen in that country.
That technological change is making GDP less useful is simply not true! The National Accounts system does as well accounting services as it does accounting goods. That's like saying that United Healthcare's accounting isn't as useful as GM's. Part of the confusion in the article is expecting an accounting system to measure what it can't measure. Both United Healthcare and GM accurately measure the costs of their employee benefit programs - but they can't (objectively) measure the quality of those programs.
The BEA does a marvelous job of accounting the Earnings (GDP expense & GDI revenue) of the US government - fully double-entry & accrual - with the data available to them (as the small Statistical Discrepancy between them proves). That there are growing problems in data collection is evident - but much more the failings of government policy (such as forcing people to work multiple jobs just to survive) than it is of technology.
GDP measures that it is designed to measure accurately. The real question is not whether it can do that. The real question is why measure those things. It makes sense for a company to measure its productivity--the aggregate is the GDP. But in planning for the wealth of a nation, other things might need to be considered.
The problem is there is no definition of "wealth of a nation" (or perhaps, too many definitions - every economist has their own). In any event, even if it could be measured, it's meaningless for a fiat economy where the value of its unit of account (in the US, the dollar) is solely a function of its users' perception. And a company doesn't measure "productivity") - its Earnings Statement measures its profit or loss (Earnings less Expenses) & its Balance Sheet measures its Net Worth (ie, Assets minus Liabilities).
The National Accounts recognize the difficulty (or needlessness) of a national balance sheet and limits its earnings and expense accounts to show no profit or loss (eg, you'll see no unrealized appreciation account in a national earnings statement). But that gives government everything it needs to properly manage the economy in real time, eg, is "Compensation of employees paid" gaining or falling in relation to "Personal consumption expenditures", is "Services" revenue gaining or falling in relation to "Goods" revenue, etc. And recognize that each of these major accounts is made up of many subsidiary accounts, so one (in this case, government managers) can drill down to find the source(s) of the changes in the major accounts to try to find ways to correct or further support those changes.
As to whether our "government managers" are using these data to good effect (as would a corporate manager), that depends on the purpose of "government" - if that purpose is to ensure the welfare of its people, the answer is pretty obvious.
I would have thought the information generated and sold on from these services was the output (probably another intermediate good) that is measurable. The creation of the service as an intermediate good. And the provisioning of the service to users an input.
Both the toilet and the smartphone required infrastructure investment. Aside from information technology and health care, however, actual investment is down in the United States, way down. It's all financial engineering and aggregating monopoly power now. And we haven't gotten much return from the past two decades of investment in healthcare.
Information technology, evidenced by the smartphone, is the one thing that has actually gotten better for most people in the past few decades. And the public infrastructure, such as that associated with the toilet, is likely to get a whole lot worse.
Nice article explaining the basics of technologies most people use and grown accustomed to ... What explained to me a reason for wages generally not increasing is "... automation has increased the pool of workers who can do a given task, and thus depressed real wage growth" .... It seems perhaps somehow GDP leads to understanding of the many people using free services as a "pool of workers" through data collection of these services and the actual transactions to access these services as internet access needs to be ultimately paid for ...
Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.
Bobby Kennedy , circa 1968
Im disappointed, in an article about smartphones and toilets, surely there would be reference to %GDP gained , or lost, while using our smartphones on the toilet. Has the economist not a glib word for every occasion?
Is Gross Domestic Product (GDP) a reliable source for growth of the economy, yes.. it entails that, which path the nation is headed and whether it is producing goods seen as valuable which equates to generating revenue. In a geo - political sense, this can be seen as marketing and trade.. exchange of goods.
It differentiate, agri - business, manufacturing and finally research and development (R&D). Take Europe for instance or America, mmm I reckon Europe and using America is vague.. let me suggest America and Detroit... I don’t know much about Detroit besides the fact General Motors (GM). If car production was doing bad, then it be Detroit suffering from socio - economical.... no money to inject into the service and ultimately ruining GM and its consumers then pen ultimately the Congressional Budget Office (CBO) borrowing from the treasury to boost spending using the keynesian policy of pouring money into the economy to revive it.
Is Gross Domestic Product (GDP) a reliable source for growth of the economy, yes.
It measures how much we spend, and much of it is based on what consumers consume.
So as long as credit growth remains positive GPD will continue to grow.
Remember what happened in 2008 when credit growth slowed and finally collapsed?
"When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
- Chuck Prince, July 2007
Citigroup CEO until Nov 2007.
Hey there stranger,
I agree with you one hundred percent, the market is volatile... and no politics or legislative laws can properly regulate the situation... That is one bad thing about globalization.... or a single currency like the Euro.
When one catches a cold the rest feel it. Dancing the tune is highly recommend however before dancing and I advise you people out there don’t try this at home.... lol.... is to watch and look around..... not saying emulate or copy them necessarily but coping strategy and how they are reacting.... before diving in... sometimes you got to feel it....
Since this is the economist, and not how to dance or what to do when you hear a song and is not to be taken literally just my view, it should be noted that the Organization Economic Community Develop (OECD) along with the Europeans Pillar or any institution should reform or re evaluate some policies like the European Central Bank one of the pillars established in Europe.
PC's (spreadsheets and word processors) have been ubiquitous in the office place at least since the 1990's. Productivity can take a very long time to work it's way through an economy. However, many people still probably use less than 1% of the functionality of these programs (almost 30 years on). Many of my staff become 2-3x more productive when I introduce them to two or three slightly more complicated Excel functions. Those who have left comment on how much they can contribute in their new workplaces with these same functions.
So true! A couple of years ago I was seriously concerned with the loss of jobs to automation. And I still am - but over a much longer time scale. The reason is the painfully slow pace of adoption. To anyone with hands-on STEM experience, the capability is obvious, but to others, learning to take advantage of that capability is taking forever. That hit home again watching the Zuckerberg hearings. The virtually total lack of understanding of technology (and worse, the misunderstanding) among our legislators makes one want to cry.