Timmy elsewhere

At Computer Weekly

5 thoughts on “Timmy elsewhere”

  1. Well, I was sort of nodding along until you got to the Consumer Surplus bit and started estimating an imaginary, unmeasurable figure which cannot have a quantity because values are ordinal, not cardinal. Then having declared a multiplier (yay, Keynes), didn’t notice that what the consumer pays for a free service is zero, so any value multiplier results in… zero, and no, you can’t slyly switch from “what the consumer pays” to “what advertisers pay” as a base figure and hope nobody notices. That’s just naughty.

    This smacks of those Georgist chaps who want to tax unpriced assets on the basis of the imaginary monetary value you’re getting from owning them. See, the problem is that if you want to totalise all these unpriced things, and declare them to be a monetary value, you then have to scale the imaginary money supply to compensate, then when you normalise the result you find all the values are right back where you started. Your multiplier N is actually, in monetary terms, N/N, which is 1.

    Plus, the wild claims as to the value of Google and Facebook to consumers seems to be rather contradicted by the reality that most consumers won’t pay a penny for their services and would just leave if they started charging. The value of “Web 2.0” does seem to actually be mostly as an advertising platform, which is already measured by GDP (and arguably shouldn’t even be measured in that, since it’s a business to business transaction which is already measured for the companies buying the advertising).

    GDP is a crap measure anyway. Tractor statistics are better, frankly.

  2. Without having a background in economics (or, actually, any higher education) this is a conclusion I also came to a while ago. 250,000 people used to work for Kodak – I now share my pictures instantlyon Facebook, almost free, to everyone. 250,000 people lost their jobs – I save a small fortune in photo development.

    This will show as negative GDP, despite the fact my life has very clearly became easier – how do we measure the ‘free’ economy every day, or me reading The Guardian for free every day, considering the free Guardian keeps telling me every day I’m getting poorer?

  3. It’ll only be negative to GDP if nobody spends their money on anything else. The problem with GDP is it’s an approximation seen through a blur of the wrong thing. The easy way to see that is if one imagines a non-inflating money supply, then GDP would never go up or down, even if you fell back into a 15th century standard of living, because the quantity of money spent per annum would remain the same, but purchase fewer goods and services.

    It only kind of works because we inflate the money supply to (supposedly) compensate for some basket of goods that we hope aren’t wildly fluctuating and thus represent a kind of “average value of non-specific stuff”, and inflation thus manifests indirectly in the monetary value of the survey of big company order books that GDP actually is measured by.

    Anyway, that point being that we can only measure monetary transactions and guesstimating non-monetary transactions on their basis leads us into deep error. LIke (just for fun, and to upset Ironman), claiming that the economic value of (free) sex with your girlfriend can be calculated from the price of escort services, which means you’re magically earning another grand a week of “consumer surplus”, or something.

  4. So Much For Subtlety

    Ian B – “LIke (just for fun, and to upset Ironman), claiming that the economic value of (free) sex with your girlfriend can be calculated from the price of escort services, which means you’re magically earning another grand a week of “consumer surplus”, or something.”

    Earning? Foregoing surely.

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