These caveats aside, the clear conclusion is that we’re really, really, getting our GDP numbers wrong. Or to be more precise, the numbers might be accurate, but they are a horrible guide to what we’re really trying to measure. What we want to know is ‘how rich are we? How close with popping with the pleasure of it all are we, being alive in this very digital dawn?’.
In economic terms the best we can do here is to estimate the value we get to consume. As a proxy for that – and we really must note that it’s a proxy – we measure GDP, which is value created at market prices. This is a problem when there’s no direct market value for something. As Google’s chief economist Hal Varian has said, GDP has a problem with free.
GDP has an even bigger problem with public sector which is valued at cost, not value to consumer. Gordon Brown increased reported GDP by giving public sector workers pay rises with no corresponding increase in output.
Quite – all those free fun runs in parks on Saturday mornings leave us glowing with pleasure. But can you put a price on it. Possibly 20 volunteers for 1.5 hours at minimum wage might be a workable way of pricing it, but it’s not included in GDP as Tom says.
I transcribe loads of historical documents and digitise them. Nobody pays me to do it, and nobody is prepared to pay for it to be done, but I still do it, and loads of people find it useful. How is that valued?
The typical method is “how much wages are you foregoing?” But, I do it whenever I haven’t got any work on, if somebody’s offering to pay me to work I do that instead. If nobody’s paying me to work I can happily work 24 hours a day doing history research, if only I could stop falling asleep. The only estimate is to rate it via the £72.50 a week dole while unemployed which works out as 43p an hour.