THE impact of technology on the economy is one of the most-debated issues of the moment, whether it is the potential for automation to cause unemployment, boost long-term productivity, or widen inequality. A good deal of the annual Barclays Equity-Gilt Study, published yesterday, was devoted to the subject. But one section caught my eye; the idea that technological change was making GDP a less useful measure.
The report says that When “GDP was first introduced, manufacturing accounted for a large share of the core advanced economies, and the (system of national accounts) was designed primarily to measure physical production.”
But the modern economy is dominated by services and
Services cover a wide range of activities and are often customised, making their basic unit of production, as well as differences in quality and changes over time, hard to define
Furthermore, the report points out that
Digitised goods or services are often free: and without an observable market price, the (system of national accounts), by definition, excludes them entirely from GDP. But just because the consumption of a digital product does not involve a monetary transaction does not automatically mean that it is of zero value to the consumer. Thus the current treatment of digital products within the (system of national accounts) systematically underestimates the value generated by the digital economy.
This may be true. My question is how new this is. Past technological innovations have enomously boosted human welfare. But were those benefits reflected in a narrow GDP measure?