WHY THE DEVELOPMENT OF THE INTERNET HAS HAD VERY LITTLE EFFECT ON GDP.

WHY THE DEVELOPMENT OF THE INTERNET HAS HAD VERY LITTLE EFFECT ON GDP. The chief determinant of economic growth is technological change. A problem in measuring growth is the difficulty of measuring quality change. A refrigerator is much better than an icebox, but how do you measure the improvement? James Surowiecki had an article in the New Yorker (November 25) on an enormous change which I have not seen discussed before, even though it has taken place in broad daylight. GDP (gross domestic product) is our basic yardstick for economic growth, but services or products which are provided free do not enter into the calculation of GDP. (A favorite example for economics teachers explaining the problem has been that the services of housewives are not reflected in GDP). Surowiecki points out that products like Wikipedia, Twitter and Google Maps “barely exist” as far as GDP is concerned. A product like Skype which lowers expenditures on long distance telephone calls has the effect of lowering measured GDP. One way to estimate the value of the internet to people is to measure and value the amount of time that people spend on the internet. A study by Erik Brynjolfsson and Joo Hee Oh came up with an estimate for free goods on the internet of hundreds of billions of dollars in 2011.