Thursday, November 21, 2013


Would you give up internet use for life for a million dollars? It only costs you pennies a day. It's a great question and Michael Cox's way of illustrating what economists call consumer surplus, the difference between price and how much the item is valued.

We also know that consumer surplus is not in GDP.  And we know that accountants measure what they can.

But people take their economic stats very seriously.  Data releases move markets almost daily.  No doubt the people laboring at the various statistical agencies are smart and hard working, but they have a difficult task -- one that is becoming harder all the time.

So official GDP reports must be taken with at least a grain of salt. And GDP is likely to become a more difficult concept as we get ever more satisfaction from "free" stuff.  These simple observations are a challenge to the increasingly popular stagnation narratives.

This is nicely summarized in the latest James Surowiecki column in the New Yorker (Gross Domestic Freebie.) He adds that these new-economy effects are unevenly spread. What is not? He also mentions "havoc" but that too is inherent in a dynamic economy.  Who really wants to go back to "the good old days?"  Almost no one who is seriously informed.  I usually have two words for anyone who pines this way: "medical science."


Same theme but more vivid.