Thursday, February 06, 2014

Free stuff

Russ Roberts interviews Erik Brynjolfsson this week and the conversation is as usual worthy.  Roberts has an amazing batting average.  Listen to the whole thing.

Many people are critical of the economic metrics we use, especially GDP.  In the interview, the guest notes that if I pay for a set of Encyclopedia Britannica, GDP goes up but if I use Wikipedia instead, GDP is not boosted or may even fall if I squirrel away the savings. We get ever more stuff free, enjoying ever more consumer surplus, but making our conventional metrics ever less useful.
Guest: Yeah. Let me build on the optimistic part and then give some caveats. We do have a chapter on free goods and we talk about Wikipedia. It turns out I've done some research on the value of free goods in the economy, and the consumer surplus is probably on the order of $300 billion a year from just the Internet free goods.
$300 billion is about 20% of GDP and surely rising. It's hard to take declinist talk seriously.