By Cindy Ivanac-Lillig
These days, it’s nothing new to point out how technology is changing the way we are living, raising children, attending class, etc. However, I bet you haven’t spent much time thinking about how technology is changing how we measure economic activity.
Gross Domestic Product (GDP) is the sum of the value of all goods and services produced in the United States. It is the go-to answer to the question: “How is the U.S. economy doing?” GDP is calculated by the Bureau of Economic Analysis (BEA), which has just announced that it will be changing some classifications and calculations to better represent value creation in our economy. One of the big changes is the treatment of Research & Development (R&D) spending. R&D will now be treated as an investment as opposed to an expense. So, for example, Apple’s significant R&D investment will now be counted in GDP as opposed to simply final iPad sales.
This is a big deal and is easily the most profound change being made to the GDP calculation, but it was another rather small change that caught my attention and really made me think about how technology is affecting what we consume and how we count it. The BEA will now begin looking at artistic investment differently. According to the Financial Times, the BEA analyzed data from www.imdb.com (the Internet Movie Database for the scarce few who have yet to visit the site) to help discern the value of a movie long after it has been produced. This research seemingly helped craft new accounting treatments for what they are calling “artistic originals.” Wow! And here I thought IMDb was only there for people like me that can’t remember actors’ names.
How has technology and the speed of technological innovation affected our overall perception of value? (For the econ students out there: Does this change your thinking about utility and indifference curves?)