Measuring The Complimentary Digital Economy

The digital economic scheme provides a let on of services for which the marginal cost (given an meshing connection) is zero: games similar Candy Crush, email, spider web searches, access to information as well as entertainment, as well as many more. Because users are non paying an additional cost for using these services, this shape of economical output doesn't appear to endure captured past times conventional economical statistics. "If you're non paying for it, you're the product." They write:

”Free” digital content is pervasive. Yet, different the bulk of output produced past times the mortal concern sector, many facets of the digital economic scheme (e.g., Google, Facebook, Candy Crush) are provided without a marketplace position transaction betwixt the concluding user of the content as well as the producer of the content. ... Furthermore, because these technologies are hence pervasive as well as convey induced large changes inwards consumer deportment as well as concern practice, these opened upward questions convey evolved into arguments that the exclusion of these technologies from the national accounts leads to a pregnant downward bias inwards official estimates of increment as well as productivity.

The firstly contribution of this paper is to supply an declaration that, yes, it is possible to mensurate many aspects of the ”free” digital economic scheme via the lens of a production account. ... To endure clear at the outset, this approach does non supply a willingness to pay or welfare valuation of the “free” content. But this approach does supply an approximate of the value of the content that is consistent with national accounting estimates of production.

We model the provision of “free” content every bit a barter transaction. Consumers as well as businesses have content inwards telephone commutation for exposure to advertising or marketing. Our approach reduces to treating the provision of the ”free” digital content every bit payment inwards sort for viewership services produced by households as well as businesses. Put differently, the national accounts currently ignore the purpose of households inwards the production of advertising as well as marketing. In our methodology, households are active producers of viewership services that they barter for consumer entertainment. ...

We focus on 2 types of ”free” content: advertising‐supported media as well as marketing‐supported information. Advertising‐supported media includes digital content similar Google search, simply too to a greater extent than traditional content similar impress media as well as broadcast television. Marketing‐supported information includes digital content similar so‐called freemium games for smartphones or recipes from BettyCrocker.com, simply also more traditional content similar impress newsletters as well as audiovisual marketing. Conceptually, the barter transaction betwixt the producer as well as user of “free” information is nearly identical to that with advertising‐supported media. The principal departure is that advertising viewership is almost entirely ”purchased” past times media companies from the full general populace as well as and hence resold to exterior companies. In  contrast, the marketing viewership that is exchanged for “free” information is by as well as large ”purchased” by nonmedia companies from potential customers as well as used in‐house.

H5N1 let on of interesting insights emerge from this approach. Here's a figure showing full U.S.A. advertising spending over fourth dimension every bit a part of GDP. Total advertising revenue has been fairly stable over time, amongst the sudden autumn inwards impress advertising beingness mostly offset past times a rising inwards digital advertising. 

This figure shows full expenditures on marketing over fourth dimension every bit a part of GDP. In this case, spending on impress marketing has declined, simply because of rising expenditures on digital marketing, full spending on marketing has risen past times to a greater extent than than 1% of gross domestic product inwards the in conclusion xx years. 

Overall, criterion the value of the "free" digital economic scheme has relatively piffling lawsuit on output or trends inwards full ingredient productivity (TFP)_. They write (citations as well as footnotes omitted):

"We are especially interested inwards the analysis of “free” digital content showtime inwards 1995 because that twelvemonth has been previously identified every bit an inflection signal inwards the production of information technology (IT) equipment. Moreover, that is when the Internet emerged every bit a pregnant source of ”free” content. We calculate that, from 1995 to 2014, our experimental methodology applied to digital content annually raises nominal gross domestic product increment past times 0.036 per centum point, existent gross domestic product increment past times 0.089 per centum point, as well as TFP increment 0.048 per centum point. The increment of digital content is partially offset past times a decrease inwards ”free” impress content similar newspapers. From 1995 to 2014, all “free” content
categories together annually heighten nominal gross domestic product increment past times 0.033 per centum point, heighten existent GDP growth past times 0.080 per centum point, as well as heighten TFP increment past times 0.073 per centum point.  ...  These revised numbers slightly improve the recent slowdown inwards economic growth—but non nearly plenty to contrary the slowdown."

This analysis seems broadly sensible as well as right to me: for a previous declaration along similar lines, see  "How Well Does gross domestic product Measure the Digital Economy?" (July 19, 2016). But it comes amongst a alert that applies to all discussions of economical output, as well as is recognized repeatedly past times the authors here.

gross domestic product is measured past times the monetary value of what is bought as well as sold, simply it doesn't mensurate consumer welfare (or "happiness" or "utility") inwards a straight way. Thus, it's possible that fifty-fifty if the gains to gross domestic product from including "free" digital services are relatively small, peradventure those pocket-size gains are increasing consumer welfare as well as happiness past times a much larger amount. Of course, i tin brand a similar declaration that the monetary value of for certain other outputs, from broadcast tv set dorsum inwards the 1960s as well as 1970s, or the availability of aspirin, is a lot less than the consumer welfare generated past times these products. Measuring "the economy" is an exercise of adding upward sales receipts, acre thinking most benefits as well as costs of economical patterns (as has long been recognized) is a much broader exercise. 

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