How Much are Free Goods Worth? A LOT.

by Andrew McAfee on November 12, 2012

Here’s the money slide from Erik’s Brynjolfsson’s presentation earlier today at the Techonomy 2012 conference. His talk was titled “How the GDP Statistics Ignore Free Goods and Why it Matters.” It’s based on research he conducted with post-doc Joo Hee Oh.

Here’s the summary slide (the paper describing the research is not available yet; Erik will post it on his site when it is):

Anonymous November 17, 2012 at 4:58 pm

The value of many other activities – hiking outdoors, grandparents sitting kids, cooking home, lovemaking / sex, a conversation with a friend (that saves a visit to the therapist…) etc. etc. don’t get factored in to the GDP either, even though those “services” also greatly increase our welfare. What’s new here?

Jed Harris November 17, 2012 at 5:25 pm

A few things that are new:

– The amount / value of some categories of free things is increasing rapidly. Not so much true of hiking, cooking, etc.

– Some categories free things are taking over economic niches that used to be occupied by market-provided things. This could be true of cooking (or even sex) but doesn’t in practice seem to be a trend. In some cases major disruption results.

– Major parts of the economy have become dependent on free things. For example Google and Apple depend on free OS software (and add their own layers). Google depends on free data from the web. The internet largely runs on free software (originally due to the ethos of the IETF).

Brynjolfsson’s presentation is worth watching. He makes a reasonably good case for the claims in this slide — personally I think they make sense, and the methods used to derive them very much need to be more widely applied. We need to have better measures of value.

But Brynjolfsson doesn’t say where he thinks this is going. Combined with the effects of automation the future trajectory is interesting to contemplate.

Anonymous January 13, 2013 at 11:53 am

you are saying, of course, that the best things in life are free. is there life outside of the economy? or has life become the economy?

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