Last year, the U.S. economy expanded just 1.6 percent in terms of gross domestic product or GDP. 2016 will go down as yet another year of tepid growth. But there are a growing number of economists who are expressing skepticism about the accuracy of the GDP measure.
This is due in part to the presence of an expanding digital world that overflows with free services like Facebook, Google and YouTube. As pointed out by writer Patricia Cohen, at its most basic, GDP is calculated by looking at prices. We value output by noting the price that it fetches.
But what is the value of a free software update that protects against a malicious virus? Trying to measure the economy’s output has always been challenging. Every since Nobel Prize winner Simon Kuznets helped create the government’s initial estimate of national income in 1934 the comprehensiveness and accuracy of the measure have been a subject of debate.
For instance, Kuznets wanted to include the value provided by mothers taking care of their children in GDP. Kuznets lost that battle, in large measure because of the lack of market transactions and accompanying prices.
