James Surowiecki in the New Yorker notes that because we measure the health of the economy by Gross Domestic Product growth, a lot of the digital economy is left out because it's free, even though it's valuable. Take Google Maps and many mobile apps for example. Surowiecki explains the idea behind GDP and the disconnect with the digital age:
“The basic assumption is simple: the more stuff we are producing for sale, the better off we are. In the industrial age this was a reasonable assumption, but in the digital economy that picture gets a lot fuzzier, since so much of what’s being produced is available for free.....New technologies have always driven out old ones, but it used to be that they would enter the market economy and thus boost GDP - as when the internal combustion engine replaced the horse. Digitization is distinctive because much of the value it creates for consumers never becomes part of the economy that GDP measures”
According to Surowiecki, recent studies estimate that the value of free digital goods on the internet is hundreds of billions of dollars a year and rising fast (GDP in the US is nearly $16 trillion). Since GDP also leaves out things such as depletion/destruction of the environment and natural resources, the gap between what's measured and reality in the ever more crowded planet seems to be getting wider. This matters because policy makers and business rely heavily on GDP for key decisions, or avoiding them.
