More people are gaining access to new, productivity enhancing technologies, more people are engaging in mutually beneficial trade, and fewer people are being born, thus allaying any continued fears of a so-called population bomb.Here's the part that concerned me:
The way we measure real GDP accounts for all the goods and services being produced, but it doesn't properly account for value that exists but can't be measured - such as the immense social benefits that accrue to social media users from services that cost them nothing...More than ever, we are producing commodities that contribute to social welfare through use value rather than market value.However, this particular form of technological access has yet to provide good deflation where it matters most: our ongoing financial responsibilities for non tradable sectors. These obligations are still in place and we need to make sure GDP measures continue to count them whatever their cost, so that collectively we will all have the money to pay them.
Consumption gains can contribute to well being on monetary terms, but those are gains that free up our time for further production potential, instead of making further demands on the limited time we still have. Why have economists and policy makers alike confused the leisure gains of social media, with the kinds of productivity which in the past have actually reduced the costs of living, working and doing business?
Even though social media can add quality to time value, this gain does not matter at a monetary level. Value in use gains - important though they are - will continue to need other resource reinforcements, in order for individuals to use them effectively in the marketplace at a value in exchange level. Facebook doesn't make it easier to pay our bills. The aggregate spending capacity of mutual monetary obligations is the defining feature of GDP measure, whether or not central bankers and policy makers may wish it to be otherwise.
"JEC" of Mean Squared Errors has a good response to Brad Delong in "'No, social media is not 'undervalued' in GDP":
...let's keep in mind that, when we talk about GDP, we're talking about the market value of goods and services, not their value value...It's no objection to say that the market value of social media differs from its "real" value--that's true of literally everything that composes GDP. It's perfectly valid to argue that GDP is a meaningless construct...But it's an entirely different matter to claim that a particular component is being mismeasured.Note as well that "value value" could also be attributed to personal time value. Yet consumption or leisure can't be confused with the productive components of time value which make it possible to fulfill one's own monetary or financial obligations. While time aggregate representation would greatly benefit from more compensated personal value, the main difficulty in this regard is a lack of personal production representation, in terms of a value in use structure.
Consumption gains should not be confused with the gains that free up time use potential. Should GDP measure change to reflect "hidden" consumption gains, poor reasoning such as this would likely lead to further monetary tightening by the Fed. And money has been too tight for too long, already.
Regular readers know that I believe value in use settings could be a part of GDP representation, so long as the time value of mutual assistance is in fact monetarily compensated. Indeed, this approach would include time value on more personal or "value value" terms. It would have the additional support of linked asset structure, which would create a local equilibrium that reflects local wage and income capacity. The value gains which matter for GDP are those which are readily measured on monetary terms, and value in use time structure is no different in this regard.