Sunday, February 29, 2004
Freeware does not contribute to GDP
Jorge Ortiz writes:
Greg Kochanski brought this up years ago on the SMART List. His argument went something like this:
If I do my laundry and you do your laundry, neither of us contribute to the GDP. But if I do *your* laundry and you pay me, and you do *my* laundry for a similar fee, then we've both contributed to GDP. Yet the exact same clothes got cleaned. That is, the same value was created in both cases, but it was only *measured* in the latter.
In fact, it is worse than that. When we do each other's laundry on a fee-for-service basis, we both need to engage the services of banks and accountants, and (of course) the IRS gets involved. I think the term for this is "value subtracted."
I am not economist, but . . . since freeware can be downloaded for free, the "product" (for GDP purposes) is counted as zero. [So] if we were to replace all commercial software products with freeware, we would actually decrease the GDP, even if the actual functionality of freeware were equal or better than the commercial products it replaces. Perhaps another kind of tragedy of the commons. (Don't trust me too much on this one -- do check with your economist . . . )I think Jorge is right, but this is not to say that freeware does not create value, only that our value-measuring tools are dull.
Greg Kochanski brought this up years ago on the SMART List. His argument went something like this:
If I do my laundry and you do your laundry, neither of us contribute to the GDP. But if I do *your* laundry and you pay me, and you do *my* laundry for a similar fee, then we've both contributed to GDP. Yet the exact same clothes got cleaned. That is, the same value was created in both cases, but it was only *measured* in the latter.
In fact, it is worse than that. When we do each other's laundry on a fee-for-service basis, we both need to engage the services of banks and accountants, and (of course) the IRS gets involved. I think the term for this is "value subtracted."
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