What the GDP Gets Wrong (Why Managers Should Care)

Innovation and Economic Growth

Article Snapshot

Author(s)

Erik Brynjolfsson and Adam Saunders

Source

MIT Sloan Management Review, August 2009

Summary

This article examines the shortcomings of the Gross Domestic Product (GDP) as a measurement of national economic output.

Policy Relevance

GDP is a common measure of economic growth and the standard of living in a country.

Main Points

  • GDP underestimates the value of goods produced in an economy because it only measures the amount spent on them. Many goods and services are worth much more to consumers than what they must pay to acquire them.
     
  • While the information age has probably led to a large increase in the total value of goods produced and consumed, because many of them have become cheap or free such as music, movies, search engines, this increase is not very well reflected in GDP measurements.
     
  • As a result GDP is becoming a less accurate measurement of the total output of the economy.

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