MIT Measuring the Economy Project

MIT Measuring the Economy Project is led by Erik Brynjolfsson and Avinash Collis. We are supported by the MIT Initiative on the Digital Economy.

Our Research

Erik Brynjolfsson, Felix Eggers and Avinash Gannamaneni

NBER Working Paper No. 24514

GDP and derived metrics (e.g., productivity) have been central to understanding economic progress and well-being. In principle, the change in consumer surplus (compensating expenditure) provides a superior, and more direct, measure of the change in well-being, especially for digital goods, but in practice, it has been difficult to measure. We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods. We test the robustness of the approach and benchmark it against established methods, including incentive compatible choice experiments that require participants to give up Facebook for a certain period in exchange for compensation. The proposed choice experiments show convergent validity and are massively scalable. Our results indicate that digital goods have created large gains in well-being that are missed by conventional measures of GDP and productivity. By periodically querying a large, representative sample of goods and services, including those which are not priced in existing markets, changes in consumer surplus and other new measures of well-being derived from these online choice experiments have the potential for providing cost-effective supplements to existing national income and product accounts.

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Erik Brynjolfsson, Felix Eggers and Avinash Gannamaneni

AEA Papers and Proceedings, Vol. 108, MAY 2018

GDP is a measure of production, and yet it is widely used as a proxy for well-being. It is particularly ill-suited for assessing the contributions of digital goods which are free to consumers and thus excluded from GDP measures. This underscores the need to develop new measures of well-being which can assess not only the contributions of digital goods but also welfare more generally. In Brynjolfsson, Eggers, and Gannamaneni (2017), we propose a new way of measuring consumer welfare using massive online choice experiments. This brief paper motivates the need for such an approach and introduces the method.

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3. The digital economy, GDP and consumer welfare: theory and evidence

Erik Brynjolfsson, Avinash Collis, W. Erwin Diewert, Felix Eggers and Kevin Fox

Draft available soon

Media Mentions

  1. CNN: Technology helped America's economy way more than we thought, August 2018
  2. Financial Times: A few ideas for fixing GDP, August 2018
  3. The Guardian: Why the UK economy needs a platform 9¾ leap of imagination, July 2018
  4. Financial Times: We need a publicly funded rival to Facebook and Google, July 2018
  5. NPR: Internet a la Carte, May 2018
  6. BBC: The Race To Driverless Cars, May 2018
  7. The Times: If the best things in life are free, how do you measure their value?, May 2018
  8. The Australian: Social media worth a fortune to us, May 2018
  9. Independent: If you want to know how much Google and Facebook are worth to you, try thinking about how much money it would take for you to stop using them, May 2018
  10. The Sydney Morning Herald: How much is Facebook and Google worth to you?, May 2018
  11. Bloomberg: How Much Is It Worth to Use Facebook? It Depends, May 2018
  12. Boing Boing: Facebook is worth much less to its users than search and email, but it keeps a larger share of the value, May 2018
  13. The Economist: How much would you pay to keep using Google?, April 2018
  14. Financial Times: Treat social media like email and search engines, April 2018
  15. The Wall Street Journal: Real Time Economics, April 2018
  16. Quartz: How much would you pay for Facebook?, April 2018
  17. BuzzFeed: How Much Would You Pay For Ad-Free Facebook?, April 2018
  18. Marginal Revolution: The value of Facebook and other digital services, April 2018
  19. Die Welt: Nur für diesen Betrag würden Nutzer auf Google verzichten, April 2018
  20. Neue Zürcher Zeitung: Facebook ist für Nutzer 50 Dollar pro Monat wert, April 2018
  21. Il Sole 24 Ore: Quanto pagheresti per continuare a usare Google? La (sorprendente) risposta, April 2018
  22. Le Temps: Un an sans Facebook, April 2018
  23. De Standaard: Voor 31 euro zijn we bereid Facebook op te geven, April 2018
  24. The Economic Observer (经济观察网): 变革的印迹——印刷术对于近代欧洲的影响, March 2018
  25. The Economist: The “free” economy comes at a cost, April 2017
  26. MIT Sloan Management Review: Why We Need New Measures of the U.S. Economy, June 2016

Team

Principal Investigators

Erik Brynjolfsson, MIT

Avinash Collis, MIT

Collaborators

W. Erwin Diewert, The University of British Columbia

Felix Eggers, University of Groningen

Kevin Fox, University of New South Wales

Contact us

Do you have any suggestions/ questions regarding our research?

Are you interested in collaborating with us on expanding our research?

Please contact Avinash Collis at: avinashg@mit.edu