Cato Institute Conference: The Future of U.S. Economic Growth: Panel II

Panel 2: The Future of Innovation: Stagnation, Singularity, or Something in Between?:

• Erik Brynjolfsson, Massachusetts Institute of Technology
• Robert Gordon, Northwestern University
• Stephen Oliner, American Enterprise Institute

A Question: For us economists, intensive economic growth is the rate in percent per year at which the real cost of obtaining the currently-produced bundle of marketed goods and services decline. what I am hearing from Erik is that, in his view, that is missing much if not most of the action: that what we really ought to be doing is measuring the rate at which the real cost of staying on the same utility surface is declining. And that these two are very different right now.

The fearfully sharp Robert Barro says somewhere that, with competitively-produced and sold commodities, the consumer surplus generated was as a rule of thumb roughly equal to the total cost, and that order of magnitude seems about right to me. But there seems every reason to think that when the real value produced is in the process of attracting an audience–a product to be sold to advertisers–that rule of thumb is wrong, and that consumer surplus generated is orders of magnitude larger than market cost. If true, that suggests massive misallocation. Metric gigatons of not just low-hanging but dropped fruit.

If only we could think up better societal division-of-labor coordinating mechanisms than either pounding information goods into the Smithian market that works so well for rival-and-excludible commodities but not so well elsewhere, or making your nut by selling as product the eyeballs and attention of those who are your real customers.