Lunchtime Must-Read: Bill Davidow: The Invisible Virtual Economy
Bill Davidow: The Invisible Economy: “Our techniques for measuring economic performance are obsolete. So we reach improper conclusions about the state of the economy. The economic recovery is probably more robust than we realize…. Many economists, policy makers, and politicians think otherwise, because they are using 20th-century methods to analyze our 21st-century economy…. Almost everything we do in the physical economy is paid for with money. We use dollars to measure most of the activity. If more dollars are spent or earned, we conclude that the economy is growing. The virtual economy is robust… and growing at staggering rates, everywhere.
A lot of the services provided to us in the virtual economy are free. If we paid dollars for those services, they would be counted as part of the GDP and would add to economic growth. But we don’t, so they are not counted…. Consumers can substitute Google News for their newspaper. The cost of a USA Today subscription is $275. His earnings will look the same, but he has more money at his disposal and more or less the same consumption. Essentially, he is earning more, but neither his income nor GDP will show it…. The virtual economy… has become very large and is having a broad impact…. The current measurement systems ignore our virtual salaries. We earn these salaries by selling our privacy and attention for zero and spending hours deleting targeted emails. Using those salaries, we purchase services that are worth billions….
If advertisers paid us directly for the sale of our privacy and attention and we turned around and spent the money to purchase Google searches, music, and phone calls, the government would count both our pay as income and the sale of the services as part of the GDP…. The annual cost of a Honda Civic used for, say, 7,500 miles per year, is around $6,500 per year, or 85 cents per mile. Using a Zipcar for 500 hours a year, approximately the same amount of driving, would cost only $4,250…. It is important to realize the effects of the virtual economy do not fall evenly across the economic spectrum. The lower your income, the more likely it is that you are paying a greater portion of your salary for essentials such as food and healthcare in the physical economy…