Net benefits How to quantify the gains that the internet has brought to consumers

Measuring the economic impact of all the ways the internet has changed people’s lives is devilishly difficult because so much of it has no price. It is easier to quantify the losses Wikipedia has inflicted on encyclopedia publishers than the benefits it has generated for users like Ms Mollica. This problem is an old one in economics. GDP measures monetary transactions, not welfare. Consider someone who would pay $50 for the latest Harry Potter novel but only has to pay $20. The $30 difference represents a non-monetary benefit called “consumer surplus”. The amount of internet activity that actually shows up in GDP—Google’s ad sales, for example—significantly understates its contribution to welfare by excluding the consumer surplus that accrues to Google’s users. The hard question to answer is by how much. read more

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