[snrplfth]

One must also ask, how much of it is consumer surplus. In just the same way as a disease going away reduces the economic activity associated with managing that disease, information technology and the internet have done away with many previously necessary activities, in the process of creating an overall improvement - potentially "shrinking" GDP, even while it delivers substantial benefits. What is instantaneous worldwide communication worth? What would it have been worth in 1967? It's so common and important now - but it's also very cheap, so it doesn't show up significantly in many calculations of economic production.

[hyperpape]

This is a good question. I think there is certainly some consumer surplus not captured in GDP statistics, though it doesn't necessarily undermine my point.

That said, your example of curing disease is a bad case of the broken window fallacy. No longer having to combat specific diseases 1) leaves people healthy and able to contribute to economic activity, and 2) leaves the people previously employed in medical fields able to take other jobs.

Maybe in 2016, where there's a seeming lack of jobs in the developed world, that's not a clear driver of economic growth, but in 1916, it was.

[snrplfth]

Oh, I'm not trying to commit the broken window fallacy. I'm just saying that, for example, if there was a disease that caused a lot of pain, and it was suddenly cured, the reduction in measured economic activity associated with managing that disease might outweigh the measured increased productivity and redeployment of resources and labour. (Maybe something like arthritis, say: usually worst after most people are retired and not measured as workers, doesn't take a huge number of people to manage, but causes a lot of pain.) Obviously curing a disease is an economic good. It's just that we're not terribly good at measuring consumer surplus, or leisure, or various dimensions of satisfaction - especially once you get past basic consumption indicators.

I suspect it's more likely that we're underestimating the consumer surplus from the internet than we are overestimating it. By how much, I don't know.

[hyperpape]

I think you're still making it, just in a more subtle way. What happens to the money those people spend on arthritis treatment?

[snrplfth]

Of course, that money is redeployed, which is good. The point is that, in the case of something like chronic pain, it is very difficult to measure the level of pain, but easy to measure the money spent on it. So, it can be challenging to compare.

Or, to go back to technology, take Facebook for example. Perhaps people would have liked to have a social networking site before, but it simply wasn't available. When it became available, many people used it and enjoyed it in their leisure time. Because it's free, and, while large, does not pull very large revenues per user, it doesn't show up as a major economic activity. And because it's used mostly as an end-consumer leisure activity, it is missed by indicators that don't measure this well. So there can be a substantial total increase in services enjoyed, and we might be missing it. Again - might. I cannot say for sure, but it's worth asking.

[hyperpape]

Gotcha. I definitely agree that there can be consumer surplus not captured by GDP.

[smsm42]

Maybe people just don't earn them, since not having to pay for treatment they can now spend time on reading books and watching birds instead of working. I don't say that happens with everybody, just one possible scenario. That's the thing with such global measures - they can't capture things they are not designed to capture.