Are you angry about politics and the economy? The strong support for Donald Trump, Sen. Ted Cruz, R-Texas, and Sen. Bernie Sanders, I-Vt. – all “outsiders” of the “Washington establishment” – during the presidential primary campaign, including in Kansas, suggests you probably are.
The conventional reasons offered for your anger are that most Americans are frustrated with the sluggish pace of the recovery since the financial crisis of 2008, stagnant wages for the middle class, falling wages for low-income workers, and widening income and wealth inequality. Some analysts throw in personal insecurity in light of terrorist attacks and mass shootings in this country, Europe and elsewhere around the world.
I won’t tackle the security issue here, but want to make a stab at the economic arguments and relate them to, of all things, how economists measure the value of the internet. Bear with me and I’ll show you the potential connection.
All of the claims about economic growth and incomes rest on how government statisticians measure them: by counting the market value of goods and services produced and the cash and other compensation you are paid for your work or from your investments. However, much of what the internet provides us also is valuable but it is free, and thus is not counted as part of national income or gross domestic product.
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But I’ll bet many of you would say that the benefits of internet search engines (finding stuff instantaneously without having to spend hours, if not days, in a library), price comparison sites, watching videos or listening to all kinds of audio content are quite substantial.
Then there are the benefits of telecommuting – living where you want without being constrained by your workplace – that the internet has made possible, which also are not well-captured in GDP statistics. For example, I am just one of more than 10 million people in the United States alone who “telecommute” at least half-time to work, and surely one of many in Wichita.
Hal Varian, the chief economist of Google, adds that the internet enables small- and medium-size companies to become “micro” multinationals from day one, enabling customers from all over the world to find and buy their products and services. This benefit, too, is not counted in the GDP data.
Some economists have argued that GDP undercounts growth by as much as 1 percent a year because the government data don’t capture these benefits of the internet and other factors, such as the improving quality of goods and services. If these omissions were corrected, then officially stagnant personal incomes of the middle class might actually be improving. If people knew that, perhaps they wouldn’t be so upset.
Other economists counter that government statisticians have always undercounted GDP, and that there is no strong reason for believing that this problem has become worse in the internet age.
So, if you’re an angry citizen and haven’t changed your mind after reading this column, it is probably because either you feel like you’re treading water regardless of what official government statistics may show, or that the conventional hypothesis about the reasons for your anger this political season – slow growth and rising inequality – is wrong.
Robert Litan, a Wichita-based attorney and economist, is an adjunct senior fellow at the Council on Foreign Relations. Twitter: @BobLitan.