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Misleading Indicators

Reliance on GDP and other traditional indicators may be sabotaging the development of thriving innovation economies. While GDP measures the market value of all goods and services produced within a country, many stars of the digital age produce no goods and provide free services.

BELLEVUE, WASHINGTON – “If you can’t measure it, you can’t manage it.” That is the wisdom behind metrics like gross domestic product and other aggregate indicators that signal the health of national economies around the world. Policymakers and planners have used these numbers for decades to help them understand how to guide domestic economic growth.

But reliance on GDP and other traditional indicators may be sabotaging a keenly sought goal: the development of thriving innovation economies. Today, some vital parts of the information-technology sector barely register in the national accounts. While GDP measures the market value of all goods and services produced within a country, many stars of the digital age (think Wikipedia, Facebook, Twitter, Mozilla, Netscape, and so on) produce no goods and provide free services.

These same star players also tend to undercut the productivity of traditional businesses. Free navigation apps have shrunk sales for Garmin, the GPS pioneer that was once one of the fastest-growing companies in the United States. Skype is killing the international phone call “one minute at a time.”

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