Briefly: What’s the value of a free service?

At the New York Times, Patricia Cohen has written an interesting piece on how economic growth measures (e.g. Gross Domestic Product, or GDP) aren’t great at measuring some parts of the economy.

That’s because a country’s GDP doesn’t include goods or services which are ‘free’. For instance, a mother or father who doesn’t work and looks after their kid doesn’t add a dollar to GDP because they aren’t being paid — but they’re performing an immensely valuable service.

Another — increasingly important — GDP blackhole is free digital services:

The growing suspicion, however, is that in a digital world overflowing with free services like Facebook, Google and YouTube, price is an increasingly ill-suited proxy for value.

What is the worth of a free software update that protects against a nasty virus? Of the streaming service that enables you to watch shows on your computer instead of on a television? Of the hours and hours saved by looking up a fact on Wikipedia rather than having to go to a library? All have productive value but no price.

I’ve thought about this problem in relation to free/open source software too. The more people who are using open source software, the lower GDP goes, even if the user is happier than if they’d paid for propriety software.

One thought on “Briefly: What’s the value of a free service?”

  1. I’m old enough to have written software so early in the computer age that there weren’t really any models for charging for it (yet). And now, I see the sheer volume of code in the open-space arena and it’s staggering to say the least. I completely agree that GDP is now becoming a dated measuring stick for a global economy that daily feeds from the Internet’s cornucopia.

    What would be an equally-interesting topic would be to discuss what would happen to the economy if you pulled the plug on the Internet? What happens when you *can’t* navigate in your car with Google’s or Apple’s map? How do you make a food recipe from scratch if you *can’t* bring up AllRecipes? How do we cope after the Internet is gone?

    Having answered these new questions you may better come to understand the value of “free” as delivered by our digital world and the Internet.


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