03 August 2016
by Jacob Greber

Your smartphone is worth more than GDP

Free web-based goods and services like Australian invention Google Maps may be invisibly boosting the economy by as much as $4.3 billion a year, or more than double the amount captured in official economic growth figures, new research shows.

The calculations by consultancy AlphaBeta, commissioned by the search-engine giant, support the view that traditional measures like gross domestic product - developed after the industrial revolution - aren't capturing a growing share of activity delivered by the so-called new economy.

A global debate is currently raging over the impact of new technologies, with pessimists such as US economist Robert Gordon arguing that today's innovations are incremental and trivial compared to the big changes of a century ago, which included electrification, combustion engines, refrigeration, air travel and the invention of the computer chip.

According to this view of the world, the lack of big leap progress is a key reason productivity - and by extension - standards of living have stagnated over the past two decades across advanced economies.

Countering that is work by economists such as former Bank of England chief economist Charles Bean, who in May argued that today's economy is "radically different and changing rapidly" through technological innovation and the rising value of "intangible, knowledge-based assets".

He argues that measuring GDP is "like trying to hit a moving target" with the digital revolution altering the relative importance of what adds and detracts value to and from an economy. "We need to act quickly. Otherwise the speed of economic change will render our statistics irrelevant to modern life," he says.

In Australia, where official productivity growth figures have been weak over the past 15 years, the invention of Google Maps 12 years ago in the second bedroom of a Hunters Hill home in Sydney, underscores Professor Bean's point.

AlphaBeta estimates that official statistics ignore the huge and growing consumer benefit of Google Maps, a technology that allows users to arrive at work more efficiently, stick to appointments and avoid lengthy traffic jam.

Users in Australia last year consulted Google Maps 60 million times a week, saving 13.5 hours a year in time on the road and around $500 million in petrol pump costs for a total value of $4.3 billion.

More broadly AlphaBeta's study suggests Google services, such as search, youtube and Adwords generated $15.1 billion for Australian businesses and $14.8 billion in consumer benefits last year.

In conventional terms those numbers would be equivalent to 1.9 per cent of GDP, a material contribution, or roughly double what is captured in the national accounts.

"It's a paradox that global growth and productivity are so low, despite the technological breakthroughs impacting our daily lives," co-founder of AlphaBeta Andrew Charlton said.

"We all carry in our pockets communication devices with more computing power than the Apollo space mission and more accessible information than in the world's largest library.

"Yet most of these products are free to users, so they aren't fully captured in our standard measure of progress, GDP growth."

Google director of engineering, Alan Noble, argues in a blog post to be published on Wednesday that just because a smartphone application is free doesn't mean it doesn't deliver economic value.

"When no money changes hands, how do you think about the intangible benefits and put a dollar value on them?" Mr Noble writes.

"Google Maps now has more than a billion users worldwide, is free of charge and allows you to quickly pinpoint the places and information you need, whether it's how many minutes until the next bus arrives, or how long it will take to walk or bike from work to home."