IEEE Technology and Society Magazine - March 2023 - 42

Feature
GDP. A consequence of the pandemic in combination
with the climate issue is that regulations
intended to mitigate future risks are likely to become
more commonplace and impose greater costs on
production. This will make it look like countries that
are doing the most to avert future risks are the least
successful, even though their regulation also tends
to drive innovation.
These examples show that GDP calculations
miss much value creation, especially as societies
digitalize.
Value creation in the metaverse
In the coming decades, digitalization may change
shape again. Autonomous vehicles, virtual realities
(VRs), the " Internet of Things, " self-learning robots,
digital doctors, and teachers can create values that
also largely grow alongside what is measured in GDP.
The question is whether completely different measures
of economic development are then needed.
All large digital platforms are engaging in huge
investments in the metaverse, a virtual space
where people live and work. To this end, Facebook
is investing in a hardware platform for " virtual
reality " and " augmented reality " (AR), which
serves users real-time-adapted digital information
as they survey the real world through smart spectacles
and the like. This is one part of building a
" creator economy, " where people make money
from digital work. If users start spending 35 hours
a week immersed in the Facebook semivirtual
world, rather than 35 minutes a day in front of
a normal laptop, the impact on how value creation
is registered could be huge. While such a
move from physical workplaces to work at home
is partly just a continuation of previous trends, it
can have huge consequences of value creation
shifts to forms that are not captured by GDP or
other official measures. Most importantly, this will
occur if more value creation falls under the definition
of " household production " and more digital
consumption carries a zero price. As we have seen
above, such changes are not captured by traditional
GDP measurements.
How can the value of innovations be
better measured
A reasonable measure of a country's economic
success, and not least its innovation policies,
requires new and better measures of value creation.
42
The pandemic has precipitated the need for alternative
measures, especially for innovative countries
that digitalize evermore.
While most innovation policies may be in need of
new measures, they are important for monetary and
fiscal policies as well. Underestimation of growth
may, for example, nudge central banks to overstimulate
and risk inflating asset bubbles.6
Underestimation of how prosperity evolves and to
whom it accrues also has important implications for
other variables in economic policies, such as poverty
and economic inequality.
A cell phone and a very limited subscription
fee give access to encyclopedias, almost all of the
world's music, maps, a video selection larger than
previous video stores, and thousands of other
applications. As this is not measured correctly in
traditional GDP calculations, it means that true consumption
of low- and high-income earners may have
evolved, and continue to evolve, quite differently
from what national account statistics convey.
Measuring value creation of innovations in
new ways
It is possible to systematically measure performance
and functionality, at least in some dimensions.7
One area where this is already partially done
in part is the environment and climate.
Environmental accounts are structured based
on national accounts and report national environmental
statistics and economic statistics in a common
system. Environmental data are systematized
according to the same industry division and the
same end uses as economic data. The main purpose
of systematizing statistics in this way is to analyze the
links between economics and the environment. The
areas that have been included so far are, for example,
emissions to air and water, waste, energy use,
material flows, chemicals, environmental protection
costs, environmental companies, environmental
taxes and environmental subsidies, and natural
resources.
National accounts measure the GDP in two different
ways: 1) from supply and 2) from demand. The
environmental accounts measure the same thing
from an environmental perspective. If the production
perspective answers the question " Who releases? "
6See [10] for an example of a study that analyzes how inflation statistics are affected
by some of the measurement problems discussed here.
7See [11] for an example of suggestions to measure virtual household production.
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