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We fail to accurately measure the digital economy’s impact

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The ubiquitous use of gross domestic product (GDP), along with its per capita derivative, means we often get away with writing the abbreviation alone. Yet this widespread social proof offers a false sense of accuracy for a fragile measurement overdue for an update.

Economists have long been aware of the vulnerabilities to GDP and other official statistics such as poverty and inflation. A compelling antidote to the veneer of authority came in The Sum of Our Discontent (2001) by David Boyle. He noted, for example, how you could add up trade deficits and surpluses from all countries and be hundreds of billions of dollars away from zero.

In the case of GDP, much of our cherished labour flies under the radar because it's unpaid, bartered or otherwise part of the informal, cash economy. Consider a homemaker who cooks wholesome meals for her children. She adds real value but it doesn't register, while a fast-food meal eaten out does. The same goes for family support with moving versus paid transport or personal lending versus formal loans.

Geographic location also throws a spanner in the works, since GDP goes by where goods and services are produced. Foreign companies, for example, repatriate a fifth of Ireland's GDP, negating the measured gains to locals.

GDP unravels even further when it equates government spending to private-sector spending subject to market prices. Robert........

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