THE WAR OF THE FLOWERS

Abhijit’s parents did not really believe in toys. He spent long afternoons playing war games with flowers. The buds of the ixora, with their long stems and pointy heads, were the enemy, purportedly throwing stones at his foot soldiers, the long and fleshy leaves of the portulaca.

Abhijit remembers these as some of the most pleasurable hours of his day. That should surely count as well-being. But none of his enjoyment was captured by the conventional definition of GDP. Economists have always known this, but it deserves emphasis. When a rickshaw puller in Abhijit’s native Kolkata takes the afternoon off to spend time with his lady love, GDP goes down, but how could welfare not be higher? When a tree gets cut down in Nairobi, GDP counts the labor used and the wood produced, but does not deduct the shade and the beauty that are lost. GDP values only those things priced and marketed.

This matters because growth is always measured in terms of GDP. The year 2004, when TFP growth, after jump-starting in 1995, slowed down again, is when Facebook began to occupy the outsized role it currently plays in our lives. Twitter would join in 2006 and Instagram in 2010. What is common to all these platforms is the fact that they are nominally free, cheap to run, and wildly popular. When, as is now done in GDP calculations, we judge the value of watching videos or updating online profiles by the price people pay, which is often zero, or even by what it costs to set up and operate Facebook, we might grossly underestimate its contribution to well-being. Of course, if you are convinced that waiting anxiously for someone to like your latest post is no fun at all, but you are unable to kick the Facebook habit because all your friends are on it, GDP could also be overestimating well-being.

Either way, the cost of running Facebook, which is how it is counted in GDP, has very little to do with the well-being (or ill-being) it generates. That the recent slowdown in measured productivity growth coincides with the explosion of social media poses a problem, because it is entirely conceivable that the gap between what gets counted as GDP and what should be counted in well-being widened exactly at this time. Could it be there was real productivity growth, in the sense that true well-being increased, but our GDP statistics are missing this entire story?

Robert Gordon is entirely dismissive of this possibility. In fact, he reckons Facebook is probably responsible for part of the productivity slowdown—too many people are wasting time updating their status at work. This seems largely beside the point, however. If people are actually much happier now than they were before, who are we to pass judgment on whether it is a worthwhile use of their time and therefore whether it should be included in well-being calculations?¹⁹