New research continues to demonstrate that information technologies are even more economically powerful than official data suggest. Over the past five years, I’ve attempted to show that we have underestimated the price declines and performance improvements in smartphones. (See, for example, “The A12 chip: Estimating innovation with iPhone prices,” in which I estimated that it would have cost $28 million to purchase the basic building blocks of an iPhone XS in 1991.) Last summer, the Bureau of Economic Analysis (BEA) partially acknowledged this when it revised its historical price and output figures for mobile phones, cloud computing services, and internal software development.
The BEA’s revision was in part based on excellent work by the Federal Reserve’s David Byrne. Now Byrne and other economists are putting even more analytical meat on the bones. In the process, they are once again dramatically raising estimates of the economic impact of smartphones and internet services.
In newly updated work with Carol Corrado, for example, Byrne seeks to capture missing value from broadband connectivity and content flowing over these networks. His bottom line is that “the innovations boost consumer surplus by nearly $1,700 (2017 dollars) per connected user per year for the full period of this study (1987 to 2017) and contribute more than 1/2 percentage point to US real GDP [gross domestic product] growth during the last ten (2007 to 2017).”Read More