{"id":1362,"date":"2019-08-02T10:49:24","date_gmt":"2019-08-02T14:49:24","guid":{"rendered":"http:\/\/entropyeconomics.com\/?p=1362"},"modified":"2019-08-26T10:54:04","modified_gmt":"2019-08-26T14:54:04","slug":"mobile-broadband-a-still-under-appreciated-economic-miracle","status":"publish","type":"post","link":"https:\/\/entropyeconomics.com\/index.php\/2019\/08\/mobile-broadband-a-still-under-appreciated-economic-miracle\/","title":{"rendered":"Mobile broadband: A (still) under-appreciated economic miracle"},"content":{"rendered":"\n

New research continues to demonstrate that information technologies are even more economically powerful than official data suggest. Over the past five years, I\u2019ve attempted to show that we have underestimated the price declines and performance improvements in smartphones. (See, for example, \u201cThe A12 chip: Estimating innovation with iPhone prices,\u201d<\/a> 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<\/a> its historical price and output figures for mobile phones, cloud computing services, and internal software development.<\/p>\n\n\n\n

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The BEA\u2019s revision was in part based on excellent work by the Federal Reserve\u2019s 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.<\/p>\n\n\n\n

In\u00a0newly updated work<\/a>\u00a0with Carol Corrado, for example, Byrne seeks to capture missing value from broadband connectivity and content flowing over these networks. His bottom line is that \u201cthe 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).\u201d<\/p>\n\n\n\n\n\n\n\n

Erik Brynjolfsson and colleagues use a distinct methodology to estimate welfare gains from the \u201cproliferation of new and free goods\u201d which \u201care not well-measured in our current national accounts.\u201d They call the new measure GDP-B<\/a>.  In one empirical analysis supporting the broader idea, Brynjolfsson looked at the camera market. He estimated that in 2000, the world snapped 80 billion photos, at an average cost of $0.50. By 2015, he estimated, we took 1.6 trillion photos at a price closer to $0.00, but that much of this value wasn\u2019t captured in the data.<\/p>\n\n\n\n

In a new report called \u201cProductivity Paradox 2.0,\u201d Goldman Sachs builds upon Byrne\u2019s and Brynjolfsson\u2019s work, adds its own analysis, and attempts to sum up all these effects. Goldman breaks down the under-appreciated technology benefits into four categories:<\/p>\n\n\n\n