Maps, apps and GDP gaps

It’s embarrassing to admit but, driving around the continent this summer, I’ve been doing my first travelling with Google Maps in the passenger/navigator seat, as it were. Like many Canadians working their way through their grey- haired years, I’m not the most slavish cell-phone updater. But earlier this year I finally did trade in my clunky slide- out keyboard model for something slimmer and smarter. Well, not actually “trade in,” because when the salesperson typed in the model number the trade- in value came back as “zero.” I regard it as at least some consolation that her computer actually still had a record of my old, not completely paleo-technic, phone.

I did know about Google Maps before this, of course. I’d used it to look up locations, plan trips of one kind or another and play with Streetscape. These days, I start my classroom discussion of The Wealth of Nations by streetscaping up and down the main street of Kirkcaldy, Scotland, Adam Smith’s hometown. Something about the majestic rolling-in of the North Sea waves, I tell the students, must have influenced Smith’s prose rhythms. Good thing he didn’t have earbuds to distract him.

Because of the limitations of my old phone, however, I’d never actually used it for real- time navigating. Well, what a revelation! Now I’m hooked on watching ( only when in the passenger seat, mind) the little blue dot that represents my vehicle as it wends its way around the countryside, sometimes even managing to hew to the darker blue line representing my suggested route. I especially like the way the dot scoots forward when I wake the phone from a nap.

And how amazing those route suggestions are! A couple of weeks ago, while driving through Atlantic Canada on a beautiful new highway made possible by federal equalization payments, a puzzling strip of red showed up along what should have been uninterrupted green ( green indicates traffic speeds are normal). It turned out to be an apparently non- fatal accident that nevertheless had required several emergency vehicles and some flares. How did my phone know that!?

Ordinary humans are amazed by these technological miracles; amazed, that is until they’ve digested them and fully integrated them into their daily lives, after which they quickly learn to complain when the technology doesn’t go exactly right.

We economists marvel, too, but we also wonder how free apps fit into GDP. They do have their long- run downside, as we forget how to read maps and plot routes ourselves. (Anybody out there remember how to work a slide rule? No? That’s not a loss for computation but it does mean lower average numeracy.) But in the short run they save billions of hours in wrong turns not taken and trillions of cells of stomach lining no longer eaten up by travel anxiety. Not to mention their entertainment value.

But hardly any of that very big upside shows up in GDP. In one respect, in fact, GDP goes down. I used to buy maps, including travel atlases. I’m unlikely to do that anymore. Maps purchased by consumers are a “final good or service” and thus do enter into GDP. Maps I interact with online but don’t pay for aren’t GDP. So well- being has gone up — a lot — as a result of Google Maps. But GDP may well have gone down.

In fact, apps do produce some GDP. Google sustains itself in part by selling ads, including to retailers and restaurants looking to pay for prominent mention on its map display. Its ad revenue is an intermediate input into GDP. Many of the entities buying Google ads are in the business of selling “final goods or services” and if they’re money- making, the prices of their goods have to cover the cost of their ads. So by that circuitous route the “value” of the apps does end up in GDP.

But what’s the relationship between what advertisers pay for my eyeballs and the value of the app to me? The two are not completely unrelated. The more I use the app the more I’m likely to buy the advertised products, presumably. But in practice, the probability of my buying is pretty small while my benefit from the app is pretty big. How strange that miracle apps can change our lives but not our GDP.

Some economists argue that the productivity slowdown that pre- dates the 2008 financial crisis may be partly due to mal- measurement of the benefits of new technology. In effect, Google’s employees have uber- high productivity in terms of benefit production but not so much in terms of “final good and service” sales. On the other hand, the output gap from the rate of productivity growth being lower over the last 10 years than it was in the 1990s is now US$ 3 trillion and, as far as explaining it goes, there isn’t yet an app for that.

SOME ECONOMISTS THINK OUR PRODUCTIVITY SLOWDOWN MAY RELATE TO POORLY QUANTIFYING TECHNOLOGY’S BENEFITS.