IMF, statisticians gather on measuring welfare in a digital economy, continued relevance of the GDP tool

The debate on whether gross domestic product (GDP) is a great tool for measuring economic welfare in the 21st century is ongoing as the International Monetary Fund (IMF) holds the Fifth Statistical Forum at its headquarters in Washington DC.

The statistical forum is a platform for policymakers, academics, researchers, and compilers of economic and financial data to come together to discuss cutting-edge issues in macroeconomic and financial statistics and to build support for statistical improvements.

The theme of this year’s forum is “Measuring the Digital Economy”.

Digitalization indeed has transformed the way we work, consume, and engage with one another. Against a backdrop of slow growth of GDP and productivity, there are concerns that existing macroeconomic statistics may not fully capture the gains from digital and digitally-enabled products and activities, which have become a topic of much discussion and debate.

“GDP was a great tool for the 20th century, but we’re in the 21st century now. We need to have a different set of tools for measuring welfare,” most economists seem to reckon.

The Forum will include empirical or conceptual papers that foster progress on understanding the implications of digitalization for macroeconomic and financial statistics and developing strategies to fill the measurement gaps.

Louis Marc Ducharme, Director of Statistics Department, IMF in his opening remark noted that “digital economy” has given households access to many new, free, or low cost products. It has also allowed households to make more intensive use of assets that they already own via participation in the sharing economy and to substitute home production for market production.

He added that for producers, data has become a new kind of factor of production, and access to open-source software, cloud computing services, and increased opportunities for globalized production have allowed cost savings or tax savings.

“Do existing macroeconomic statistics still provide a full picture of changes in production, consumption and inflation, and if not, how can the new data needs be addressed?” he asked.

Why Russia might not support OPEC’s deal extension beyond March

Tamim Bayoumi, deputy director, strategy, policy and review Dept., IMF noted that the existing conceptual framework for GDP offers logical coherence and is well-suited for analyzing key macroeconomic questions involving employment and government revenue, but digitalization has made the well-known limitations of GDP as a measure of well-being or total production more fundamental.

“What are the main conceptual issues, and what are the prospects for addressing them?’ he opined.

Sanna Ojanperä, researcher, University of Oxford, speaking on “The Digital Knowledge Economy Index: Mapping Content Production”, said the overall importance of possible errors in measuring the digital economy depends, in part, on its size.

“What do we know about the actual size and growth of key parts of the digital economy, such as B2C e-commerce, the sharing economy and international trade in digital services? How the size and structure of the digital economy vary across developing, emerging and advanced economies? Is there a good way to capture international trade in digital and digitally-enabled services? How has the use of mobile money and other kinds of e-money spread?” he queried.

The Forum ends Friday, November 17, 2017.