The Bureau of Labor Statistics of the U.S. Department of Labor is the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy.
Martin Fleming is a chief economist and vice
president of Business Performance Services, IBM
Digitization changes everything: improving
economic measurement in an era of radical
innovation and transformation
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The digitization of goods and services has fundamentally
transformed how business is transacted. Traditional
economic measures worked well in the industrial era, yet
they fall short in measuring economic value in the present
era of radical innovation. For example, with the substantial
upfront investments in software development, economic
activity is more appropriately measured by income earned
Digital services— i.e., search and social media—create
value, yet users access them for free. Music and book
services are available at lower prices, causing income loss
to musicians, authors, and publishers. These significant shifts caused by digitization raise important questions. For
economists, one major challenge is how to measure economic activity in an era with fewer physical objects to
Gross domestic product (GDP) relies on the ability to measure expenditures. It is well suited for agriculture and
manufacturing, but less so for services, software, and intellectual property. Gross domestic income (GDI)
measures income by summing labor and capital income earned in producing output. Gross value added (GVA)
measures the value each industry adds. Conceptually, all three measures will arrive at the same total; however,
there are statistical discrepancies.