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Yes, Lady Gaga’s songs contribute to GDP: the new measure to reflect the importance of intellectual property

July 29th, 2013 |  Published in Intellectual Property

Lady Gaga

 

29 July 2013 – This coming Wednesday, July 31st, the Bureau of Economic Analysis, the Commerce Department unit that measures U.S. Gross Domestic Product (GDP), will give a greater economic weighting to the creation of many types of intellectual property — from books to movies to music to biotech drugs. The economy won’t change overnight, but the numbers will. Going all the way back to 1929, the GDP will look bigger. Economists have been trying to understand the sources of growth in the GDP and one of the longstanding gaps in the numbers has been the contributions of intangibles — creations in the arts and entertainment, research and development, things like that — and what they contribute to GDP.  Bringing GDP closer to reality.

News flash!  We live in an increasingly knowledge-based economy. (Duh). So now, via a category called “intellectual-property products”, measurement of GDP will catch up. It will include expenditures for research and development (R&D) for entertainment, literary, and artistic originals, an adjustment for other fixed assets—ownership rights, etc.

What does this mean for Lady Gaga and the GDP? Until this upcoming change, if Lady Gaga did a concert and sold concert tickets, the concert tickets would count as GDP, but the money she spent writing and recording an album wouldn’t. That didn’t make sense because the money an artist invests in a film or song is really quite analogous to a factory investing in a new machine. (Well, that’s Money, Honey). The same is clearly true of money invested in R&D for new drugs or smartphones.

Last week we attended a workshop held by the McKinsey Global Institute that discussed the knowledge-based economy, the new GDP accounting, and the whole concept and use of digital capital — the resources behind the processes key to developing new products and services for the digital economy. It was a fabulous 1-day event. Today McKinsey put up on their public site a very good briefing note that covers much of what we discussed and you will find it to be an excellent guide to understanding this new terrain (clicking here).

 

 

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