So this new technology stuff works then

We’re told that streaming has increased the consumption of music:

The consumption of music in the UK is now higher than in any year since 2006, when the industry was being powered by the downloadable mp3 file. Thirteen years ago, Crazy by Gnarls Barkley became the first song to get to No 1 on downloads alone as consumers switched over from CD singles and filled up iPods with individually purchased tracks (and, possibly, pirated ones too), while still purchasing plenty of CD albums.

Given, as Adam Smith pointed out, that the purpose of all production is consumption this should be welcomed. We all get to consume more music than we did, we’re richer. New technology works therefore, it achieves that goal of increasing our wealth.

There is one little fly in this ointment. Which is that it is conceivable that the turnover of the music business has declined at the same time. Much of this streaming is, after all, available to the consumer for free. This means that GDP will have declined at the same time as we’re all becoming richer.

As many have pointed out there are problems with the manner in which GDP is calculated but this is one that’s given too little weight to our minds. Some at least - we would argue much to all - of the seemingly languid economic growth of the past decade and more is a result of this quirk of how we’re counting.

Our specific example would be WhatsApp. There was a period when it was not charging that $1 a year fee and also was not carrying any advertising. Facebook had a couple of hundred people developing and operating it. Standard GDP calculations included the costs of those engineers and yet applied no value at all to the output or consumption. WhatsApp, in the official way we count these things, therefore turned up in the economic statistics as a decline in global productivity. Which is absurd for a system providing some 1 billion people with some to all of their telecoms needs off the work of 200 people.

Punch an economist hard enough and they’ll agree that this is happening to some extent. We’re outliers here in insisting that much of the modern world can be explained in this manner rather than it being just some fringe issue. But then sometimes outliers are in fact correct….