But what if, rather than digital technologies failing to increase productivity, the changes they wrought were so significant as to require a new way of measuring success altogether? What if we are only at the beginning of an economic shift so profound that, as the Third Disruption continues to unfold, GDP will prove increasingly incapable of capturing all the value being created?
I would submit that this is now happening. Extreme supply is causing deflation across many sectors, and the Third Disruption is evaporating whole swathes of GDP. As the marginal cost of producing goods and services moves closer to zero in more and more sectors, the result is more free, nonmarket transactions will take place. Even where the market can respond and keep certain goods within the price mechanism – as proven with Spotify’s rental model as a response to digital file-sharing – extreme supply still means reduced net circulation. Today few would pay £15 for a music album, something that two decades ago everyone in the Global North took for granted. That explains why twenty years after the digitisation of the music industry began, the value of the market remains substantially smaller, even despite the increasing popularity of streaming services such as Spotify and Tidal. In 1999 the music industry generated revenues worth some \$14.6 billion in the United States, a figure which had fallen to \$7.65 billion by 2016 – and that’s not accounting for inflation.
In terms of how we conventionally understand GDP, those figures should signify disaster – reflecting how fewer people are listening to their favourite musicians than before. Except the opposite is true. Extreme supply in information goods – of which music is a paradigmatic example – means more people are listening to more music than ever, it’s just failing to show up in the numbers we think matter most.
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