Why GDP Will Rise (Not What You Think)

In Bloomberg BusinessWeek, Peter Coy writes an excellent piece on the Bureau of Economic Analysis's upcoming revision of  Gross Domestic Product measurement. That may not sound very interesting but Coy does a great job showing the macro and micro angles. To wit:

On July 31, the U.S. Bureau of Economic Analysis will rewrite history on a grand scale by restating the size and composition of the gross domestic product, all the way back to the first year it was recorded, 1929. The biggest change will be the reclassification—nay, the elevation—of research and development. R&D will no longer be treated as a mere expense, like the electricity bill or food for the company cafeteria. It will be categorized on the government’s books as an investment, akin to constructing a factory or digging a mine. In another victory for intellectual property, original works of art such as films, music, and books will be treated for the first time as long-lived assets.


The U.S. generates a disproportionate share of its wealth from the likes of patents, copyrights, trademarks, designs, cultural creations, and business processes. To see the intangible economy in numbers, look at Apple’s (AAPL) balance sheet: Property, plant, and equipment, those traditional forms of wealth from the industrial and preindustrial eras, account for $15 billion of its $400 billion market value—just 4 percent of the total. They’re only 7 percent of market value at moviemaker Time Warner (TWX) and drugmaker Pfizer (PFE).

Steal This E-Book?

Digital rights management, or DRM, is a set of technologies used to control piracy. An example is the “Fairplay” system that Apple used until recently on most songs sold in its iTunes store. Fairplay was a set of digital locks that blocked certain uses – for example, a song could be played only on up to five authorized computers. As you might imagine, DRM has been controversial, at least among some people who want to make uses of content they’ve purchased – like making a back-up copy, or copying small portions of a work for fair use purposes. Music DRM once involved the installation – without users’ knowledge -- of a particularly malicious bit of software that modified, and sometimes broke, the operating systems of customers’ computers.  That strategy imploded amidst government investigations, class-action lawsuits, and a storm of terrible publicity. In contrast, e-book DRM has been nowhere near as controversial, or ineffective. Still, the fact remains that many DRM-haters exist.

Aaron Swartz Versus the Bankers

New Yorker article on Aaron Swartz, who committed suicide while under federal investigation for bulk downloading academic articles, leaves little to disagree with. But it missed a comparison that has troubled me: between Swartz and the bankers who tanked the world economy.

I have found myself unable to write about this topic until now. First, Swartz lived for many years in my apartment building in Cambridge, Mass., and many residents remember him as quiet and kind. Second, I share his belief in the free flow of information. Using the NonCommercial ShareAlike license from Creative Commons, MIT Press published and freely licensed my Street-Fighting Mathematics"One of the early architects" of Creative Commons was Aaron Swartz.

Swartz tried to free knowledge and expand the public domain. In contrast, the bankers took from the public domain.

Pirates of the Caribbean

Hollywood is abuzz with reports that the tiny islands of Antigua and Barbuda may begin operating their own national versions of the Pirate Bay, where individuals can cheaply, or even freely, download the latest films and TV shows. The clincher: this will all be legal.

How is that possible? Because the World Trade Organization says so. Let us explain.

When the U.S. helped create the WTO back in the early 1990s, it had a few main goals. One was to create a serious world trade court. The WTO has a lot of complex rules on trade, and the idea was to build a legal system that could neutrally adjudicate allegations of rule breaking. And it would work by allowing the winning country to retaliate against the loser by “suspending obligations.”

In other words, if the U.S. takes Japan to trade court and wins, Japan has to stop doing whatever bad thing it was doing. And if it doesn’t, the U.S. gets to retaliate--by, for example, increasing tariffs on Japanese goods up to the amount of harm Japan was causing.