Yan Chen

Typical measures of economic output do a bad job of capturing the value of the Internet, according to an April 30 article in The New York Times. Gross domestic product, the most prominent indicator of the nation’s economic health, only puts a value on goods and services that people pay for; because many online interactions are free, they don’t show up in GDP. So reading publications online or doing searches on Google aren’t valued as economic activities, even though they may be saving time or increasing productivity. One reason for omitting online pursuits, The Times said, is the difficulty of assigning value to Internet transactions. That may be changing. An experiment at the University of Michigan conducted by ISR researcher Yan Chen and two other U-M researchers showed that participants with access to a search engine could answer a question 15 minutes faster than those without. Building on this study, Hal Varian, Google’s chief economist, estimated that search engines might be worth $65 billion a year across the working population, the article said.