Saturday, August 03, 2013

UNESCO and Indicators of GDP in intellectual-property products

The world is moving to define "intellectual-property products" and to include these products in measures of GDP. 
UNESCO should be involved in defining appropriate indicators and collecting appropriate data.
In the 1930s governments greatly improved the system of national economic accounts. One aspect of that improvement was the introduction of a measure of Gross Domestic Product (GDP). GDP has become so common a term in the interim that we may have forgotten that economists made a number of decisions as to what products would be included and which would be excluded. For example, the product of household services such as cleaning and cooking might not be included if they were produced by family members, but might be included if provided by salaried servants.

In another example, the term "domestic" was not simple. Thus the product of a foreigner working on a foreign owned fishing boat functioning in a country's national waters might not be counted, while that of a citizen in a fishing boat registered in a country might be included in GDP even if the fishing was done in international waters or in the national waters of another country.

Developed countries are now changing the boundaries of what is to be included in the GDP. According to The Economist:
A new investment class called “intellectual-property products” has been created by America’s Bureau of Economic Analysis (BEA). Ideally, the value of private firms’ R&D would be based on the future income it generates, discounted to today’s values. But since future products, and their related prices, are unobservable, those calculations are tricky. So the BEA is measuring R&D investment using firms’ innovation-related costs. Government R&D, mainly spending on health, defence and aerospace, is now measured in the same way. 
The BEA faces an even fiddlier task with original artwork, a category that includes films, books, music and TV shows. (Newspaper articles have no lasting value, according to the BEA, but what do they know?) The problem is that there is scant information on investment costs. Moreover, the asset—the right to the music, manuscript or TV format—is rarely sold. Rather it is used to create a future stream of products, like books and TV shows. So the BEA must estimate likely future royalty fees, and translate them into today’s money to value the investment. Since artistic assets can last a long time (“The Simpsons” has been running since 1989) that is a tough task. 
In the short term America’s new GDP measure makes international comparisons more difficult. The BEA is not the first mover: Australia made the change in 2009, leapfrogging Canada in the OECD’s country rankings of GDP per person. Canada switched in 2012, making back some of the ground. For the moment, America, Australia and Canada are the only G20 countries on the new system. By 2014 many other countries, including those in the EU, will have joined them.
In the United States it has been estimated that there are between 700, thousand and 2 million children being home schooled, and it seems that home schooling is increasing. Moreover, there is probably an increasing amount of adult home study intended to improve the learner's earning potential. With the rapid expansion of online courses and elaboration of new models providing online courses, many available to the learner gratis, there is likely to be an increasing amount of human capital created by self study online. Should educational products produced through home schooling and continuing education be part of GDP?

The Internet is changing other kinds of products. Journalists are providing online content without working for traditional news agencies. Authors are self-publishing e-books. Musicians are uploading their music without going through traditional music publishers. People are uploading videos without going through traditional movie or television companies. Indeed, there are millions of personal computers providing scientific computation through informal networks such as the search for extraterrestrial intelligence. Crowd financing is being used to accumulate capital online for all sorts to new enterprises and projects.

UNESCO, of course, is the agency within the UN family that leads in education, in science, and in culture. It has also had a role since its creation in copyright and related intellectual property concerns. The UNESCO Institute for Statistics plays an international role not only in the collection of statistics related to education, science and culture, but also in advising countries on the indicators to be used for date in these fields.

Thus it would seem that UNESCO should be deeply involved in the international discussions of these intellectual-property products. If GDP data is to be comparable among countries, then countries should use common definitions for the indicators used. Moreover, the intellectual communities involved in the creation and exploitation of intellectual property should be involved; the effort should not be left only to economists and statisticians.

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