Luke, I Am Your GDP
By Ashley Mergen
1977 called and it wants its GDP revised. In a stunning announcement, the Bureau of Economic Analysis (BEA) is set to correct a long-standing mismeasurement of the data that gauges the heartbeat of the U.S. economy. This “comprehensive revision” will put the extensive and intensive investments in intellectual property (IP) front and center.
So what does this mean? According to the Washington Post’s Neil Irwin, the force is with the creative industries, pharmaceutical researchers, and tech innovators. The recalculations are likely to show that the economy is 3% bigger than we thought—roughly adding on an economy the equivalent size of Belgium—and details exactly how important the creative and innovative industries, like George Lucas’ Star Wars empire, are to U.S. GDP:
“When he made a Star Wars movie, his company spent a lot of money to create the film. It then owned a copyright, and could make money for many years afterward on that investment. In other words, it’s a lot more like our washing machine company building a factory than it is like the routine process of making washing machines. The same is true for a lot of types of intellectual property: When Apple researchers develop the iPad, or Suzanne Collins writes a Hunger Games novel, it is an upfront investment that will have a long payoff.”
A long time ago, in an economy far, far away (i.e.- today) the GDP stemming from IP-intensive industries was largely calculated by consumer and business spending, like ticket sales or purchasing raw materials for building a movie set. However, the economists at the BEA now feel a more accurate read on our economic pulse would include a more significant source of GDP: the extensive up-front investments for moviemakers, medical researchers, and technologists alike, which are protected by IP.
But you don’t have to be a George Lucas to know intellectual property is central to the success of our economy. Over 45% of private sector employment—totaling 55.7 million jobs and 74% of exports—are in IP-intensive industries and are already driving one-third of U.S. GDP under current statistics measurements, a number likely to go up following these revisions.
As Irwin aptly points out, we’re witnessing the George Lucases of IP industries propel our increasingly knowledge-based economy forward. In essence, pursuing the mindset that “always in motion is the future.”
For another perspective, please head over to Freeenterprise.com and read “Brains! Intellectual Property Will Be Added to GDP.”