Using Massive Online Choice Experiments to Measure Changes in Well-being
GDP and derived metrics (e.g., productivity) have been central to understanding economic progress and well-being. In principle, the change in consumer surplus (compensating expenditure) provides a superior, and more direct, measure of the change in well-being, especially for digital goods, but in practice, it has been difficult to measure. We explore the potential of massive online choice experiments to measure consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the consumer surplus generated from these goods. We test the robustness of the approach and benchmark it against established methods, including incentive compatible choice experiments that require participants to give up Facebook for a certain period in exchange for compensation. The proposed choice experiments show convergent validity and are massively scalable. Our results indicate that digital goods have created large gains in well-being that are missed by conventional measures of GDP and productivity. By periodically querying a large, representative sample of goods and services, including those which are not priced in existing markets, changes in consumer surplus and other new measures of well-being derived from these online choice experiments have the potential for providing cost-effective supplements to existing national income and product accounts.
We thank Susanto Basu, Carol Corrado, Erwin Diewert, Kevin Fox, Robert Hall, John Hauser, Andrea Meyer, Dana Meyer, Leonard Nakamura, Jeff Prince, Adam Saunders, Christopher Stanton and participants of the NBER Summer workshop for the Conference on Research on Income and Wealth (2016), NBER Winter Digitization meeting (2017), NBER Productivity lunch (2017) and the IMF Statistical Forum (2017) for helpful comments and the MIT Initiative on the Digital Economy, via a grant from the Markle Foundation, for generous funding. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Erik Brynjolfsson is the director of the MIT Initiative on the Digital Economy.
Proceedings of the National Academy of Sciences, March 2019 citation courtesy of