Money doesn't grow on trees, but GDP says so (image credit: waɪ.ti)

Recently, I signed up for Jigsaw. If you’ve never used it, but do any sales for business, you should start. Jigsaw provides often hard-to-find business contact information—think vice-presidents at Fortune 500 companies—to subscribers. This in itself wouldn’t be interesting; other companies provide such a service. What makes Jigsaw different is the model.

The model is a wonderful example of the emerging freeconomy, as described so well in Chris Anderson‘s recent book Free. Sure, you can pay for access to Jigsaw contacts if you have the money. But if you have less money than time, you can contribute to the Jigsaw community by adding or updating contacts from your own database. That earns you points you can use to download contacts. It also helps Jigsaw rapidly grow one of the largest, most accurate and regularly updated business contact databases in the world. It’s the Wikipedia of Rolodexes.

That alone is a marvel of modern technology and network effects, what the pundits these days like to call “social media” (an arbitrary and ambiguous term, as I recently ranted in this Commune post on marketing with “social media” feeds). But what struck me as I began using this service, given my focus these days on happiness and economics, is how poorly our existing economic indicators capture this value.

The primary economic indicator in most industrialized nations is gross domestic product, which is essentially a measure of how much money changes hands. Chop down a tree and sell the wood, GDP goes up. Process the wood and sell paper, GDP goes up. That’s an over-simplification, but even in this simplified model, it’s easy to see what gets missed. Didn’t the tree, for example, which gives shade and cleans the air for no monetary value, still have some nonmonetary value? Is that value more or less than the value of the paper we made from it? Such issues are driving attention in alternative indicators of progress, such as Bhutan’s Gross National Happiness.

With the freeconomy, GDP gets even more detached from reality. Sets of encyclopedias used to sell for thousands of dollars. Today, Wikipedia offers millions of articles free, articles that were freely created. Did the value of an encyclopedia disappear because nobody’s paying? Did the value of contributing to an encyclopedia suddenly drop to zero? Did it shift to the cost of accessing the internet through ISPs? If so, what happens when we use free internet access, becoming increasingly prevalent at coffee shops and even some cities?

Strictly measuring GDP, we can’t put a value on things without price. But that doesn’t mean they’re not valuable. Tools like Wikipedia and Jigsaw add tremendous value and measurably improve people’s lives. But we’ll never realize how much until we change what we’re measuring.