WHAT ECONOMIC MEASURE ISN'T OUTDATED?:

Until this change, as Wellesley economist Daniel Sichel recently told NPR, "If Lady Gaga did a concert and sold concert tickets, the concert tickets would count as GDP," but the money she spent writing and recording an album wouldn't. That didn't make sense, because as Mr. Sichel pointed out, the money an artist invests in a film or song is "really quite analogous to a factory investing in a new machine." The same is clearly true of money invested in R&D for new drugs or smartphones.

Taken together, these new revisions are even more significant than the 1999 revision that added expenditures for computer software to the national accounts. Why? First, by expanding the list of intellectual-property investments used to calculate GDP to include R&D and the arts and entertainment industry, the present U.S. economy is shown to be roughly 3%--or $400 billion--larger than thought. (That doesn't mean we'll see a dramatic increase in GDP after July; the GDP figures going back to 1929 will also be adjusted, lessening the impact of the change on current growth rates.)

Second, the revision reflects the economy's quiet transformation from one based principally on industry to one decidedly based on knowledge and information. Third, this revision opens the door to further changes in the GDP calculation methodology, since the Bureau of Economic Analysis has in essence conceded that the GDP indicator, as now defined, has fallen behind today's economic realities.

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