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Lady Gaga Writing A New Song Is Like A Factory Investing In A New Machine

Thursday, April 25, 2013

I spoke yesterday with Dan Sichel, a Wellesley economist and a Lady Gaga fan. Both of these facts are relevant for this story.

The U.S. government is about to tweak the way it measures the economy, and some of the biggest changes will affect the entertainment industry.

Under the current system, Sichel told me, Lady Gaga's sales of concert tickets, online songs and CDs all count toward gross domestic product. But the value of the time she spends in the studio working on new songs isn't counted. That's about to change.

"It's quite analogous to a factory investing in a new machine," Sichel says.

Under the new rules, Lady Gaga sitting in front of her laptop, staring at the sky, thinking up new songs will count as investment, which is part of GDP. A similar change is coming for movies.

Money companies spend on research and development will also be added to GDP.

Why haven't these things counted before? The accounting rules for GDP were written in a simpler time, when most companies produced physical things. But over time, the economy has increasingly shifted toward producing intangible goods.

In all, the tweaks will add an estimated 3 percent to the size of the U.S. economy. Historical GDP numbers will also be adjusted, so the charts won't show any big jump. And for most people, the important thing to pay attention to is not the absolute size of GDP, but the change over time: How much is the economy growing?

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

Source: NPR

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