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March 29, 2005

Open Source and What GDP Misses

The commitment of Brazil's government to spread open source software has been a delight to lefty tech geeks and a horror to Microsoft. But as the government announces an even broader rollout of computers without commercial softwareto the masses of the population, it raises a challenging problem to economists measuring the strength of the Brazilian economy.

Here's the bizarre economic result. By deploying computers with free software, the government de facto expands the wealth of its population, yet beause the software is free, the GDP numbers won't show any increase in wealth. In fact, any government action that saves rather than spends money for the population -- from promoting energy conservation to preventive health care -- shows up in its economic rankings as no gain in wealth.

GDP and other traditional measures of wealth are geared to only measuring commerical transactions. For both developed nations and, even more importantly, for developing countries, measures such as GDP wrongly devalue initiatives that don't expand commercialization of daily life.

Free software is therefore a challenge to more than Microsoft. It's a challenge to the whole economics profession.

Posted by Nathan at March 29, 2005 08:50 AM