Next month, the U.S. economy is going to look a lot bigger. Not because it's growing any faster, but because economists are going to measure it differently.
Right now, gross domestic product, or GDP, doesn't include intellectual property or intangible products like royalites from movies and music.
You want to really stump an economist? Ask him what his favorite movie is. I asked Brent Moulton. He 's an economist at the Bureau of Economic Analysis, which measures the U.S. economy.
His answer: “You’re asking tough questions here.”
I never did find out what Moulton's favorite film is. But he did tell me the most recent movie he saw: "Monsters University."
There’s a reason I was asking Moulton those tough movie questions. The Bureau is giving a much-needed Hollywood facelift to the way it measures economic output. And Moulton is the surgeon. Right now, the Bureau only counts tangible products -- things like cars and washing machines -- when measuring the Gross Domestic Product, or GDP. Sales of movie tickets, songs and books counted. But Moulton says the Bureau didn’t measure research and development costs for those products.
“That would include things like salaries paid to actors or people doing special effects,” he says.
The Bureau is going to unveil its facelift on July 31, with a slew of new numbers. The economy is going to look a lot bigger, according to economist Joel Prakken of Macroeconomic Advisers.
“There will be an upward revision in the level of GDP that’s several hundreds of billions of dollars," he says.
But, the economy isn’t growing any faster. We’re just measuring more of it. Dan Sichel teaches economics at Wellesley College.
“It’s as if we had not counted Alabama as part of the economy," he says. "And suddenly one day we realized we should start counting Alabama.”
And why didn’t we start counting everything sooner? It’s complicated. It’s taken the Bureau of Economic Analysis 10 years to come up with its new accounting model.