Hidden value: how consumer learning boosts output

Iphones. Ipads. Wikipedia. Google Maps. Yelp. TripAdvisor. New digital devices, applications, and services offer advice and information at every turn. The technology around us changes fast, so we are continually learning how best to use it. This increased pace of learning enhances the satisfaction we gain from what we buy and increases its value to us over time, even though it may cost the same — or less. However, this effect of consumer learning on value makes inflation and output growth more difficult to measure. As a result, current statistics may be undervaluing household purchasing power as well as how much our economy produces, leading us to believe that our living standards are declining when they are not.