…Suppose we lived in the world of Harry Potter, and one day in
the late 1950s RCA hired a wizard to wave his magic wand and
transform all of the world’s black and white sets into color
sets. This would clearly represent a large increase in the
standard of living—a larger increase, in fact, than the non-
magical process whereby people have to buy new, more expensive,
televisions. Yet the government in the alternate universe would
almost certainly have recorded a smaller increase in GDP. Our
own BLS would see consumers buying more expensive televisions
while in the Harry Potter universe consumers would be happy with
the old, cheap ones. Hence, consumers circa 1970 would be
wealthier in that universe than in ours, but official GDP
statistics would show just the opposite. Today these magic wands
exist. For example, a couple of years ago, Google waved a magic
wand that transformed millions of Android phones into
sophisticated navigation devices with turn-by-turn directions.
This was functionality that people had pr