“[...]what looks like a Great Stagnation in the traditional market economy is to a significant extent a product of a vast growth in economic value that has occurred on the Internet and largely outside of the traditional market economy, and a corresponding cannibalization of and brain drain from traditional market businesses.

Most of the economic growth during the Internet era has been largely unmonetized, i.e. external to the measurable market. This is most obvious for completely free services like Craig’s List, Wikipedia, many blogs, open source software, and many other services based on content input by users. But ad-funded Internet services also usually create a much greater value than is captured by the advertising revenues. These include search, social networking, many online games, broadcast messaging, and many other services. Only a small fraction of the Internet’s overall value has been monetized. In other words, the vast majority of the Internet’s value is what economists call an externality: it is external to the measurable prices of the market. Of course, since this value is unmeasured, this thesis is extremely hard to prove or disprove, and can hardly be called scientific; mainly it just strikes me as subjectively obvious. [...]

What’s worse for the traditional market (as opposed to this recent tsunami of unmonetized voluntary information exchange), this tidal wave of value has greatly reduced the revenues of certain industries. The direct connection the Internet provides between authors and the readers put out of business many bookstores. Online classifieds and free news sources have cannibalized newspapers and magazines. Wikipedia is destroying demand for the traditional encyclopedia. Free and cut-price music has caused a substantial decline in music industry revenues. So the overall effect is a great increase in value combined with a perhaps small, but I’d guess significant reduction in what GDP growth would have been without the Internet. [...]

Cowen suggests that external gains of similar magnitude occurred in prior productivity revolutions, but I’m skeptical of this claim. A physical widget can be far more completely monetized than a piece of information, because it is excludable: if you don’t pay, you don’t get the widget. As opposed to information that computers readily copy. (The most underappreciated function of computers is that they are far better copy machines than the paper copiers). [...]” http://unenumerated.blogspot.com/2011/02/great-stagnation-or-external-growth.html