To better gauge the U.S. economy, government statisticians are turning to a British film buff who once watched the movie “Aliens” 14 times in as many days.
Col Needham’s IMDb.com, an Internet movie database now owned by Amazon.com Inc. that tracks all things Hollywood --from box office receipts to celebrity hijinks -- will be a notch in a new yardstick for measuring gross domestic product.
In its most significant reclassification since 1999, GDP will now include spending on research and development and some forms of entertainment, transfer fees related to home sales and a new treatment of pensions. While the July 31 update will boost the world’s largest economy by around $400 billion, equivalent to adding another Virginia or New Jersey, it probably won’t alter the recent trend in growth.
“If you measure something in pounds or in kilos, you haven’t changed the weight,” said Neal Soss, chief economist at Credit Suisse AG in New York. “It’s the same economy, we’re just applying a different accounting convention to measure it.”
Spending on films and long-running television shows such as the situation comedy “Seinfeld” will be classified as investment, rather than an expense. That would have added about $70 billion to GDP as of 2007, according to estimates from the Commerce Department’s Bureau of Economic Analysis.
The biggest impact will be from including research and development costs, which would have boosted the economy by about $314 billion in 2007, according to BEA estimates. In the 1999 rejiggering, the government first counted spending on computer software as an investment.
In addition, the change raised the tally of real estate spending in 2007 by about $60 billion with the incorporation of purchase costs such as title insurance and engineering plans. The new treatment of pensions, which will be counted as they are accrued rather than as they are paid out, added about $30 billion to government consumption and boosted the saving rate as the benefit increased personal income.
“This is the knowledge economy,” said Carol Corrado, senior adviser at the Conference Board, a New York-based research group that tracks consumer confidence. “It’s catching up to modern business reality and recognizing that firms make investments in a wide variety of things. Sometimes they’re things you can’t see or touch but nonetheless they’re really important.”
GDP is the sum of all goods and services produced as tracked by consumer spending, government outlays and business investment on such things as plants, equipment and inventories. It also includes the value of exports minus imports.