What’s the social value of Microsoft?

Here is Mark Thoma and Robert Barro, here is Brad DeLong.  You may recall that Barro had claimed that the social value of the company was roughly equal to its revenue; of course many critics objected.

Imprecise questions are being thrown around.  It is fine to question Microsoft’s net contribution by asking what other companies would have done in its stead.  But then, to be consistent, we should ask what revenue those alternate-universe companies would have earned.  The correct comparison is one set of social values minus revenue (that of Microsoft) to another (hypothetical) social value minus revenue (what would have happened without Bill Gates).  Would the alternative have been more or less monopolistic, more or less stifling of innovation, more or less able to enforce copyright?  And so on.  We can speculate but of course we’ll never solve those counterfactuals. 

We can, however, assert the nonetheless profound truism that gross social benefits of Microsoft, over time, exceed the gross revenue of the company by quite some amount.  The company is a highly imperfect price discriminator and many people rip off its software.

I’ll call the comparisons in the counterfactual (different revenues, propensities to monopolize, social values, etc.) a wash and thus I believe that the correct measure of the social value of the company is much greater than its revenue. It would make more sense to compare the company to a first best if we thought there was a feasible antitrust policy to get us there, but I find that hard to believe.

In other words, Barro probably is underestimating the value of Bill Gates and Microsoft.


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