Matt Yglesias links to an interesting discussion about the growth of activities that raise our standard of living without being captured in economic statistics. Wikipedia is a great example of this: it's tremendously valuable to hundreds of millions of Internet users, but because it's given away for free that value is not reflected in our economic statistics.
I think this general insight is right, but I don't agree with John Quiggin's conclusions about the social implications. In particular, Quiggin writes:
It seems unlikely that large inequalities in income are beneficial to anyone except the recipients of high incomes.
If improvements in welfare are increasingly independent of the market, it would make sense to shift resources out of market production, for example by reducing working hours.
The first point ignores the fact that rich people are a crucial part of many public-spirited enterprises. Jimmy Wales was able to finance the initial development of Wikipedia (then called Nupedia) because he had previously earned profits building commercial websites. The Ubuntu project, creators of an extremely popular Linux-based operating system, is supported to the tune of millions of dollars a year by successful entrepreneur Mark Shuttleworth. Brewster Kahle used the profits from his successful Internet businesses to build the Internet Archive, a crucial repository of public domain works. John Gilmore, who made his fortune as one of Sun's first employees, has used his wealth to promote a variety of free software projects, including GNU radio and Gnash. I could provide plenty of other examples.
The important thing to recognize is that these projects could only exist because of the combination of their founders' expertise and their money. Without cash, these folks would have been unable to provide the support necessary to get these projects off the ground. But even more important, these projects also wouldn't have succeeded without their deep understanding of their fields. Only someone with years of experience in the software industry would have the judgment and the relationships necessary to make a project like Ubuntu successful.
In particular, if the policy option on the table is to reduce inequality by redistributing wealth from rich people to the government, there's absolutely no reason to think that the federal government could support these kinds of projects with anything like the degree of success that these private actors have done. Congress has plenty of cash, but members of Congress and their staff haven't the faintest clue what it takes to build an operating system. Moreover, they wouldn't even know how to tell a competent operating system designer from an incompetent one, so if they sought outside expertise they'd likely get bad advice.
I think it's a little bit surprising that Matt would endorse Quiggin's argument about working hours. If you read Matt's blog, it's obvious that he works a lot more than the 1824 hours/year national average. I suspect that Matt works so much in part because his job involves goofing off on the Internet and because he's excited about the mission of his non-profit employer. Moreover, I'd wager that a large fraction of Matt's readers read his blog at their jobs while they're theoretically "on the clock." In other words, one of the most important but unmeasured ways that our standard of living has improved in recent decades is that more and more of us are blessed with white collar jobs with intellectually-engaging work, pleasant working conditions, and the flexibility to spend time at the office doing things like reading blogs.
Probably the best illustration of these trends is Google. Google is, of course, a fabulously profitable company. It's also a company that's famous for the long hours put in by its employees—one reason they offer their employees free food and other perks is so they'll be less likely to go home in the evenings. At the same time, Google has a policy of "20 percent time" that officially encourages employees to spend company time working on personal projects that may or may not contribute to the company's bottom line. And Google is also one of the most enthusiastic users and supporters of free software, employing a number of key free software developers such as Guido Van Rossum and Jeremy Allison.
There is, in other words, no particular reason to think that the growth of the non-monetary sector of the economy can or should lead to reduced working hours, on average. Rather than using higher wages or shorter working hours to attract employees, firms may increasingly compete for workers by giving workers more interesting work and more on-the-job flexibility. Indeed, it seems likely that an increasing fraction of the time the Labor Department considers as time spent "working" actually consists of employees reading blogs, editing Wikipedia, and otherwise contributing to the richness of the non-commercial sector of the Internet.