From Timothy Blee, a thought experiment that builds on Tyler Cowen's concept of how the Internet improves our lives without impacting the conventionally measured economy.
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 previously paid hundreds of dollars for in stand-alone devices. Now it’s just another feature that comes with every Android phone, and the cost of Android phones hasn’t gone up. I haven’t checked, but I bet that this wealth creation was not reflected in GDP statistics. And it’s actually worse than that: as people stop buying stand-alone GPS devices, Google’s innovation will actually show up in the statistics as a reduction in GDP.