| Abstract: |
An overview is provided of the history, logic, merits and limitations of the
national accounts. Past In the second half of the seventeenth century the
first estimates of national income were made. These estimates served clear
purposes, like demonstrating that a revision of the English tax system could
raise sufficient resources for waging a war with Holland or France. The number
of estimates and their frequency gradually increased, in particular since the
First World War. Major innovations, like the development of the sector
accounts, input-output tables and the arrival of the first guidelines took
place in the thirties and forties. These innovations were stimulated by the
Keynesian revolution and the development of macro-econometric model building.
Since the Second World War national accounts statistics have become
institutionalised and standardised, i.e. they are regularly compiled by
national statistical institutes, Central Banks or Ministries and are based on
one universal set of multi-purpose concepts and classifications. About a
decade ago, the third generation of international guidelines on national
accounting was introduced. In comparison to the first guidelines, the scope
was drastically extended, e.g. by the inclusion of prices and volumes, balance
sheets and input-output tables. However, the basic concepts, like the
production boundary have hardly been changed in fifty years. Since the
collapse of communism, no separate guidelines and concepts exist for the
(formerly) communist countries. The European Unification has stimulated a
revolution in national accounting, in particular with respect to the
development of jurisprudence and the improvement and harmonization of the
estimates. The European Union was not only aware of the possibilities of the
national accounts as a tool for European policy, but acted also as a critical
consumer. The latter was vital for generating this revolution in European
national accounts practice. Present National accounts statistics are a miracle
come true: all over the world, very incomplete, imperfect, heterogeneous and
partly outdated data are transformed into a complete, consistent,
internationally standardised and up-to-date overview of the national economy
and its major components. What is the magic behind this miracle? The universal
model National accounts statistics are estimates of a universal accounting
model for describing, analysing and managing national economies. This
universal model is not a neutral description of economic reality: it is
focused on what can be readily observed in monetary terms, it contains
substantial transformations of what can be observed and is based on a specific
way of labelling economic reality. Different choices would have resulted in a
different picture of economic reality. The major biases of the universal model
merely reflect the natural focus of a regular economic statistic, i.e. a focus
on what can be readily observed in monetary terms. This explains why the
economic importance of unpaid household services, leisure time, pollution and
tax expenditures is ignored. Including such major analytic elements in the
basic concepts would seriously endanger the statistical purpose of the
universal model. Furthermore, it would also drastically decrease the relevance
of the universal model and its major aggregates for important other data
needs, e.g. those of budgetary and monetary policy. The substantial
transformations of what can be readily observed are required in order to look
–on behalf of analysis and policy- through the complex, chaotic and many
different economic and institutional realities. The specific concepts used are
the result of many implicit and explicit considerations with respect to
relevance, reliability and comparability. They are also influenced by the need
to agree on one set of concepts, even if arguments are not sufficient to
settle the score. The universal model incorporates two types of perspectives
on the national economy. Firstly, it describes the national economy in terms
of its major components (sectors/industries, various types of flows and stocks
and several economic processes). This is the general perspective of the
universal model. However, the universal model describes also each major
component in a macro-economic context and in relation to the other major
components. These are the specific perspectives incorporated in the universal
model. Seven major specific perspectives can be distinguished: 1.
Non-financial corporations (business accounts); 2. Financial corporations
(monetary policy, financial markets); 3. Government (budgetary policy,
government finance); 4. Households (personal income, wealth and consumption);
5. Rest of the world (balance of payments); 6. Industries (production,
employment and input-output analysis); 7. Other (e.g. the environment, human
capital and the welfare state). The old and most recent history of the
national accounts demonstrates that these specific perspectives, and in
particular that of the government and its relations to the national economy,
are a major motivation for compiling national accounts statistics. The
universal model is an ingenious and very practical product. The various
perspectives demonstrate that it is a synthesis of various types of applied
economic analysis, e.g. business accounts, Keynesian type of analysis,
input-output analysis and index number theory. The universal model also
reflects three hundred years of experience in compiling national accounts
statistics. Nevertheless, the universal model can still be improved in various
ways. The universal model stresses the importance of flexibility, but does not
make an explicit link to the seven perspectives. For each of these
perspectives, standard supplementary concepts, like government expenditure and
revenue, entrepreneurial income after tax and net worth to the owner, are very
relevant and can be easily derived from the basic concepts of the universal
model. For each of these perspectives also the importance of prices, volumes,
real values and key-ratios should be stressed. Also some changes in the basic
concepts are proposed e.g.: - Other non-market output, e.g. of the government,
should be valued including a net operating surplus by amount of an opportunity
interest on the capital invested. - The purchase of consumer durables by
households should be recorded as capital formation instead of as final
consumption expenditure. Imputed services of owner-used consumer durables
should be recorded by amount of its consumption of fixed capital plus an
opportunity interest on the capital invested. These imputed services are
consumed as part of the final consumption expenditure of households. These
changes increase the relevance of the national accounts from an economic
theoretic point of view. Furthermore, also various changes in the presentation
of national accounts statistics are proposed, e.g. a more systematic
distinction between actual and imputed flows and the limitation of the number
of accounts. The national measurement process The universal model can not be
estimated directly. It should first be translated into an operational model
for a specific country during a specific period of time. This involves
interpretation of the universal model in view of the national economy and
further specification of the concepts, detail and scope. For example, which
units belong to the sector government en to what extent can price- and volume
measures take account of changes in quality? The operational model decides to
a substantial extent what is actually measured. Differences in national
operational models are therefore a serious threat to international
comparability. The operational model is estimated by combining very
heterogeneous and incomplete sets of data; the latter include national
accounts estimates for previous periods and frames of reference for grossing
up and combining data, e.g. a business register or a population census. The
major estimation tools are accounting identities, plausibility checks and
assumptions. The estimation process is influenced by environmental factors
like skills (e.g. skills in combining data and making plausible assumptions),
resources (e.g. resources for compiling good price-statistics, for maintaining
a reliable business register or for compiling national accounts statistics)
and policy (e.g. a mixed strategy of continuity or a preference for prudence
and stability). Uses of the national accounts National accounts statistics are
important for economic policy and analysis. Four different roles are played by
national accounts statistics: 1. description and object of analysis; 2. tool
for analysis and forecasting; 3. tool for communication and decision-making;
4. input for alternative accounts, budgetary rules and estimates. As a
description and object of analysis, national accounts statistics are unique.
They define and measure the national economy and its major components. They
make the sizes and developments in national economies all over the world
visible and put them into quantitative terms. As a consequence, the world
economy, the national economies and their major components can be monitored
and analysed. Not all descriptions are suited as an object of analysis.
National accounts statistics are partly built on assumptions. Assumptions are
essential in combining and completing the basic set of data. Plausible
assumptions are even to be preferred above unreliable data. The more
encompassing, up-to-date, detailed and reliable the basic data set, the
smaller the role played by assumptions can be. By changing the definitions of
the universal model, the role of assumptions can be increased or decreased.
This also changes the usefulness of national accounts statistics as an object
of analysis. For a proper analysis of national accounts statistics, sufficient
information should be available about the operational concepts underlying the
national accounts statistics, their reliability and the role of major specific
events and institutional circumstances. Furthermore, users should have
sufficient knowledge of the logic, merits and limitations of national accounts
statistics in general. As a tool for analysis and forecasting, national
accounts statistics are built on three very useful stocks of knowledge: the
universal model, the operational model and the national compilation skills.
Ignoring the national accounts as tool for analysis and forecasting can result
in serious conceptual and statistical pitfalls. However, as a tool for
analysis and forecasting, the national accounts have also clear limitations.
For a proper use, national accounts statistics should often be rearranged or
be supplemented with alternative concepts, alternative data and equations
describing economic behaviour. As a tool for communication and
decision-making, national accounts statistics are unique. They serve as the
universal facts and language for thinking and communicating about national
economies and their major components. They provide new opportunities for
decision-making by providing information about major macro-economic
developments, by providing explicit targets for many types of policy and by
providing price-indexes for inflating contracts and agreements in real terms.
However, for a proper and optimal use, knowledge of the merits and limitations
of national accounts statistics is essential. National accounts statistics
serve also as an input for alternative estimates, accounts for non-national
accounting purposes and policy targets. As an input for alternative estimates,
official national accounts statistics serve as a very cheap, well-designed,
universal semi-manufactured product. These alternative estimates may reflect
fundamentally different perspectives on the national economy, e.g.
welfare-measures. However, some of the major alternative estimates are best
labelled as non-official national accounts statistics, e.g. by providing much
longer time series. National accounts can also serve as a benchmark or source
of inspiration for accounts for non-national accounting purposes (e.g. for the
bookkeeping systems of municipalities) and policy targets (e.g. in defining
the budgetary ceilings for state expenditure in the Netherlands). In this way,
the national accounts actually extends its scope as a tool for communication
and decision-making. The future On the brink of the twenty-first century the
world is undergoing dramatic changes. Four trends (globalisation,
regionalisation, automation and more-market oriented government) are changing
the data needs and possibilities of the national accounts. Globalisation and
regionalisation will increase the political use of national accounts figures.
This reinforces requirements on international comparability and
standardisation as evidenced by the European experience. Globalisation and
more-market oriented government will pose serious difficulties for the quality
and completeness of the statistics and administrative data sources used for
compiling national accounts figures. A pro-active response is essential for
statisticians. The possibilities for national accountants may be increased due
to automation, putting minimum standards on the inputs for the national
accounts statistics to increase their international comparability and advances
in national accounts compilation techniques. More-market oriented government
can stimulate the development of more efficient, effective and attractive
national accounts statistics that appeal to a wide range of data users.
However, it can also result in cutting down the resources for national
accounts statistics and its major inputs below a minimum-level. National
accounts statistics will then be trapped: resources are not enough to meet a
minimum standard of reliability, to make national accounts statistics more
attractive and to find new users; the potentials of the national accounts
statistics are then trapped. In order to meet these challenges and dangers of
the future, the efficiency and the national accounts as a product should be
improved. This can be done in various ways, e.g. by: - Developing an
international long term strategy for improving national accounts compilation
techniques; - A better balance between the compilation process and the
outputs; - More modules for specific purposes. Some of these could contain
internationally standardized supplementary concepts, like entrepreneurial
income after tax, government expenditure and revenue or household income in
cash. They may also contain modelling results, as modelling is often essential
for a balanced view on the national economy. - An international, EU-like,
program for increasing the reliability and comparability of major national
accounts variables, e.g. Domestic Product and the volume growth of Domestic
Product. - Investigation of user practice and the lessons that can be learned
from that. - Supplementing national accounts statistics with information about
their meaning and reliability, e.g. about the operational concepts, the data
sources, compilation methods, the size of the differences between successive
estimates and the results of various types of sensitivity analyses. In order
to clarify the value-added of national accounting and to fight wide-spread
illiteracy in national accounting, marketing and education should be taken up
seriously, preferably by an international long term strategy and by making use
of all the possibilities of internet. |