Academic journal article Business Economics

Replacing GNP: The Updated System of National Economic Accounts

Academic journal article Business Economics

Replacing GNP: The Updated System of National Economic Accounts

Article excerpt

GNP has been replaced by GDP as the primary measure of U.S. production. The rationale for this shift is provided, as well as an explanation of what it entails. Beginning with the Economic Statistics Initiative, this paper also discusses the changes ahead for the U.S. economic accounts. Focusing on the National Income and Product Accounts, the United Nations System of National Accounts is identified and compared to the present set of U.S. accounts, highlighting some changes it suggests. The paper concludes with an indication of the plans to modernize and extend the U.S. economic accounts.

GNP REPLACED? Can it really be that the Bureau of Economic Analysis (BEA) has replaced its focus on gross national product (GNP) with a focus on gross domestic product (GDP) as the primary measure of U.S. production?(1) Yes, it's true, and NABE members have probably picked up other, more subtle, signals of change ahead in the U.S. economic accounts developed by BEA:

1. The Administration's FY 1992 Economic Statistics Initiative supported a modernized and extended set of economic accounts that would follow the United Nations revised System of National Accounts.

2. The January 1991 issue of Business Economics carried an article discussing something called "satellite accounts" that are to be part of a modernized and extended set of U.S. economic accounts.

Where is all this leading? It is useful to start with the Economic Statistics Initiative. Understanding the serious problems facing the U.S. statistical system in keeping up with the rapid pace of change in today's economy, a Working Group on improving the quality of economic statistics was established in April 1989, chaired by Michael J. Boskin, Chairman of the Council of Economic Advisors. The Working Group developed a package of high priority recommendations for improving economic statistics, which the President approved on November 25, 1989. To implement these recommendations, the Administration's FY 1992 budget proposed a multi-year Economic Statistics Initiative.(2) The Initiative's goal of improving economic statistics provides the broad context from which I will focus my remarks.

One aspect of this improvement for BEA is the creation of a modernized and extended set of economic accounts. Although BEA's international accounts -- balance of payments and underlying investment data -- are also involved in this project, I will focus today on BEA's national accounts, including the national income and product accounts (NIPAs). With respect to the national accounts, the Initiative said:

National economic accounts that follow the United Nations revised System of National Accounts (SNA) would be introduced in the comprehensive revision . . . in the mid-1990s. The principal new features will include (1) an integrated set of current and capital accounts . . . , and (2) satellite accounts . . .

These statements frame my topic. In discussing it, I will identify the SNA, discuss its integrated current and capital accounts, highlight some changes they suggest for BEA's NIPAs, and indicate BEA's plans. I will omit a discussion of satellite accounts and instead refer you to an earlier issue of Business Economics.(3) However, I would like to mention that BEA's work on a research and development satellite account is moving forward, and the FY 1992 budget contains funding for us to begin work on a second satellite account dealing with natural resources.

THE SNA: SOME BACKGROUND(4)

The SNA is a set of international guidelines for economic accounting. It is "international" in that it originated with the United Nations, and it serves as a guide for the economic accounts of many countries. Of the major industrial countries, the United States alone does not follow the SNA. Further, Central and Eastern European countries are abandoning their Marxist-based Material Product System and adopting the SNA, or at least doing SNA accounting in parallel. …

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