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National accounts

From Wikipedia, the free encyclopedia

National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a method, the subject is termed national accounting or, more generally, social accounting.[1] Stated otherwise, national accounts as systems may be distinguished from the economic data associated with those systems.[2] While sharing many common principles with business accounting, national accounts are based on economic concepts.[3] One conceptual construct for representing flows of all economic transactions that take place in an economy is a social accounting matrix with accounts in each respective row-column entry.[4]

National accounting has developed in tandem with macroeconomics from the 1930s with its relation of aggregate demand to total output through interaction of such broad expenditure categories as consumption and investment.[5] Economic data from national accounts are also used for empirical analysis of economic growth and development.[1][6]

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Transcription

What I've done here is listed a bunch of events that might occur in a given period. And what I want to think about in this video is how, if at all, they might be accounted for in GDP, especially in this expenditure view of GDP. And I encourage you to pause this video and try it out yourself. See how, if each of these events happen in the period for which we are trying to calculate GDP, how would they be accounted for, according to the buckets we thought about, the composition of the expenditure view of GDP. So now I'm assuming that you have unpaused, you've tried it yourself, and so let's try to go through it. So Khan Academy is a firm. It's a not-for-profit firm. No one really owns Khan Academy. I guess society owns Khan Academy, but it is a firm. So Khan Academy employs a software engineer and pays them $100,000. Well, this is a firm making the expenditure. And arguably and even conceptually, this also is an investment. Because this $100,000 is going to be used to develop code that has future benefit. So this is going to be the investment category. Let me do it in that same color. So I, investment, is going to get plus $100,000. In general, the spending by firms goes into investment. Now, let's look at the second scenario. Accenture, which is another firm, and this is a for-profit firm, earns $10 million-- or maybe I should say gets $10 million in revenue, just to be clear what we're talking about-- by building a new IT system for California. And the important thing to think about, you might say, oh, OK, wait, this is OK, Accenture is a firm, but California is clearly the government. So how do you account for this? And it's the expenditure view of GDP. So in this situation, California is spending $10 million in the period for a new IT system. So this is going to be government. The government category is going to be increased by $10 million, because of this expenditure. Now next one. My mother sells her house in New Orleans to a Swedish woman for $200,000. Once again, a house is being sold from someone in the country to someone who was foreign, what do we do? But the important thing to realize is that this is not a new house. This is a transfer of an existing house. Nothing was produced here. So this has no contribution to GDP. It doesn't matter it's a Swedish woman or anything like that. The house existed before. It just changed hands. A new house did not get produced. So nothing happens to GDP here. Next one. I-- and I'm assuming that I am here, sitting here in Mountain View, California, American citizen-- I buy a Japanese made lawn mower for $200. Now this one is interesting. Because if you think about it theoretically, nothing was produced in the United States, so nothing should be added to GDP on a net-net basis. And we'll see that that is actually the case. But it's going to show up by adding to consumption and then taking away from net exports. So two things are going to happen here. We'll say, OK, Sal is an American consumer. If we just look at how much more he spent, he spent $200 more, so it's going to be added there. But then we're going to take it out of net exports. So net exports-- let me do it in that same green color-- net exports. Everything else is neutral. So in this thing right over here, there was no foreign purchases. But there is me buying a foreign product. And let me subtract that out. So I'm going to subtract out $200 right over there. So net exports will be lower by $200, because essentially this was a $200 import. And that completely cancels out the $200 increase in consumption. And so this will have zero net effect on GDP. These two terms will cancel out. Now I buy a new home in California for $500,000. Now household spending for the most part is considered C, except when you are buying a new home. So even though I am not a firm, because I am buying a house, a new house, this will go into investment. So investment will go up by $500,000. And then finally American Airlines buys a new Airbus jet, and Airbus jets are made in Europe. So what's going to happen here? So once again, net-net, nothing was produced in the United States. So on a net basis, this should not contribute to GDP. And we'll see that on net basis, it will break out, it will be neutral, but it will be like this situation. There's an American firm that made a purchase-- and actually, I didn't put the amount here. So let's say it was $100 million. I think that's actually about what a passenger plane might actually cost, for $100 million. So the way we would account for it, investment would go up by $100 million. You have an American firm making a purchase, $100 million. Conceptually, it makes sense. It's going to provide future goods and services, going to give transportation to people. But it's going to be netted out, because you have a net import. So what this is going to do to net exports, on this side of it, you're going to have $100 million, because this was an import. So you're going to have negative $100 million, when you think of it from an export point of view. And you had no corresponding positive export. So you're going to have net exports-- net exports is going to go down $100 million. This was a net import of $100 million, so it makes sense that net exports would go down. It would be negative net exports. And these two, once again, are going to cancel out with each other, so that you have no net GDP, which makes sense, because this plane was not produced in the United States.

Contents

Scope

National accounts broadly present output, expenditure, and income activities of the economic actors (households, corporations, government) in an economy, including their relations with other countries' economies, and their wealth (net worth). They present both flows (measured but it is over a period) and stocks (measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the national income and product accounts (in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including GDP. As to stocks, the 'capital accounts' are a balance-sheet approach that has assets on one side (including values of land, the capital stock, and financial assets) and liabilities and net worth on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to flow of funds accounts or, again, capital accounts.[1]

There are a number of aggregate measures in the national accounts, notably including gross domestic product or GDP, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of income (wages, profits, etc.) or expenditure (consumption, investment/saving, etc.). Measures of these are examples of macro-economic data.[7][8][9][10] Such aggregate measures and their change over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process.

National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time.[11] A corresponding price index can also be derived from national output. Rates of change of the price level and output may also be of interest. An inflation rate (growth rate of the price level) may be calculated for national output or its expenditure components. Economic growth rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the national accounts is in growth accounting across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factor inputs or technological change.[12]

The accounts are derived from a wide variety of statistical source data including surveys, administrative and census data, and regulatory data, which are integrated and harmonized in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of intangibles and services of the banking and financial sectors.[13]

Two developments relevant to the national accounts since the 1980s include the following. Generational accounting is a method for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy than budget deficits, which reflect only taxes minus spending in the current year.[14] Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence of environmental degradation.[15]

Macroeconomic data not derived from the national accounts are also of wide interest, for example some cost-of-living indexes, the unemployment rate, and the labor force participation rate.[16] In some cases, a national-accounts counterpart of these may be estimated, such as a price index computed from the personal consumption expenditures and the GDP gap (the difference between observed GDP and potential GDP).[17]

Main components

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.

  • Current accounts:
production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;
income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.
  • Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
  • Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
  • Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993).

The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).

Notably absent from these components, however, is unpaid work, because its value is not included in any of the aforementioned categories of accounts, just as it is not included in calculating gross domestic product (GDP). An Australian study has shown the value of this uncounted work to be approximately 50% of GDP, making its exclusion rather significant.[18] As GDP is tied closely to the national accounts system,[19] this may lead to a distorted view of national accounts. Because national accounts are widely used by governmental policy-makers in implementing controllable economic agendas,[20] some analysts have advocated for either a change in the makeup of national accounts or adjustments in the formulation of public policy.[21]

History

The original motivation for the development of national accounts and the systematic measurement of employment was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952.[1][22] International standards for national accounting are defined by the United Nations System of National Accounts, with the most recent version released for 2008.[23]

Even before that in early 1920s there were national economic accounts tables. One of such systems was called Balance of national economy and was used in USSR and other socialistic countries to measure the efficiency of socialistic production.[24]

In Europe, the worldwide System of National Accounts has been adapted in the European System of Accounts (ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today.[25]

See also

References

  1. ^ a b c d Nancy D. Ruggles, 1987. "social accounting," The New Palgrave: A Dictionary of Economics, v. 4, pp. 377–82.
  2. ^ United Nations, The System of National Accounts and öNational Accounts Data.
  3. ^ Joel S. Demski, 2008. "accounting and economics," The New Palgrave Dictionary of Economics. Abstract.
  4. ^ Graham Pyatt and Jeffery I. Round, ed., 1985. Social Accounting Matrices: A Basis for Planning, World Bank.
  5. ^ John Maynard Keynes, 1936. The General Theory of Employment, Interest and Money, Macmillan.
  6. ^ Mankiw, N. Gregory; Romer, David; Weil, David N. (1992). "A Contribution to the Empirics of Economic Growth". Quarterly Journal of Economics. 107 (2): 407–437. CiteSeerX 10.1.1.335.6159. doi:10.2307/2118477. JSTOR 2118477.
  7. ^ Referred to in the Journal of Economic Literature classification codes under JEL: C8 - Data Collection and Data Estimation Methodology and JEL: E01 - Measurement and Data on National Income and Product Accounts and Wealth.
  8. ^ T. P. Hill (2001). Macroeconomic Data. International Encyclopedia of the Social & Behavioral Sciences. pp. 9111–9117. Archived from the original on January 5, 2013.
  9. ^ Lequiller, François; Blades, Derek (2006). Understanding National Accounts. OECD.
  10. ^ François, Lequiller; Blades, Derek W.; Derek, Blades (January 1, 2006). Understanding National Accounts - Lequiller François, Derek W. Blades - Google Boeken. ISBN 9789264025660. Retrieved March 25, 2013.
  11. ^ Amartya Sen, 1979. "The Welfare Basis of Real Income Comparisons: A Survey," Journal of Economic Literature, 17(1), p p. 1–45.
       • D. Usher, 1987. "real income," The New Palgrave: A Dictionary of Economics, v. 4, p. 104.
  12. ^ From The New Palgrave Dictionary of Economics, 2008, 2nd Edition, with Abstract links:
       • "economic growth" by Peter Howitt and David N. Weil
       • "growth accounting" by Francesco Caselli.
  13. ^ Oskar Morgenstern, 1963. On the Accuracy of Economic Observations, 2nd ed. ch. 16. Princeton.
       • H. O. Stekler, 1964. [Review], Journal of the American Statistical Association, 59(307), pp. 965-967.
       • J. Steven Landefeld, Eugene P. Seskin, and Barbara M. Fraumeni. 2008. "Taking the Pulse of the Economy: Measuring GDP." Journal of Economic Perspectives, 22(2), pp. 193–216. PDF link (press +).
       From The New Palgrave Dictionary of Economics, 2nd Edition, with Abstract links:
      • "intangible capital" by Daniel E. Sichel
       • "national income" by Thomas K. Rymes.
  14. ^ The Economist, Economics A-Z, "Generational Accounting." Accessed 9 Aug. 2010.
       • Jagadeesh Gokhale, 2008. "generational accounting." The New Palgrave Dictionary of Economics, 2nd Edition. Abstract and uncorrected proof.
       • Laurence J. Kotlikoff, 1992. Generational Accounting: Knowing Who Pays, and When, for What We Spend. Free Press. Review extract[permanent dead link].
  15. ^ From The New Palgrave Dictionary of Economics, 2008, 2nd Edition, with Abstract links:
       • "green national accounting" by Sjak Smulders
       • "sustainability' by Daniel W. Bromley
       • National Research Council, 1994. Assigning Economic Value to Natural Resources, National Academy Press. Chapter links.
  16. ^ • Robert Topel, 2008. "unemployment," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
      • Katharine Bradbury, 2008. "unemployment measurement," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  17. ^ Robert J. Gordon and Peter K. Clark, 1984, "Unemployment and Potential Output in the 1980s," Brookings Papers on Economic Activity, (2), pp. 537-568 Archived 2016-05-21 at the Portuguese Web Archive.
  18. ^ Blades, François Lequiller, Derek (2006). Understanding national accounts (Reprint. ed.). Paris: OECD. p. 112. ISBN 978-92-64-02566-0.
  19. ^ Blades, François Lequiller, Derek (2006). Understanding national accounts (Reprint. ed.). Paris: OECD. ISBN 978-9264025660. GDP lies at the heart of the system of national accounts.
  20. ^ "National Income Accounting and Public Policy" (PDF).
  21. ^ "National Accounts: A Practical Introduction" (PDF).
  22. ^ André Vanoli, 2008. "national accounting, history of," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract.
  23. ^ United Nations, System of National Accounts 2008-2008 SNA.
  24. ^ Economic theory , [1].
  25. ^ National Bureau of Economic Research Book Series, 1937-2010. Studies in Income and Wealth, 71 v.

External links

This page was last edited on 30 May 2019, at 01:47
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