BEA's strategic plan for 2001-2005

Survey of Current Business, May, 2002

A conceptual framework for the national accounts should be carefully distinguished from a specific plan for improvements to the accounts, such as the BEA strategic plan. The strategic plan focuses on BEA's own plans for the future and is very important in laying out priorities and eliciting responses from the user community. However, the plan does not provide a rationale for the priorities or relate BEA's plans to those of other statistical agencies with interests in the national accounts. This is a particularly important omission in a decentralized statistical system, like the Federal system in the United States.

An illustration of an issue that would be part of a new architecture is the integration of the national income and product accounts (NIPA's) with the capital formation and wealth accounts that form the flow of funds accounts, produced by the Federal Reserve Board (FRB). BEA has made important progress in developing the asset side for such a system through its capital stock study. And the results have been incorporated into the national balance sheet by the FRB. However, new architecture or new thinking is required to link the balance sheet to the generation of incomes and products.

The second issue to be considered is, why not use SNA93? SNA93 would be part of any new architecture, since it embodies the collective experience of the national accounting community and is familiar to many people working on the U.S. national accounts. However, it fails to provide the income and product accounts in current and constant prices needed for many applications of the national accounts, such as estimation of potential output. Consistency in the boundaries among the various component accounts is an unresolved issue in SNA93. Wealth, for example, refers to a different set of economic units than income and product.

A more fruitful approach begins with the NIPA's and develops a system of capital formation and wealth accounts with the same boundaries. This could be linked to the generation of incomes and products, so that the income and expenditure and the production accounts could be presented in current and constant prices. These accounts could be generated at both aggregate and industry levels and would provide a link to productivity measurement, a critical omission in the original formulation of national accounting systems by Simon Kuznets, Richard Stone, and the other originators of these systems.

An important advantage of the approach I have suggested is that the NIPA's would remain unchanged, at least initially. Improvements in the source data would continue to provide better estimates, including better deflation of outputs. However, the NIPA's would be extended to encompass wealth accounts and these would gradually be integrated with the NIPA's along the lines I have suggested. The new architecture would provide a new approach to national accounting that builds on the United Nations' system but would gradually supersede it.

To illustrate some of the implications of the new architecture, I will consider the production account as an example. A detailed illustration of this account is given in my Presidential Address to the American Economic Association ("Information Technology and the U.S. Economy," American Economic Review, March 2001, pp. 1-32.) This takes BEA's concept of gross domestic product (GDP) as a point of departure and adds estimates of capital and labor inputs to convert gross domestic income to constant prices. These estimates incorporate capital data from the BEA capital stock study.