the paper describes the basics of the national accounts system – market exchanges revealing...

• The paper describes the basics of the national accounts system – market exchanges revealing observable and measurable transaction values.

• Says that imputations for non-market and non-observed values should be treated very

conservatively so as not to undermine the reliability of the accounts

The System of National Accounts – Staying on

TrackRobin Lynch

The System of National Accounts – Staying on Track

Highlights loose ends and inconsistencies in the SNA:

• The treatment of government output;

• Intangibles, particularly R&D,

• Real assets with negative values

• Non-life insurance

• Institutional units – one definition but treated differently according to whether resident or non-resident


• Lynch uses examples such as non-life insurance, where he claims that the basic national accounts concepts have been perverted to avoid presenting negative profits and value added that the insurance industry may experience from time to time, to mount a broader claim that national accounts concepts are at times corrupted to provide a cosmetically acceptable solution. Surprisingly, he does not seem to entertain the possibility of negative prices.

• He asks if we can afford to introduce further non-market non-observable measures of economic

phenomena into the core accounts. • He proposes handling extensions beyond the fundamentals through satellite accounts rather than

changing the core accounts.

• He puts forward some interesting views on the output of government. This is a confused area of the SNA and deserves further work.


• For me, the paper was a roller coaster ride – at times I agreed enthusiastically, at other times I disagreed quite strongly.

• My recasting of the core question of changing the core accounts versus creating satellite accounts is that we need to make some hard decisions on what changes should be made to the core accounts and what complementary presentations we need to compile as satellite accounts. I cover this in my conclusion.

• The core concepts of the SNA need to be clarified and strengthened. Changes to the framework consistent with the core concepts should be made. Where it is considered essential to adopt an alternative concept, we should compile satellite accounts.


A couple of random reactions:

• I am surprised that the discussion of the treatment of non-life insurance and the following discussion of negative asset values did not lead to a mention of the possibility of negative prices.

• I think that intangible assets are produced and used just like any other assets.

The Emperor's New Clothes: The Remaking of an Accounting FrameworkMichael Wolf

The paper proposes measurability as the main guiding principle in developing the SNA.

Seen as best means of ensuring reliability and comparability.

Highlights loose ends and inconsistencies and proposes some solutions (many and detailed – impossible to respond individually in this context):

• Definition of income.

• Net lending.

• Meaning of balancing items.

• Recording globalisation.

• Classification of institutional units.

• In keeping with theme of measurability, proposes close alignment with business accounts.

The Emperor's New Clothes: The Remaking of an Accounting Framework

• The strong focus on measurability leads Wolf to be cautious about fancy extensions to the SNA.

• Highlights the complexity of the existing SNA and the challenge of implementation with limited resources even before fancy extensions.

• Supports more focus on NDP to highlight cost of using capital.

• Supports inclusion of cost of using natural resources.

• Highlights the risks of the increasing use of macroeconomic accounts as "a bureaucratic instrument for the administration of economic development". Identifies treatment of emissions trading as a victim of this.


Loose ends in SNA would benefit from classification as:

• Challenge to concept

• Challenge to recommended methodology.

• Difficulty in measurement.

This theme is expanded on in my conclusion.


A couple of random reactions:

• The subordination of the accounts to administrative priorities poses a very big risk to their integrity. Wolf mentions the non-SNA based treatment of emission permits as an example. Another is the reluctance to record pension liabilities. We need to solve this problem.

• I agree that the definition of income, particularly in respect to the treatment of holding gains, needs to be clarified as a matter of priority.

The System of National Accounts and Alternative Economic PerspectivesbyAlice Nakamura and Leonard Nakamura

Paper proposes System of Personal Accounts (SPA)

Satellite data for looking at individuals (with household attributes)•Distributions analyzed across multiple dimensions•Most crucial dimension: human capital

Paper not about changing SNA (but maybe in places it should be?)

Micro data on individuals to inform three perspectives on wellbeing•1. Current period outcomes;•2. risky possibilities;•3. Resources.

Viewed in three contexts:•Financial risks; human capital development; pollution impacts

The System of National Accounts and Alternative Economic Perspectives

• Highlights the value of unsummarized data: micro data.

• Micro data is increasingly available and easily accessed.

• Micro data represent the ultimate adjunct to SNA

• Micro data is increasingly being accumulated and made available by statistical agencies, tax authorities, and central banks.


Three Perspectives on Wellbeing

• Current period outcomes:

–This is the perspective of SNA–What economic agents actually chose and consume

• Risky possibilities:

–How choices, activities, and wellbeing are affected by risk–Clearly reflected in financial and insurance activities

• Resources:

–How resources define individual capabilities and choice–Human capital is primary in human capability as it affects ability to make choices


• An SPA can be used to create social accounting matrices or for microsimulation experiments.

• SPA data can be added up along multiple dimensions.

• An SPA might reside in a single data base or in linked multiple data bases.

• Privacy controls can be built into SPA access, but trust in data custodians is essential.


N&N propose that national accountants begin adding micro data adjuncts:

These micro data adjuncts can be viewed as steps towards:

• A System of Personal Accounts and a System of Global Corporations Accounts

• Taking risk and capability into account.

Conclusions

There are many inconsistencies and loose ends in the SNA plus many assertions that it does not measure what we should be measuring.

Lynch and Wolf detail some of these.

The challenge is to work through these systematically and figure out:

• Which represent a lack of clarity about the concepts of the SNA, in which case the solution is to clarify the concepts.

• Which represent breaches of the concepts of the SNA, in which case the solution is to bring them into line with the concepts.

• Which represent problems with the methodology proposed, in which case the solution is to refine the methodology in line with the concepts and to decide if it can produce fit for purpose estimates.

• Which represent a lack of suitable data, in which case the solution is to review estimation possibilities to see if fit for purpose estimates can be produced, or if we have to leave an explicit gap in the accounts.

• Which represent a demand for a concept other than the SNA concept, in which case the solution is to compile a satellite account.

Conclusion

• N&N's paper presents a strong case for SPAs but assiduously avoids proposing changes to the SNA.

• It left me pondering the implications for the SNA.

• The inclusion of human capital, including its production and use, seem to be achievable by applying SNA concepts. This needs further work and work such as this paper can inform our discussion.

• The paper made me think that, as much as we like to describe the SNA as a value-free collection and aggregation of observed data, there is an implicit welfare model underlying the SNA. National accountants need to engage with the broad welfare debate to make this model more explicit and work through the implications for the future of the SNA.

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