National Income Accounting and Public Policy

National Income Accounting and Public Policy Modern national income accounting was designed in the early 20th century for the purpose of providing improved indicators about the performance of the economy so that government policy makers could better control the economy. The way that performance is measured affects the types of policies used to try to accomplish policy goals. Two attributes of national income accounting are analyzed for their effects on economic policy. First, government production is included in the national income accounts at cost, rather than at market value as private sector output is measured. This biases policy toward a larger public sector. Second, output is measured as a homogeneous dollar amount. This biases policy toward focusing on increasing quantities of inputs and outputs in the production process, rather than on innovation and entrepreneurship, which are the true engines of economic progress. Economic policy could be improved by focusing less on national income as an indicator of policy, and more on the underlying processes that foster economic progress. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Austrian Economics Springer Journals

National Income Accounting and Public Policy

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2004 by Kluwer Academic Publishers
Subject
Economics; Public Finance; Political Science; History of Economic Thought/Methodology
ISSN
0889-3047
eISSN
1573-7128
D.O.I.
10.1023/B:RAEC.0000044638.48465.df
Publisher site
See Article on Publisher Site

Abstract

Modern national income accounting was designed in the early 20th century for the purpose of providing improved indicators about the performance of the economy so that government policy makers could better control the economy. The way that performance is measured affects the types of policies used to try to accomplish policy goals. Two attributes of national income accounting are analyzed for their effects on economic policy. First, government production is included in the national income accounts at cost, rather than at market value as private sector output is measured. This biases policy toward a larger public sector. Second, output is measured as a homogeneous dollar amount. This biases policy toward focusing on increasing quantities of inputs and outputs in the production process, rather than on innovation and entrepreneurship, which are the true engines of economic progress. Economic policy could be improved by focusing less on national income as an indicator of policy, and more on the underlying processes that foster economic progress.

Journal

The Review of Austrian EconomicsSpringer Journals

Published: Oct 27, 2004

References

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