Tuesday, July 30, 2013

The difference between DOC and DOA*...  

Is that the Department of Commerce works to get better, unlike the Dept. of Ag (NASS - I'm talking at you).
The big picture is this: Recalculating the treatment of all “artistic originals” that fit the bureau’s definitions would have increased the economy in 2007 by about $70 billion, or 0.5 percent. And R.& D., particularly in the field of biotechnology, would have added more than $200 billion. Combined, these two changes would have swelled G.D.P. by almost 3 percent, Mr. Kornfeld said. How it will affect G.D.P. this year and in the restatement of past numbers was being calculated as we spoke. Brent R. Moulton, the bureau’s associate director for national accounts, said the statistics would be out this week. He noted that other nations had been making such shifts as well.
The changes could have profound implications. R.& D. and the creation of entertainment originals have generally been treated as a cost of doing business, reducing G.D.P. Now they will be recognized for their potential to add economic value for years to come. Business software has been treated this way since the 1990s. “It makes sense to expand our definitions,” Mr. Landefeld said. “That’s something the bureau has done for decades.”
But the bureau’s changes will widen the gap between corporate and national economic accounting, said Baruch Lev, a professor of accounting and finance at New York University. Despite the change in G.D.P. accounting, he said, R.& D. is still generally treated as an expense, not as an investment, in calculating profits and tax liability.
“National accounting — G.D.P. accounting — is giving us a more accurate picture of the world,” he said, adding that various intangibles might constitute as much as 50 percent of the value of publicly traded companies. These assets don’t show up on corporate balance sheets, he said, keeping investors “in the dark about the true value of many of the companies traded in the stock market.” [More]
I would offer that even our ancient sector is subject to changes in wealth creation and structure. Yet doing things we've done them since we used pencils (and no faster!) is ingrained in our government monitor. 

As more of our economy arises from intellectual and seemingly ephemeral goods/services, better acknowledgment of this change in the statistics will guide policy toward better outcomes. It also prevents undue emphasis remaining on tangible production as "real" and deserving more favorable treatment.

*I think I'm going to use this apt acronym for the Department of Ag more often.


Greg said...

1st blog'g in to say entertain'd/inform'd/encouraged by your words this am .. thanks for try'g to help
reprint of my comment @TBP - I'm stick'g to it .. but the outlink concepts has me spin'g
"what GDP should be renamed to = GROSS domestic Production
story, song & dance, paper push (legal & cash) “Production”
so GDP = “Gross” (j6p word mean’g) “Domestic” (usa books) “Push” (sales)
“Product” is not even half the story

sometimes I wonder what feudalist flag* people work for .. other than that casholla (its so complicated)

* coda – corporate castle flag"
sometimes my mind spins beyond what my fingers type .. (or maybe a room has heard before) the overpopulation theme and a worthy** job for all

** worthy is the keyword - on a planet of defined production capability and near once in a dinosaur lifetime of buried minerals .. aka some GDPush jobs just burn precious

Hilda said...