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GDP & Beyond: Measuring Economic Progress & Sustainability. J. Steven Landefeld, Director. SGE Annual Conference September 21st, 2009. Long Standing Issue. Kuznets original concerns regarding the scope of the original accounts

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Gdp beyond measuring economic progress sustainability

GDP & Beyond: Measuring Economic Progress & Sustainability

J. Steven Landefeld, Director

SGE Annual Conference

September 21st, 2009


Long standing issue
Long Standing Issue

  • Kuznets original concerns regarding the scope of the original accounts

  • "Too much and too long, we seem to have surrendered community excellence and community values in the mere accumulation of material things. Our gross national product, if we should judge America by that, counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors…

    Yet the gross national product does not allow for the health of our children, the quality of their education, or the joy of their play…it measures everything, in short, except that which makes life worthwhile. And it tells us everything about America except why we are proud that we are Americans."

    -- Robert F. Kennedy Address,University of Kansas,

    Lawrence, Kansas, March 18, 1968


Long standing issue1
Long Standing Issue

  • “The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity; on the ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good.”

    -- President Barak Obama, Inaugural Address, Washington D.C., January 20, 2009


Long standing issue2
Long Standing Issue

  • “The big question concerns whether GDP provides a good measure of living standards. In many cases, GDP statistics seem to suggest that the economy is doing far better than most citizens' own perceptions. Moreover, the focus on GDP creates conflicts: political leaders are told to maximize it, but citizens also demand that attention be paid to enhancing security, reducing pollution, and so forth - all of which might lower GDP growth.

    The fact that GDP may be a poor measure of well-being, or even of market activity, has, of course, long been recognized. But changes in society and the economy may have heightened the problems, at the same time that advances in economics and statistical techniques may have provided opportunities to improve our metrics.”

    -- Joseph Stiglitz, Economist.com, September 10th 2009


What can we do within the nipa s economic progress sustainability
What Can We Do Within The NIPA’s: Economic Progress & Sustainability

  • Measures of Economic Progress:

    • Households

    • Regions

    • Business

  • Measures of Sustainability:

    • GDP

    • Investment

    • Asset Prices

    • Leverage





Household income cash income
Household Income: Cash Income* Sustainability

**

  • * Cash income refers to income generated from the economy available for discretionary spending by households. This measure of Income excludes spending on such basics as food, shelter, clothing, child care, utilities, out of pocket medical care expenses, transportation and interest payments on consumer debt. Source: BEA NIPA data, deflated using PCE less food and energy price index.

  • ** The slightly higher average annual growth rate in real DPI versus real discretionary income reflects the different deflators used to deflate each measure. The total PCE price index (used to deflate DPI) increased 2.3% from 2000-2002 and the PCE less food and energy price index (used to deflate discretionary income) increased 2.0%. Nominal DPI and discretionary income over the same time period increased 5.1% and 4.9%, respectively.


Regional household income
Regional Household Income Sustainability

Adjusting for regional price differences

Source: BEA Regional data.


Regional household income1
Regional Household Income Sustainability

Impact of classifying retirement income in state of residence

Source: BEA Regional data.


Sustainability
Sustainability Sustainability

  • Measuring Sustainability:

    • Long-Term

    • Examples from Recent Experience


Business income real gdi ndi
Business Income: Real GDI & NDI Sustainability

Source: BEA NIPA data


Business income real gross net domestic investment
Business Income: Real Gross & Net Domestic Investment Sustainability

Source: BEA NIPA data


Housing personal income
Housing & Personal Income Sustainability

Ratio of Residential Fixed Investment to Personal Income

Source: BEA NIPA data & Federal Reserve Board Flow of Funds data


Equity prices nipa profits gdp
Equity prices, NIPA profits & GDP Sustainability

Source: BEA NIPA data, Standard and Poor’s data


Household asset values savings
Household asset values & savings Sustainability

Source: BEA NIPA data & Federal Reserve Board Flow of Funds data


Business sector leveraging
Business Sector Leveraging Sustainability

Source: BEA/FRB Integrated U.S. Macroeconomic accounts


Missing the mark
Missing the Mark Sustainability


What else should we highlight
What Else Should We Highlight? Sustainability

  • The thrust of the Economist cover story (and others like it) is that economists failed to adequately incorporate risk and the financial sector into their models of the real economy

  • We need to provide them with the toolkit to help do that.


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