The NIPA Revisions

This week, the government will revise the entire NIPA dataset which includes GDP. The GDP figures will be revised about 3% higher. Of course, it’s just on paper but it reflects how we think about the economy.

Matthew Yglesias explains:

Good news, Americans—you’re about to get richer.

Well, not you, personally. But you in your capacity as a citizen of the mightiest economic empire the world has ever known. The Commerce Department’s Bureau of Economic Analysis is prepared to announce that America’s gross domestic product is 3 percent larger than previously estimated—about $1,500 extra worth of goods and services per person. What did we do to get so lucky?

Nothing. We did nothing. But we’re getting richer anyway. As Robin Harding first reported over the weekend, we’re getting richer on paper because the BEA is changing how it calculates the national income and product accounts (NIPA) to bring it into line with recommendations promulgated by the United Nations back in 2008. The main idea is that in an economy that increasingly depends on the production of intangible goods, we need to recognize that the production of ideas is an important form of investment. So in the future, the BEA is going to count a company’s research and development as a form of investment just like the purchase of a new office building. And the creation of a durable work of art—a film, a season of television—that can be sold year after year will, likewise, be treated as a capital investment. These new calculations will also be applied retroactively, and thus, like magic, we’ll all be richer. Or, at a minimum, learn that we’ve been richer all along.

Posted by on July 29th, 2013 at 1:03 pm


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