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National Income Accounting and Public Policy

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  • Randall G. Holcombe

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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.

Suggested Citation

  • Randall G. Holcombe, 2004. "National Income Accounting and Public Policy," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 17(4), pages 387-405, December.
  • Handle: RePEc:kap:revaec:v:17:y:2004:i:4:p:387-405
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    Cited by:

    1. Vaclav Rybacek, 2016. "Is The Size Of Government Underestimated? On The Treatment Of Market In Macroeconomic Statistics," Romanian Economic Business Review, Romanian-American University, vol. 11(4), pages 85-90, december.
    2. Christopher Coyne & Rachel Mathers, 2009. "The Fatal Conceit of Foreign Intervention," Working Papers 09-06, Department of Economics, West Virginia University.
    3. François Facchini, 2007. "Entrepreneur et croissance économique : développements récents," Revue d'économie industrielle, De Boeck Université, vol. 0(3), pages 3-3.
    4. repec:rau:rseijr:v:1:y:2017:i:4:p:74-81 is not listed on IDEAS
    5. Fabrizio Antolini, 2016. "The Evolution of National Accounting and New Statistical Information: Happiness and Gross Domestic Product, Can We Measure It?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 129(3), pages 1075-1092, December.

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