A History of National Accounting

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Courrier des statistiques, English series no. 9, 2003 35

To produce a history of nationalaccounting is a bold wager, even ifthe result is but one history amongseveral. In the afterword, written inthe first person singular, Andr Vanoliexplains the genesis and purpose ofhis endeavor.

Vanolis book bears the stamp ofhispersonality and professional

career. This is reflected in the choiceof topics addressed (a choice that isbound to come under scrutiny, giventhe works ambition), the emphasison certain periods over others, andthe links between the internationalsetting and national experiences,between national-accountingconcepts and economic theories,and between the construction ofnational accounts and statistical

systems. Vanoli became involved inpreparing Frances national accountsin the 1950s, an activity that he latercombined at INSEE with his duties ashead of the Institutes statisticalcoordination and internationalrelations. In sum, the author hasplayed a key role in the evolution ofFrench national accounting and ininternational discussions. Another

aspectand not the leastsignificantis that the author wasalso a protagonist of the story he tellsus, at least during the last fourdecades of the twentieth century.2 Inso doing, he takes sides, recountingthe debates that led to a particulardecision and the opposing viewsexpressed in the decision-makingprocess; in some cases, he disputesthe positions eventually taken; and

he outlines scenarios for the future.From this standpoint, his narrative isalso a committed history (histoireengage) in the best sense of the term.

A History of national accounting

1. In particular, we could not summarize allthe aspects of the very substantial chapter 8on the links between production, income, andwealth. Likewise, we have merely touchedupon some key points in chapter 10.2. He set up Frances National Council onStatistical Information (Conseil National de

lInformation Statistique: CNIS). He wasclosely involved in the internationalharmonization of national-accountingsystems, particularly the work leading to the1970 ESA and the 1993 SNA/1995 ESAthestandard system in use today. Vanolisupervised the creation of national accountsin several countries including Colombia,Ecuador, Peru, Brazil, Tunisia, and Greece.Chairman of the International Association forResearch in Income and Wealth (IARIW) from1977 to 1979, he has headed the FrenchNational Accounting Association (Associationde Comptabilit Nationale) since its foundingin 1983.

This article offers a summary of the book byAndr Vanoli,former senior statistician (directeur)at INSEE, entitledUnehistoire de la comptabilit nationale (A history of nationalaccounting [in French], Paris: La Dcouverte, 2002).* Becauseof the scale of the topic, the variety of methods and

approaches, and the wealth of documentation, it was neitherfeasible nor desirable to aim at a comprehensive summary ofsuch a book. Indeed, we have had to set aside some importantaspectsan arbitrary process, as selections of this kindinevitably tend to be.1 We have also sought to go beyond amere abstract by rearranging the different chapters around afew broad issues. Our presentation, therefore, does not strictlyfollow the books outline. This choice reflects the way in whichthe author of the article has read the book, interpreted it, andattempted to define its main contributions.

* To be published in English by IOS Press (Amsterdam) in February 2005.


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A first-rate manualof high educational value

Andr Vanoli has scored an impressive pedagogic achievement. For this, he has relied on his outstanding professionalexperience, at the national and international levels; on his incomparable knowledge of national-accounting systems,issues, and debates; and on his ability to show the connections between national accounting and the historical andinstitutional contexts, economic theory, and the advances in methods and tools of statistical observation. But thehigh caliber of this exposition would not be so significant without the authors remarkable teaching skills. These areconveyed in a lively, incisive style (the book is spirited, as the publishers blurb puts it), combining precision,simplicity, and rigor.

These qualities are also rooted in the booksarchitecture, which would be hard to overemphasize. The ten chaptersare each composed of four building-blocks:

The text itself, focused on the most critical points of the topic covered. Vanoli goes straight to essentials, withoutactually burdening the reader with technical argumentsalways plentiful in national accounting.

A set ofboxes (75 in all!). In the authors words: One of their main purposes is to make the book accessible toreaders who have only some general ideas about national accounting or, conversely, to help them skip a moretechnical discussion. Are the boxes only for non-specialists? Far from it, in the opinion of the author of this article:so many boxes wonderfully illustrate the link between the high quality of the text and the authors expository skills.

Also worth stressing are the boxes on terminology and vocabulary, in particular the one on the term real (p. 513).Such discussions are essential in a work of this kind.

Outlooksections at the end of each chapter, combining conclusions and links to other topics. Let there be nomisunderstanding, however: contrary to the clich, hurried readers will not be able to confine themselves to theoutlooks, under pain of missing out on the books richness. The outlooks stimulate the reader to think about theissues. In a way, they invite the reader to identify the most salient points in each chapter, and to relate the content ofa given chapter to the books other chapters. In sum, the outlooks foster truly active reading.

Suggested reading, in lieu of a general bibliography. Vanoli explains the reasons for his choice in the introduction.He shows its advantages as well as its few drawbacks. The author of this article does not share his doubts. In fact,I greatly enjoyed reading these sections. For once, we are faced not with a litany of references, but a genuine

extension of the main text. Ultimately, the suggested readings are another way of writing the chapters. I cannot urgereaders too strongly to follow this advice, i.e., they should not skip the suggested reading sections under anycircumstances.

Last but not least, Andr Vanolis book contains two indexes: a name index and a subject index. The names arelinked to the suggested readingsa valuable feature. Above all, the subject index is, in fact, the index of the bookssubstance. It is thus an instrument for navigating and finding ones way around the volume, and for quickly identifyingwhat topic is discussed, and how and where it is discussed.


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By comparison with other works onnational accounting and its history,the contributions of Vanolis bookare diverse. However, we can groupthem under four broad headings,which can serve as an interpretative

framework for our reading:

a long-run history, from the mid-seventeenth century to the beginningof our era;

a worldhistory but closely tied tonational experiences andpractices. Internationalstandardization has been conductedin parallel withand sometimes inopposition tothe national-accounting systems graduallyintroduced in different countries. Atthe same time, standardization relieson these experiences, enhancesthem, and alters them.

a history in which the issues raisedby national accountants areexamined in their historical andpolitical context. This approach ismost evident in the discussions onthe environment, on the relationshipbetween national accounting andwelfare, on the measurement of non-market activities, and on the

assessment of wealth;

a history of the relationshipsbetween national accounting and thechanges in statistical systems andeconomic theories.

A long-term history

This title may seem surprising, giventhat long-term history is anapproach often linked to the

emergence of Keynesianism ineconomic theory. Yet there is a longterm in this history: the need tocount what a nation produces, and tocompare this measure with thevalues for other countries, was felt asearly as the seventeenth century.Admittedly, such initiativeswhichgovernments did not alwaysappreciatewere long promoted byprivate individuals. Moreover, theseundertakings did not rely on anational-accounting system in the

current sense of the term, nor didthey seek to produce one. They

were, in a way, the forerunners ofnational accounting. The 1930sunquestionably marked a turningpoint, but its determinants werecomplex. In any event, it would be anunwarranted simplification to reducethese determinants to the impacthowever momentousof the work ofJohn Maynard Keynes.

Estimates of national income:

King and others

The starting point, therefore, was theseries of attempts to estimatenational income from theseventeenth century onward. Theseefforts, the work of isolatedindividuals, chiefly aimed to assess acountrys economic strength forcomparative purposes or to providea basis for tax reform. GregoryKings work is exemplary in thisrespect. Not only did he propose a

measure of national income forEngland, France, and Holland, but hecompiled a series from 1688 to 1695,and extrapolated it to 1698. Alsoremarkable is the accountingframework that he developed forthese estimates.3 In a way, Kingassessed national income in incometerms and expenditure terms, whileseeking to reconcile the twoapproaches. He compiled anincome-expenditure account forgovernment and private individuals,

with a breakdown of personal finalconsumption into several products.

He also showed the balancebetween national saving andinvestment, and described exchanges(exports and imports) with the rest ofthe world. Richard Stone describesthis as a brilliant startand that

is an understatement! Otherendeavors in France (Vauban andBoisguilbert) and England (Petty)deserve mention as well.

The eighteenth century did not seedecisive progress. It even created adisturbance with the work ofFranois Quesnay. Admittedly,Quesnay introduced a perceptiveanalysis of the economic circuit interms of flows of goods and incomedistribution. But he confined theproductive sector to those activitiescapable of generating a surplus,most notably agriculture. This choicewas to weigh on the perception ofnet product (the equivalent of valueadded) and hence of national incomein the following century. While themarginalist revolution severelychallenged the approaches ofQuesnay and Adam Smith, it did nothave immediate consequences onthe estimates of national income.

The 1930s break and Stonesmemorandum

The Great Depression of 1929, theneed for far more aggressivegovernment intervention, and theemergence of macroeconomics fromits Keynesian theoretical foundationschanged the situation radically. Thiswas especially the case in the UnitedStates and Britain, but also in theScandinavian countries and theNetherlands; at this stage, France

kept a very low profile. Vanoli does,however, show the complexityof thechanges under way. On the onehand, the aim was to update thenational-income estimates using atheoretical framework renovated byKeynesianism. The latter emphasizedthe links between the majoraggregatesmainly income and its

Lord John Maynard Keynes, 1883-1946

3. We refer here to the modern description byPhyllis Deane, the British historian of

economics and national accounting (seeVanoli, pp. 26-27).


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On pages 22-23 of Vanolis book:

* Note: This column does not appear in the original.Source: G. E. Barnett (ed.), Two Tracts by Gregory King, Johns Hopkins Press, Baltimore, 1936, p. 31 (amended).

Family is the equivalent of our household (including live-in domestic staff, hence the large number of persons per family in the upper social strata).

The rows (from Temporall Lords to Vagrants) show the social stratification of late-seventeenth-century England. The last two lines (totals andaverages) show the increase in wealth and decrease in wealth of the Kingdom. Note that the lower social strata reduce their wealth because they spendmore than they earn. Stone indicates that the Totall expence column is not in Kings original.

Box 2

A remarkable precursor: Gregory King

One account per social category

Presentation slightly amended by Richard Stone, Nobel Memorial Lecture 1984 (p. 8)

A scheme of the income & expence of the several families of England calculated for the year 1688


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components, saving andconsumptionand the saving-investment equilibrium. The resultwas a highly condensed accountingframework. The US nationalaccounts, in particular, were to be

shaped by this approach fordecades. On the other hand, someinitial attempts were made to adaptto the national economy theaccounting approach used bybusinesses, particularly in the US(first by Fisher, then by Copeland)and the Netherlands. This secondapproach did not, however, producetangible results in the short run.Meanwhile, Wassily Leontiefundertook important work on thedetailed analysis of inter-industryrelationships.

The first major step was taken in1945 with Richard Stonesmemorandum. This document wasthe first to propose a completesystem of (institutional) sectoraccounts defined in functionalterms: one sector for the final-consumption function, another forproduction, and so on. Although thecomputation of aggregates remaineda feature of the system, it was nolonger its core component. The

League of Nations4 meeting to whichStone submitted his memorandumopened a new phase in the history ofnational accounting: that ofinternational standardization. Whilein no way denying its importance,Vanoli does not regard thememorandum as the firstinternational recommendation in thearea of national accounting. That wasto come a few years later, with thestandardized system of 1952.

World standardization and

European Community

harmonization

The 1950s and 1960s saw majoradvances in internationalstandardization but also a series ofnational schisms, including theFrench system of national accounts.We shall return to this later. Becauseof the resulting tension, internationalharmonization was somewhat

chaotic. An initial standardizedsystem was created by OEEC (the

ancestor of OECD)5 and the UN inthe early 1950s: the 1952 version ofthe SNA (System of NationalAccounts). The system adoptedsome of the recommendations inStones memorandum, but its mainmodels were the conclusions of the1945 meeting and the US nationalaccounts compiled in the late 1940s(see below). There was an emphasis

on computing the aggregates andbreaking them down into broaditems, but the institutional-sectoraccounts were skimpy. Model tablesshowed the decomposition ofselected items, in particular netproduct (or net value added) byindustry: this enhanced theaccounting structurebut alsocomplicated the new system.

The SNA was thoroughly overhauledin the 1960s with the preparation of

a second version: the 1968 SNA.After the Stone memorandum, theSNA revision was a crucial stage,and Vanoli clearly shows its impactand scope: an input-outputanalysis for products; a morecomprehensivealbeit stillinadequateapproach to sectoraccounts, with, in particular, theinclusion of financial transactions;valuations at constant prices;breakdown of value changes intovolume changes and price changes;

decisive advances in the valuation oftransactions in goods and services;

clarifications in the definition andmeasurement of aggregates, withGDP (gross domestic product) as thedominant concept; and so on. As asystem intended for world use, the1968 SNA was ahead of its timea

characteristic that actuallyfostered incomprehension andmisunderstandings regarding itsactual impact.

The 1960s also saw the start ofnational-accounting harmonizationin the European Community(EC), resulting in a newinternational system of nationalaccounts: the 1970 version of ESA(European System of IntegratedEconomic Accounts). While

sometimes portrayed as the ECversion of the 1968 SNA, ESAdiverged from the latter on severalcrucial points.6 This is due to itshaving been heavily influenced bythe French experience in nationalaccounting, Vanoli himselfauthored Proposals for aCommunity framework of nationalaccounts in 1964.

In return, ESA made a powerfulcontribution to the revision of the

French accounts, leading to theSECN (Systme largi deComptabilit Nationale: EnlargedSystem of National Accounting) in1976. ESAs novelty with respectto SNA is also dueindeed,mainly dueto the intensity of thestandardization that it implies. It isa far more stringent benchmark forthe European countries than SNAat the world level. This feature was tobecome ever more pronounced asEuropean integration deepened.

4. Soon to be succeeded by the UnitedNations.5. OEEC: Organization for EuropeanEconomic Cooperation; OECD: Organizationfor Economic Cooperation and Development.6. ESA is also a model of clarity bycomparison with the 1968 SNA. Indeed, thishas been one of the enduring characteristics ofthe European system by comparison with theworld system. However, the 1993 SNA is

substantially clearer than the earlier versionand far richer than the 1995 ESA.

Sir John Richard Nicholas Stone, 1913-1991,Nobel Prize in Economics, 1984


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From page 123 (in translation):

Box 16

General chronology of international harmonization

Year Refer to

1944 Tripartite meeting between the UK, the US, and Canada Appendix chap. 3,in Washington pp. 173-74

League of Nations meeting in Princeton; Stone memorandum Chap. 1, pp. 44-47;1945 (published 1947) chap. 3, appendix,

pp. 174-75

1949-Simplified OEEC system. Chap. 3, p. 1751950

1952Standardized OEEC system.

Chap. 2, pp. 72-78, 81-84United Nations SNA (first generation).

1963 Proposal for a concept of total consumption by the population, Chap. 3, p. 139as a link between SNA and MPAS.

1968 United Nations SNA (second generation; prepared 1964-68). Chap. 3, pp. 124-33and appendix, pp. 177-79

1970 European Community ESA (prepared 1964-70). Chap. 3, pp. 134-37 andappendix, pp. 175-77, 179

1971Basic principles of material balances system (MPAS), Chap. 3, p. 139published by UN.

1976

Publication of French SECN (groundwork 1967, prepared

Chap. 3, pp. 139-401970-75). French National Accounting System (ComptabilitNationale Franaise: CNF) abandons independent systemcreated in early 1950s.

1977UN comparisons between SNA and System of balances of

Chap. 3, pp. 138-39national economy (end of process begun twenty years earlier).

1989Revised version of basic principles of material balances system(MPAS), published by UN.

Chap. 3, p. 166

1990MPAS ceases to exist as alternative international system,despite a brief survival in a few economies.

Chap. 3, p. 166

1993SNA (third generation) under the quintuple aegis of UN, IMF, Chap. 3, pp. 142-47,World Bank, OECD, and European Community 150-51, 154-65 and(prepared 1986-93). appendix, pp. 179-87

1995 ESA (European System of Accounts) corresponding toChap. 3, pp. 142-47,

1993 SNA.150-51, 154-65 andappendix, pp. 179-87


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The 1993 SNA: a universal system

of national accounts

The two key events in this history atthe close of the twentieth centurywere the new SNA revision (1993version) and the subsequentintroduction of a new ESA (1995

version). Vanoli was one of the crucialplayers in this revision process.Beyond the technical aspects, hisbook underscores three vital points.First, the 1993 SNA/1995 ESAaccounting structure has probablyreached a plateau, subject to minoradjustments. By contrast, despite thefuller definition of the concepts ofconsumption and income, and thebroadening of the concept of GFCF(gross fixed capital formation), somemajor problems are still inadequately

addressed. The author makes thecrucial observation that the maindifficulties lie in (1) the connectionsbetween flows and assets, and(2) the relationships between past,present, and future involving, amongother things, the concept of income.Second, the 1993 SNA marks thethird basic stage in the internationalstandardization process, after thestandardized system of 1952 and the1968 SNA/1970 ESA. The Europeansystem has become fully consistent

with the world system and we cannow characterize ESA as an ECvariant of SNA. Moreover, SNA(and/or its ESA version) is becomingthe norm in most countries: thenational accounting system of theformer socialist countries (MaterialProducts Accounting System: MPAS)is gone, China adopted SNA in theearly 1990s and, last but not least,the US is moving toward SNA. Third,the SNA is sustained not only by theUN but also by a set of other

international organizations includingthe International Monetary Fund, the

World Bank, and OECD. Thisimportant development has driventhe convergence between SNA andother standardized statisticalsystems at the global level: balanceof payments, public finances,

monetary and financial statistics.

World history andnational experiences

One of the chief contributions ofAndr Vanoli s book is hishighlighting of the links betweeninternational standardization and thechanges in national accounting inindividual countries. Let us take threeexamples to illustrate this

phenomenon: France, the US, andthe socialist or ex-socialistcountries.

France: an independent course,

but a strongly international impact

France did not actually join in thepost-1929-crash trend toward thedevelopment of national-accountingsystems. Vanoli speaks of shoddystatistics and lack of official interest.Indeed, France had no national-

accounting system at the end ofWorld War II and did not attend thePrinceton meeting at which theStone memorandum was presented.The situation changed quickly in thelate 1940s and especially with thecreation of the Economic andFinancial Studies Department(Service des tudes conomiqueset Financires: SEEF) in 1950. Thistriggered an almost unprecedentedexpansion of French nationalaccounting, which Vanoli analyzes in

detail in chapters 2 and 10. Of thiscomplex history, let us focus here onsome selected aspects, in particularthe connection between an initiallyindependent approach and its laterability to exert a decisive influence oninternational standardization.

French national accountingdeveloped in the 1950s in two maindirections. First, SEEF initiallydesigned the tool for the primarypurpose of compiling economic

budgets, i.e., one or two-yeargeneral forecasts. This approach had

a strong impact in several areas,such as: arrangements for compilingthe accounts; some conceptualchoices, particularly the treatment ofgeneral government but alsoinsurance companies and financial

institutions; the role of aggregates(less conspicuous than in theEnglish-speaking countries); and theoverall accounting structure. Theapproach was also responsible for alack of interest in preparing accountsfor the past. Second, the SEEF teamwas highly critical of internationalstandardization as expressed in thefirst international system (1952 SNAand OEEC system): too general, toofunctional, too confused in itsarchitecture and too fragmentary inits coverage, as Vanoli puts it. SEEFspelled out its view of the conceptsand framework of national accountsin a memorandum by Claude Grusonpublished in 1950 and, more fully, ina document of September 1952entitled Principles for the preparationof national accounts and an

economic accounts table. Theambitious project, authored by LouisBlanc, Ren Mercier, and CharlesProu, marked a sharp break with theprinciples then prevailing at theinternational level: it took into

account the flows of goods andservicesincluding inter-industryflows but also using as a basis theconcept of an enterprise activitysector (secteur dactivitdentreprises: approximately, anindustry); it introduced financialtransactions; and it offered an overallsummary in the form of an integratedeconomic accounts table. Thedocument also stated the principle ofrecording transactions on an accrualbasis, with a subdivision into

transactions in goods and services,transfers, and financial transactions.

The 1960s were a momentousperiod for French nationalaccounting. Three major base-yearsystems were introduced insuccession from 1955 onward (base-1952 in 1955, base-1956 in 1960,and base-1962 in 1969), eachbringing remarkable advances indepth of coverage. By the end of the

1960s, the French national accountspossessed a structure unmatched

EuropeanCo

mmissionMediaLibrary


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in the world: an integratedeconomic accounts table; input-output tables at current prices, atyear-earlier prices, and at set base-year prices; supply-and-use tablesby product for over 400 products;

accounts of non-financial enterprisesby industry; household accounts bysocio-occupational category forselected years; and tables offinancial transactions. Ultimately, theonly missing components werewealth accounts and changes-in-assets accounts. The 1960s also sawthe vigorous expansion of thestatistical base for nationalaccounts, a phenomenon facilitatedby the transfer to INSEE, in 1962, ofthe task of compiling historicalaccounts.

The 1960s equally witnessed thebeginning of the end of theFrench schism. This does not meanthat the French gave up some of theconceptual choices dating back tothe SEEF periodin particular, for thetreatment of general-governmentaccountsbut the preparation of the1970 ESA did provide an opportunityfor a forceful comeback on theinternational scene. The European

system should not be viewed,however, as an EC version of theFrench system. In many areas, ESAadmittedly followed the Frenchnational-accounting system (financialtransactions, inclusion of the input-output table into the system,classification of transactions intothree broad categories); but in otherareas, particularly in the productionsphere, it did not. This is becauseESA had to take other experiencesinto account, especially the SNArevision (1968 SNA), whoseimportance we stressed earlier.

The implementation of the SECN(base-year 1971) in 1976 ended theperiod of divergence between Frenchnational accounting and internationalstandards, at least at the EuropeanCommunity level (ESA). In particular,the French accounts extended thecoverage of output to servicesperformed by general government(and non-profit institutions). Yet the

SECN continued and redesignedthe specific features (as against

divergences) of the French accountswith respect to international systems:the integrated economic accountstable, which had not beenincorporated into ESA; the inclusionof wealth accounts, with initial

valuations; the establishment ofsatellite accounts; the concept of anintermediate system forenterprises; and so on. In Vanoliswords, the SECN did not negate anyof the achievements of Frenchnational accounting in the previousquarter-century, but nowincorporated them into astandardized international frameworkand opened up new prospects fornational accounting.

These prospects materialized at theinternational level during therevision of the SNA for the 1993version, which triggered the revisionof ESA for its 1995 version. The 1993SNA incorporated the wealthaccounts, satellite accounts andanalyses, and integrated economicaccounts table, and evenalbeit lessfullythe concept of intermediatesystem. The fact remains, however,that the deepening of the Frenchaccounts and of international

standardizationalready under wayat the time of the preparation of the1970 ESAbecame far moreintense. Indeed, the 1993 SNA, forthe first time since the 1950s, wentfurther than the French system inseveral areas. This unquestionablysignaled a new era for nationalaccounting.

A final point is worth emphasizing inthe light of Vanolis work. The gradualconvergence and reciprocal

enrichment of the national systemand international standardsexemplary in the case of Francedonot suffice as such to ensure theinternational comparability of thevaluations derived from the nationalaccounts. The comparison requiresan even more complex processinvolving the statistical sources used,their processing, the consolidationand reconciliation methods appliedin preparing the accounts, and soforth. On these issues, we cannot

recommend too strongly a closereading of chapter 5 of Vanolis work.

US accounts: distinctive concerns

The United States was a leader inplanning an accounting system forthe national economy in the 1930s,even if these preparations had no

immediate concrete effect. Inparticular, the Senate requestedestimates of national income. Thisled to an official publication edited bySimon Kuznets in 1934 on nationalincome from 1929 to 1932, with abreakdown by industry and incomecategory. Additional estimates forfinal domestic expenditure itemswere prepared in the late 1930s.

These efforts continued throughoutthe war years, with an emphasis onmeasuring gross national product(GNP)the US was the first to usethe conceptand its components, ina context of surging militaryexpenditures. The wartime periodwas also an opportunity to modifyKuznetss accounting structure. Twokey changes were introduced. First,US accounts switched from avaluation of aggregates at factor cost(i.e., based on payments to factors)to a valuation at market prices. Inpractice, this meant that GNP nowincluded, in addition to income in the

form of corporate profits, interest,and compensation of employees, thetaxes collected by generalgovernment (minus productionsubsidies to producers)inparticular, taxes on production.Likewise, final consumption was

Simon Kuznets, 1901-1983,Nobel Prize in Economics, 1971


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calculated with the inclusion of(indirect) taxes on it. This changemay seem a technicality. In fact, asVanoli repeatedly shows, it was amomentous shift. Second, the USaccounts were the first to introduce

estimates at constant pricesalongside those at current prices.They also included quarterlymeasures: The main elements of thefuture US system were now in place.

The US system went through adecisive phase with the publicationof the National Income andProducts Accounts (NIPA) in 1947.The NIPA included six major tables: aGNP/national income table;consolidated accounts of businesses

and general government; an accountof flows with the Rest of the World(excluding financial transactions); apersonal income and expenditureaccount (including non-profitinstitutions); and an account showingthe relationship between nationalsaving and investment.7 Thisarrangement is supplemented by aset of about fifty statistical tables,with some series going back to 1929.

The NIPA powerfully influenced the

first SNA version (1952) and theOEEC system. Apart from a fewminor differences, the first version ofthe international system of nationalaccounts closely resembled the USsystem. This situation was to changeradically. US national accountantstook little part in the revision thatproduced the 1968 SNAand theydid not adopt the new system.Their basic accounting frameworkremained the 1947 NIPA, with someamendments. Surprisingly, whereassome US national accountants (e.g.,Carol Carson) played an active role inthe revision leading to the 1993 SNA,the earlier situation persists to thisday. True, the US accounts aregradually adopting therecommendations of the 1993 SNAwith quite a few difficulties, as Vanolishowsbut the established NIPAframework does not appear to havebeen challenged. This illustrates thetraditional US resistance to theadoption of international standards,as, for example, in business

accounting.

Actually, the US was following anovel approach to nationalaccounting. First, it developed adhoc systems outside the nationalaccounts, for example concerningfinancial flows (the Feds flows-of-

funds), the input-output tables, andthe wealth accounts. Althoughconsistency was one of the goals, itwas not a short-term priority.Second, there is a close linkbetween national accounting andapplied economics in the US. Thischaracteristic has given rise to anAmerican school of nationalaccounting, as Vanoli shows inchapter 10. The schools key featuresinclude: continuity and backwardextrapolation of series; emphasis on

quarterly accounts; in-depthinvestigations of such areas asmeasuring growth and productivity,and the relationships between flowsand assets; establishment ofprocedures for debate betweeninstitutions in charge of statisticsproduction, methodologicalresearch, and applied research.

Nothing new in the East

From the outset, national accountingin the socialist countriesparticularly the USSRmoved on anovel track. It relied on one of theinterpretations of the theory of KarlMarx, namely, that whichemphasized the link betweenproductive labor and merchandiseproduction. The socialist countriesthus ignored the interpretation basedon Book IV of Das Kapital (Theorieson capital gains), which discussedthe relationship of productive labor

with capitalist production.The USSR used this theoreticalapproach to lay the groundwork for anational accounting system in the1920s andafter three decadesinterruptionin the early 1950s.What emerged was a system ofbalances of the national economy:one balance covered supply and useof material products; anothercovered training and the primarydistribution, redistribution, and use ofnational income. Adopted by the

European socialist countries and

China, the system took the name ofMaterial Products AccountingSystem (MPAS).

However, MPAS did not remaintotally cut off from internationalstandardization. A comparativeanalysis with the SNA was performedunder the UNs aegis, mainly aimedat compiling conversion tablesbetween the aggregates of the two

systems. National accountants of thesocialist countries also took part inSNA revision talks in the 1960s,reflecting the clear dissatisfactionwith MPAS in some of thosecountries. The socialist countriesworked together in the Council forMutual Economic Assistance (CMEA)and the UN published a version ofthe balances system in 1971.

The crucial turning point came inthe late 1980s. A new MPAS wassubmitted to the UN in 1989, with

features to facilitate convergencewith SNA; Hungary promoted theidea of a super-system that would

Karl Marx, 1818-1883

7. GNP (at market prices) is estimated usingboth the expenditure and income approaches.National income is also shown, but at factorcost. US national accountants therefore didseparate the concepts of GNP and nationalincome, but the difference was solely due tothe valuation system. However, US nationalaccountants noted a statistical discrepancybetween the GNP measures obtained with thetwo approaches. The consolidated businessincome and product account was eliminated

in 1958. There is no GFCF for generalgovernment.


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integrate MPAS and SNA; andattempts were made to presentMPAS as a more suitable alternativeto SNA for the developing countries.But by 1990 the case was closed: theEuropean socialist countries

dropped MPAS altogether in favor ofSNA or ESA. China followed suit in1992.

A history grappling withfundamental questions

What are the ultimate determinantsof the history of national accounting?If we define the field as a quantitativetechnique for representing economicphenomena, we must indeed

address this questionin the sameway as, for example, it applies tobusiness accounting. Although hedoes not tackle the question headon, Andr Vanoli does, in the end,offer a three-level answer in parts 4and 5 of his book. The three levelsare: (1) the basic issues that everyhistorical context highlights at anygiven moment; (2) the needs ofeconomic and social policy-making;(3) the changes in economic theory.These three levels are clearlyinterlinked.

We have chosen three examples toillustrate why and how the basicissues tied to the historical contextinfluence the history of nationalaccounting: (1) the method used tointerpret the connection betweenmarket output and non-marketoutput; (2) the relationship betweennational accounting and welfaremeasurement; (3) the treatment ofenvironmental phenomena.

Market activities vs. non-market

activities

This issue arose with the very firstestimates of national income, inparticular through the debate overthe valuation method: market prices

vs. factor cost.8 Vanoli perfectlydescribes the choices made by someand the hesitations of others. Asnoted earlier, US national accountantsquickly chose valuation at marketprices as this method is directly linked

to the price system that steersconsumer choice. By contrast, Britishnational accountants, following SirRichard Stone and James Meade,long opted for a measure of nationalincome/GNP at factor cost. As Vanoliputs it, There seems to be anunderlying notion that value at factorcost is the true economic value andthat the rest is a disruptivesuperstructure. The choice of factorcost also rested on some theoreticalarguments advanced by Keynes. Thedebate was muddied by a disputable(and disputed) choice of words: ratherthan factor cost, it would be moreappropriate to speak of factorincome.

The measurement issue wasresolved with the preparation of the1968 and 1993 SNAs. In the 1968revision, Stone introduced therelevant concepts, in particular thatof basic price, which he designatedas approximate basic value. In short,the aggregatesfor output, income

or expenditureshould becomputed at market prices. Bycontrast, the measurement of valueaddedby industries or sectors callsfor a special treatment of indirecttaxes. Those levied on products(such as value added tax and excisetaxes) do not enter into producersvalue added, unlike other indirecttaxes. A similar and symmetricaltreatment must be performed onproduction subsidies, using theconcept of subsidies on products.9

This is known as valuation at basicprices, which is, so to speak, half-way between the factor-cost andmarket-price measures. Vanolielaborates on these points inchapter 6. We cannot recommendtoo highly a close reading of hisdiscussion of this fundamental issue,so ably does he strike a balancebetween rigorous description andclear explanation of these verytechnical topics.

However, in the background of themeasurement issue, the real question

was how to treat general government(the State) in the national accounts.The Great Depression of the 1930sillustrated an essential fact, namely,that government intervention hadbecome indispensable for

macroeconomic regulation , themarket having shown worrisomelimits. Events would clearlydemonstrate that governmentactivities were an integral andnecessary part of the economysworkingsand, even more so, ofeconomic welfare. This conclusionwas increasingly corroborated by thegrowth and diversification ofgovernment intervention. Given theintrinsic goal of national accounting,government therefore had to beincorporated into the process. Buthow should government activities becharacterized, how should they belinked to market activities, and howshould they be measured?

The debate was complex, diverse,and long. Indeed, is arguably notover (far from it, some will say).Leading economists took part (ArthurCecil Pigou, John Hicks, SimonKuznets, Colin Clark) and the anglesof approach were varied. There werequestions about the nature of taxes:

should they be treated ascounterparts of a service output or astransfers? Subtle discussions tookplace over the distinction betweendirect taxes and indirect taxes. Therewas much talk about a possibledouble-count with market output ifone accepted the notion ofgovernment output, valued at thesum of costs since there was noother possible method; participantsthen tried to identify the users of thatoutput, as the government performs

collective and individualizedservices; the question arose aboutinvariance in the GDP measure giventhe governments alternative modesof intervention; and so on. In aparallel development, the accountingdescription of government activitiesand its integration into the overallsystem of accounts was subject tochanges, hesitations, and alterations.In a sense, we could read thehistory of the different national-accounting systems through their

approach to measuring non-marketactivities.

8. It will be recalled that the differencebetween the two measures hinges on indirecttaxes, net of production subsidies toproducers.9. An example of subsidies on products wasthat of compensatory aid paid to farmers under

the European Common Agricultural Policy(CAP) reform.


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Vanoli ably describes all thesedevelopments in chapter 6. He alsodoes so by exposing his ownconception, which we can illustratewith the following point. For him,given that a (non-market) output

must be imputed to government, oneof the cruxes of the problem is thebreakdown of that output betweenusers: Regrettably, no-onedemonstrated that, in principle,individualized non-market servicesshould be imputed to households(final consumption) or producers(intermediate consumption) on thebasis of who would need to purchasethem if they ceased to be suppliedfree by government and becamemarket services. This sentence,which refers to the 1993 SNA, in itselflargely sums up the problem.Applying its proposals would haveimportant consequences, includingfor the measurement of GDP.

National accounting and welfare

measurement

The relationship between nationalaccounting and welfare measurementis an issue of considerable breadthwith major potential effects. Vanoli

devotes all of chapter 7 to it, andthere are also some references inchapter 8. Let us survey the differentaspects in order to arrive at an overallview.

The debate was initially theoretical,particularly in the setting of the journalEconomica, where it was launched byHicks (1940). The central questionwas simple: in what conditions can weinterpret the change in nationalincome (over time) as a change in

economic welfare? Microeconomictheory offers a reply based onconsumer satisfaction: if the basket ofgoods and services consumed in tprovides a higher satisfaction than int-1, the change in consumptionreflects a positive change in welfare.We can try to transpose the approachto the social level, but we will facemajor obstacles. It is not reallypossible, except with the aid ofunrealistic assumptions, to define aninterpretation of the change in final

consumption (by volume)and afortioriof total output (GNP or national

income)in terms of the change incollective satisfaction.10

This difficulty, which was of aconceptual kind, did not deter allattempts to connect the national-

accounting aggregates with welfareindicators. Different approacheswere tried. One sought to adjust themeasurement of the aggregates in away that made greater allowance forthe true final purposes of economicactivities. Kuznets was the mainpromoter of this method: hecontested the inclusion of certainexpenditures in final consumption(for example, costs inflated by urbancivilization, or occupational expenses);conversely, he challenged theexclusion of others, principallyhousework services. Othereconomists took up and enhancedKuznetss approach, most notably inthe US (William Nordhaus and JamesTobin), with the same goal ofadjusting the measure of finalconsumption. As a rule, theseattempts did not have a concreteimpact on national accounts.11 Butthey did highlight genuine problemsin national accounting, such as theborderline between final expenditures,intermediate expenditures, and

investment, or the treatment ofhousework services. The inclusion ofthese items would have requireddetailed studies beforehand to avoidthe use of over-arbitrary conventionsthat would have created majordifficulties in interpretation. Oneimportant factor in this context ishuman capital. If it were regarded asgenerating a specific asset thatshould be recorded in the wealthaccounts, Vanoli clearly showsthe substantial problems and

momentous consequences thatwould result for the entire system.

Another approach explored was theuse of multiple indicators.Challenging the notion that a singlemonetary aggregate could expressall the factors contributing toeconomic welfare, some statisticiansand national accountants argued thatmultiple indicators were the onlysolution. The impulse came frompoliticians and social partners (i.e.,

employers and labor unions) in acontext where the economic-growth

model was being called into questionby advocates of a moremultidimensional and socially betterbalanced development model. Thestudies inspired by this movementhave had a variety of repercussions,

some ranging far beyond thefrontiers of national accounting,others involving internationalorganizations: for example,indicators were combined to preparethe Human Development Indicator(HDI) of the United NationsDevelopment Program (UNDP).

The verdict on all these efforts ismixed. Much ado about (nearly)nothing, one is tempted to conclude,despite the importance of the issuesraised. But the debate rebounded

when environmental concernsmoved to the fore. The stakes werenow so high that the problem couldno longer be ignored.

Taking environmental phenomena

into account

Vanoli devotes a large section ofchapter 8 to environmental issues.This is probably, in fact, the densestand most challenging chapter of hisbook, as it tackles intangible

investment, the concept of humancapital, practical problems such asmeasuring consumption of fixedcapital, the structure of changes-in-assets accounts, and the effects onincome and interest measurement.Admittedly, this makes heavy readingfor someone without a firm grasp ofnational accounting.

The environmental issues addressedin the chapter focus on the levies onnatural resources. In this sense, it

does not offer a comprehensive viewof the environmental phenomenarelevant to national accounting. Thisin no way detracts from the

10. Without going into details, we can mentionthe following point: the interpretation of thechange in real national income in terms ofwelfare implies taking into account, one way oranother, the distribution of that income and thechange in that distribution.11. However, we should mention thepublication of estimates of Net NationalWelfare of Japan since 1973. But the indicator

is prepared outside the national-accountingframework.


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Pierre Muller

46

Excerpt from subject index, p. 618, entry for Welfare[Bien-tre]

Welfare, economic welfare

Welfare and NA [national accounts]

search for a rigorous demonstration

physical assessment bases?

marginal/mean utilities

cardinal utility and aggregation of consumer surpluses (Marshall, Pigou)

Pigous analysis

Hicks and the discussion in Economica

ordinal utility

tastes

distribution of income

- new welfare economics

- utility possibilities frontier (Samuelson)

- knowledge of distribution determines that of size (Graaff, Sen)

- named goods (Sen)

- value judgments

search for a composite indicator final uses of economic activity (Kuznets)

relationship between GDP and welfare measurement in SNA

correcting NI [national income] or GDP?

- Nordhaus and Tobin economic welfare measurement

- consumption/investment reclassifications

- additions

- subtractions

- Japanese Net National Welfare, q.v.

- Danish Welfare Indicator, q.v.

- household activities, q.v.

- leisure, q.v.

consumption of goods and services, and distinction between means and ends

externalities, q.v.

conclusion by national accountants

optimal long-term growth models


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importance of Vanolis discussion,which is substantial in its own right.

Natural resources are classified intotwo categories: marketableresources and non-marketable

natural assets.(Natural) marketable resources arethose whose extraction enters into acommercialization process. They canbe non-renewable at the humanscale (such as oil deposits andmineral resources) or renewable(such as timberland and fish-stocks).

Non-renewable resources pose aninitial problem, namely, the treatmentof their extraction in the nationalaccounts. Any industry selling

products extracted from the resourcesimultaneously reduces the volumeof an assetirreversibly, since theresource is non-renewable. Vanolinotes that the founders of nationalaccounting (Kuznets, Stone) wereaware of the problem but did not tryto introduce consequentadjustments. Stone, for example,viewed resources as free gifts ofnature and thus lacking intrinsiceconomic value. At the time, mostpeople probably did not believe in

the effective scarcity of naturalresources at the world level.

This vision is clearly obsolete. Non-renewable resources unquestionablypossess a high economic valueinthe same way as land. The 1993 SNArecognizes this by explicitly includingsuch resources in the wealthaccounts as non-produced naturalassets, recorded at the date of theirdiscovery (exploitability). But we areleft with the issue of their valuation,

since non-renewable resources arevery seldom bought and sold. The1993 SNA uses a rent-basedapproach: the rent is the excess ofthe price of the extracted resourceover total costs, including the returnon invested capital, discounted overthe entire exploitation period. Whilethe principles that informed thischoice are not in dispute, itsimplementation is quite arduous,particularly as regards the choice ofdiscount rate, the computation of

annual rates, and the determinationof the extraction period. On these

points, box 61 of Vanolis bookdeserves careful reading.

A second category of issuesconcerns the recording of theextraction in the accounts. The1993 SNA opts for a solution that,while representing an advance onearlier systems, is nevertheless aholding position. As a result of theinclusion of resources in the wealthaccounts, the extraction is recorded

in the other changes in assetvolume account, one of theaccounts describing the change inwealth between the start of theperiod and the end of the period. Thenon-committal aspect of thischoice lies in the fact that the SNAproceeds as if the asset reductionwere not the direct consequence ofan economic activity. In other words,the negative change in wealth shouldbe reflected in period savings. Buthow are we to translate such a

consequence into accountingterms? Vanoli shows that twoapproaches are possible, oneequating the asset reduction withconsumption of fixed capital, theother treating it as the sale of a (non-produced) asset. If actually applied,both solutions would have strongand rather diverging effects on themeasures of output, value added,distributed income, aggregates(GDP/NDP12), and so on.

Renewable resourceswarrant adifferent treatment, as there is no

asset reduction unless the extractionexceeds the natural growth of theresource. Such situations aredescribed as net extractions. Theproblems are similar to those of non-renewable resources, but even morecomplex, particularly when the rentdisappears even as the extractionexceeds the renewal.

The readers task is not over, though,as he or she must then tackle the

case of non-marketable naturalassets (air, water, etc.). In practice,the aim is not to measure theseassets in monetary termsanunattainable goalbut to determinethe damages caused by theeconomic activity either to agents orto the quality or functions of theassets as such. The recording ofthese damages raises very difficultproblems, particularly as regards thevaluation method. There is also theproblem of adjusting the aggregates

(the notorious green GDP, to use aninfelicitous phrase): the damagesshould be assessedsomeeconomists arguenot only onphysical criteria but also on monetaryones. As Vanoli emphasizes, thisimplies stretching the frontier ofmonetarization almost to infinity, andit claims to endow the measure ofGDP/NDP with a significance in

A small trawler returns to port (Brittany)

Fish-stocks: a tradable, renewable resource

MAE/F.

delaMure

12. NDP: net domestic product, equal to GDP

minus fixed capital consumption. This is theaggregate that should take precedence.


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Pierre Muller

48

terms of sustainability andwelfare.13

National accounting,statistics, and

economic theori(es)

Andr Vanoli discusses at greatlength the relationship betweennational accountingexamined in ahistorical contextand statistics andeconomic theory. Chapters 5, 9, and10, in particular, deal with theseissues. The material offered is veryrich: Vanoli covers a vast range oftopics and approaches. We havechosen three examples here: (1) thequestions on the reliability of national

accounts, (2) the problems ofmeasuring volume and pricechanges, and (3) the relationshipswith economic theory amid the crisisin macroeconomic regulation.

Questions on the reliability of

national accounts

The need to assessand, even moreso, to measurethe reliability ofnational accounts is a relativelyrecent concern. Simon Kuznets was

a pioneer with his estimates of USnational income between the wars.We should also mention PaulStudenski, who, in 1958, publishedan encyclopedic work on national-income estimates since theseventeenth century and on themethods used in different countries.Studenskis book, which Vanoliconsiders unmatched, classifiescountries into three groups byreliability (high, medium or low).

In the 1950s, and even more so in the1960s, there developed anawareness of the importance of therelationship between the reliability orquality of the valuations and thestrengthening of the statistical

system. The French example,mentioned earlier, clearly illustratesthis process. Vanoli shows the two-way relationship that developed.That French national accounting wasa powerful factor in the developmentof the statistical system in manyareas is an acknowledged fact.However, as Vanoli writes,remarkably, this development wasnot confinedas some initiallyfearedto the narrow task of feedingthe national accounts. Vanoli citesthe household sample surveys in acontext where the issue of sharingthe fruits of growth loomed large.We might also mention the businessworld, with the introduction of annualenterprise surveys and, later, theunified system of enterprisestatistics (Systme Unifi pour lesStatistiques dEntreprises: SUSE).That this apparatus should haveproved essential to the nationalaccounts in no way diminishes thefact that it simultaneously laid thebasis for an independent expansion

of business statistics.

True, the relationship betweennational accounting and the growthof statistics displays a differentintensity from one country toanother, as well as sometimesdifferent configurations. First, somecountries (in particular the US andUK) have a strong statistical basethat is ahead of their national

accounting. The momentumprovided by the latter is far weakerthan in countries like France, wherethe situation is arguably the opposite.Second, the priorities defined for thenational accounts are not withoutconsequences on the statisticalsystem. For example, the importanceattached in France to consistencyrequirements in national accountingextends to the notion that statisticsshould play its part in reconcilinginformation. This is far from being the

case in other countries, where theprimary emphasis is on the capacity

to draw on the largest possible dataset. In this sense, the fact that aunified directory of enterprises andlocal units was set up by the early1970s is not unrelated to thecharacteristics of French national

accounting. The same factors help toexplain French national accountantsdesire to intervene in discussions onissues such as the accountingstandards followed by economicagents (not only businesses), therevision of classifications of activitiesand products, and the definition ofstatistical units.14

The issue of the reliability of nationalaccounts is not confined to the

linkage with the statistical system. Italso concerns the preparation of theaccounts themselves. Vanolianalyzes three key aspects: (1) themultiple approaches to summarizingand reconciling measured values,particularly those of transactions ingoods and services; (2) problemsraised by the dichotomy between thereal sphere and the financial sphere(the adjustment); (3) the greaterattention now devoted to measuringlevels (as against rates of change),

notably in the international setting.These aspects highlight: thecomplexity of the problems raised bythe reliability of national accounts;the fact that there is no modelintrinsically more efficient than therest, even though some notions aregaining acceptance as the norm (forexample, the importance ofincorporating a high-quality input-output table into the national-accounting system); the difficultiescreated by the reliability requirement

for measuring levels and, morespecifically, rates of change (inparticular, the valuation of theunderground or informal economy);the implications of the emergence ofa more complex economy, forexample in the financial sector; andso on. All this calls for (1) greaterstatistical efforts, especially asother systems besides the nationalaccounts are affected (most notably,the balance of payments), and(2) renewed attention by economists

to measurement issues and theinteraction with economic theory.

13. The treatment of environmentalphenomena in national accounting is coveredin a (provisional) UN manual entitled System ofEnvironmental and Economic Accounting(SEEA). Presented as a satellite analysis, theSEEA is a remarkable and highly ambitiousconceptual construct. It has also sparkedmany controversies, which are far from settled.A heavily revised version is near ingcompletion.14. The example of French satellite accountsalso deserves mention here, as an illustrationof a vision of national accounting as a vector inthe quest for consistency in statisticalinformation on a given area (specific economic

activity, field of application of economic andsocial policy, etc.).


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Volume changes and price

changes: vital stakes

Chapter 9 addresses the problemsraised by the decomposition of the

value of a flow into its volumechange and its price change. Thechapter is very comprehensive butalso fairly complex, at least in somesections. To illustrate the richness ofVanolis analysis, our discussionfocuses on a single point: thevolume-price breakdown forcapital goods (producer durables).15

The volume-price breakdown ofcapital-goods output and GFCFraises delicate problems both as

regards statistics on producer pricesand the preparation of accounts atconstant prices. Most of theseproblems concern the method formeasuring quality changes, whichare very important, for example, ininformation technology. Qualitychanges need to be incorporatedinto the volume change. Should theybe estimated from the producersstandpoint or the users standpoint?An init ial discussion took placeamong US economists specializing

in productivity measurement andgrowth accounting (Edward Denison,Dale Jorgenson, Robert Gordon, ZviGriliches, Jack Triplet, and others)and a consensus emerged that thequality changes to be included in thevolume change should be equatedwith the change in the goodsperformance. In this sense, thevolume of capital goods shouldchange in step with their productivity.This debate impacted the national-account valuations. Hardly

surprisingly (see earlier section: USaccounts: novel concerns), the USaccounts paved the way: in the mid-1980s, the method for calculatingcomputer output volume wasamended to conform with thetheoretical recommendation. Othernational systems followed, includingthe French accounts. This requiredtheoretical adjustmentshedonicmethods, pairing methodsto allowfor the practical impossibility ofsimultaneously measuring all the

factors affecting changes inperformance.

From that starting point, Vanoli offersan extremely interesting analysis. Hestresses that this reconsideration ofthe volume-price decompositionfor investment illustrates thecontribution of cooperationbetween economists, statisticians,and national accountants. He thenassesses the impact of the shift,which poses formidable interpretationproblems. In particular, theimprovement in performance for theproducing branches is counted as achange in their output volume,

resulting in an increase in GDPvolume. Meanwhile, the userbranches, too, record an increase inoutput volume, whose counterpart isan increasevia GFCF in capitalgoodsin the volume of fixed capital

15. Chapter 9 deals with nearly all the issuespertaining to volume changes versus pricechanges. In particular, Vanoli discusses:(1) valuations at fixed prices vs. at previous-year prices, (2) the determination of valueadded in volume terms, and (3) international

price and volume comparisons, in particular ona purchasing power parity (PPP) basis.


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Pierre Muller

50

used by the branches. However, thisincrease in the volume of inputs infixed-capital form does not lower theGDP level, since it is measuredbefore the deduction of consumptionof fixed capital. The new approach

thus sets up a potential bias in themeasurement of growth via GDP.16

All this calls for substantial analysis,in particular on the measurement offixed capital and fixed-capitalconsumption, especially as thephenomenon prevailing in thecomputer world is accelerating andwidening as technical progress gainsmomentum (cf., in particular,automobiles). As Vanoli notes, apartial renewal of economic history isat stake.

National accounting and

economic theory

In a way, the issue of the relationshipbetween national accounting andeconomic theory informs much ofVanolis book. Changes in economictheory are indeed one of the driversof the history of national accounting,even if the connection often worksthrough indirect channels. We cannothelp being impressed by the list ofeminent economists who, in oneway or another, have taken part in thediscussions and controversies overnational-accounting issues: thisrecord is all the more remarkable as itstands in sharp contrast to thepresent situation.

Parts 4 and 5 of the book are thosethat deal most directly with the linksto economic theory, but usingdifferent approaches. In part 4, therelationships center on the analysisof fundamental issues common to

national accounting and economictheory, such as: definition andmeasurement of welfare at themacroeconomic level; connectionbetween output, income, and wealth;concept of income, concept of

volume and prices; and national-accounting practices. Some specificaspects of these issues werediscussed earlier. In part 5 (Policy),Vanoli adopts a different point of viewby setting the history of nationalaccounting in a more institutional ormore political framework. Therelationships with economic theoryare consequently perceived asrelationships with economictheories, insofar as they are afactorin combination with othersaffecting the changes in the statusand uses of national accounting.

The take-off of national accounting iscustomarily situated at theconvergence between the GreatDepression of the 1930s, the ensuingrise in macroeconomic regulationpolicies, and Keynesian theory,which established their theoreticalfoundations. These developmentsunquestionably played a role, butVanoli rightly reminds us of DonPatinkins assessment of the

interaction between a statisticalrevolution in the measurement ofnational income (Kuznets and Clark)and the Keynesian revolution at thetheoretical level. In this sense, whileKeynes broadened and formalizedthe framework for measuringaggregates and defining theirrelationships, the goal of quantifyingmacroeconomic variables precededhim.

Until the 1970s, therefore, the

relationship between economictheories and national accountingcentered on the object to bemeasured. In sum, the theoriessuggested which aggregates shouldbe measured; the accounts suppliedthe data that, in exchange, allowedtesting for historical relevance.Theoretical developments, in turn,may induce change in the accountingsystem. Sir Richard Stone, forexample, drove the implications ofthis relationship very far. Gradually,

however, it has been challengedalthough, as Vanoli shows, the

process has been shaped bycomplex determinants. The initialtransformations were due to the firstoil crisis (macroeconomic regulationcrisis), with the increased demandfor short-term data but especially the

challenge to the relevance of themedium-term forecast andbeyondthatthe national-accountingframework on which it rests. Thencame the emergence of a set ofphenomena that posed or revivedquestions appropriated by economictheory but seen as stumbling blocksfor national accounting: thefinancialization and globalization ofthe economy, the quickening oftechnical progress, the boom ininformation and communicationtechnologies, environmental issues,and so on. The third determinant wasthe growing importance of themicro sphere, in its differentaspects, which resulted in theascendancy of microeconomics onthe theoretical side, with datarequirements largely at right anglesto what national accounting couldprovide. The reader should look, inparticular, at Vanolis discussion on(1) economists greater reliance onpanel-data bases and (2) the needscreated by computable general-

equilibrium models.

Vanoli ends his work with a referenceto the tensions over therelationships between economictheory and national accounting.17

He calls for a fresh and balancedapproach to these relationships. Thebest we can do is to quote him: Athird, less comfortable approach[N.B. by contrast to the empiricalapproach on the one hand and thetheoretical approach on the other]

views an all-empirical attitude asinadequate, particularly with regardto the concept of income, believesthat national-accounting conceptsand aggregates have theoreticalbases, but asserts that theconceptual construction of thenational accounts involves somefactors that are unrelated to theories(or, for that matter, to businessaccounting).

Pierre Muller

Head of INSEE Regional OfficePays de la Loire

16. This bias is an argument for using theconcept of NDP (net domestic product) sincethe aggregate is measured after deduction offixed-capital consumption. In the situationdiscussed here, the increase in input volume(consumption of fixed capital consisting ofcapital goods) would effectively reduce theNDP level.17. The issue of the tensions betweeneconomic theories and national accounting isultimately just a narrow aspect of a broaderquestion, i.e., the tensions between economictheories, the framework for analyzingeconomic phenomena, and observation.

Vanoli devotes a large final portion ofchapter 10 to this question.

A History of National Accounting

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