The modern national income and product accounts are among the great inventions of the twentieth century. Among other things, they are used to judge economic performance over time, to compare the economies of different nations, to measure a nation's saving and investment, and to track the business cycle. Much as satellites in space can show the weather across an entire continent, the national accounts can give an overall picture of the state of the economy.
This report addresses the question of whether the U.S. economic accounts should be extended to include activities involving natural resources and the environment. It will be useful at the outset to explain what is meant by "accounting" and by the "national income and product accounts." In its most general sense, the purpose of accounting is to provide economic information about a household, organization, or government. Accounts are generally divided into "income accounts," which record receipts and outlays during a given period such as a year, and ''asset accounts," which provide a snapshot of the assets, liabilities, and net worth of an entity at a given date. People are most familiar with the income accounts and balance sheets of businesses, but the same concepts apply equally well to individuals, governments, and nations.
The present report is concerned with a specific set of accounts known as the National Income and Product Accounts (NIPA). The fundamental purpose of the NIPA is to provide a coherent and comprehensive picture of the nation's economy. These accounts measure the total income and output of the entire nation, including households, business and not-for-profit enterprises, and different levels of government. The key elements of the NIPA—what this report calls the "core accounts"—measure the total market output and income of the United States. The most important item is gross domestic product (GDP), a measure of the nation's total output of goods and services and the total income of the nation generated by that output. GDP represents the sum of the dollar values of consumption, gross investment, government purchases of goods and services, and net exports produced within the nation during a given year. It also represents the income earned as wages, profits, and interest, as well as indirect taxes. In addition to the totals for the nation, the NIPA provide a rich array of data on output and incomes in different industries and regions, as well as a record of international transactions.
To date, the major focus of the U.S. national accounts has been on developing income accounts, with relatively less attention on asset ac-