factor earnings abroad of domestic residents, which is included in national product. Inclusion of net factor earnings abroad is desirable if output is designed to measure the sustainable consumption of the nation. The recent switch in emphasis from national to domestic product occurred because domestic product is more closely related to domestic output and employment. While the emphasis on GDP rather than net national product is understandable, the panel emphasizes that the latter is conceptually preferable as a measure of sustainable income.

Value of a Comprehensive Set of Accounts: Scorekeeping and Management

Economic accounting—whether it be business accounting or the accounting of a nation's economic activity—traditionally serves two major functions: it offers a way to track the economic performance of a business or a nation, and it provides an organized body of economic data that enhances the ability of an organization or a nation to manage its economic affairs. The principal reason for growing interest in natural-resource and environmental accounting is the belief that improved accounting for the contribution of natural capital will enhance the ability of the conventional accounts to serve both of these functions.

The NIPA are the major way nations keep score on overall, regional, or sectoral economic performance, past and present. The core accounts include production measures such as gross national product (GNP) and GDP, along with data measuring market incomes and a broad array of sectoral data. These core accounts are widely used to gauge a nation's economic performance over time and to compare economic performance among nations; they are an essential tool for assessing the state of the economy and formulating macroeconomic stabilization policy. For example, economic research has shown a close link between movements in GDP and changes in the unemployment rate, changes in tax revenues, and the federal budget deficit. Understanding the economy requires comparing current trends and movements in national output with those of various historical periods in order to forecast the future. This scorekeeping function of the national accounts is widely accepted in spite of many deficiencies in the measures of prices and outputs and the numerous interpretative problems introduced because the core accounts are limited to market transactions (see Hicks, 1940; see also Kuznets, 1948a, 1948b).

As discussed above, measures of augmented national income and product endeavor to extend the purview of the economic accounts by including a broader set of consumption, investment, and income measures. These augmented accounts give a more balanced view of the trends



The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement