Re: Fundamental Flaw of National Accounting

["John B. O'Donnell" <jackodonnell@xxxxxxxx>]

You two [Per and Bruce] have been belaboring economic accounting flaws
for some time now and I have been wondering if you will come to one of
the more difficult problems of economic measurement. This is the
difficult, if not impossible, task of measuring buyers surplus for
transactions.

For example, by measuring only the production of trade represented by
the increase of price from the measured cost of production to the price
realized by the seller, it is quite possible a presumption of equal
distribution of this profit of trade would give a more accurate picture
of value produced.

This is not a proposal to do such accounting, it is only to present the
following problem --

>From the above it can reasonably be surmised that:

1) An increase of buyer's surplus at the expense of seller's would be
recorded as a loss of production for an identical quantity of goods and
services produced.

2) An increase in sellers surplus would do the opposite.

3) Either could happen with the opposite effect to the real change.
[i.e. -- An increase in recorded economic production could occur with a
decrease in actual production if the sellers managed to obtain a larger
share of the overall surplus and a decrease in recorded production can
occur with an increase in real production if buyers become more
effective in claiming a larger share of the surplus.]

None of this is intended to propose a substitute measure, it is only
presented to express a concern that conclusions based on faulty measures
must be made with great care and with full expression of the underlying
assumptions of the measures.

			-- jbod
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