The Impact of Intangibles in Global Economic Measurement
Towards
an Update of the
Balance of Payments and
System
of National Accounts
Manuals
by Francien
Berry,
Michael
Connolly,
Padma Hurree-Gobin,
Jennifer
Ribarsky,
and Paul
Roberts
Comments: Samuel
Kortum
Overview
Overview
•
How
does globalization
affect
our
measurement
of
the
economy?
Overview
•
How
does globalization
affect
our
measurement
of
the
economy?
•
This paper takes
a
broad look at that
question
•
tractable issues: remember
GNI not
just
GDP
•
less tractable issues: complications
from
MNE’s
and
SPE’s
Overview
•
How
does globalization
affect
our
measurement
of
the
economy?
•
This paper takes
a
broad look at that
question
•
tractable issues: remember
GNI not
just
GDP
•
less tractable issues: complications
from
MNE’s
and
SPE’s
•
My
discussion will focus
on
intangibles
•
a
common thread through the less tractable
issues
Intangibles
Intangibles
•
Intangibles
show up
in the accounts
as:
•
assets: patents, trade secrets
•
investments: intellectual property
products
•
returns:
royalties
Intangibles
•
Intangibles
show up
in the accounts
as:
•
assets: patents, trade secrets
•
investments: intellectual property
products
•
returns:
royalties
•
Intangibles create challenging measurement
issues
•
they’ll come back to bite
us
if
we
don’t
treat them
right!
Intangibles
•
Intangibles
show up
in the accounts
as:
•
assets: patents, trade secrets
•
investments: intellectual property
products
•
returns:
royalties
•
Intangibles create challenging measurement
issues
•
they’ll come back to bite
us
if
we
don’t
treat them
right!
•
Intangibles are central to
MNE’s,
but
also have
a
life
of
their
own
Hill
(1999)
Hill
(1999)
•
They are the
originals created
by
authors,
…,
engineers,
…,
film
studios
…
These
originals
are
intangibles
that
have
no
physical
dimensions or
spatial
co-ordinates
of
their
own
…
They can be
transmitted electronically
(pg
427)
•
•
lack
of a
spatial
coordinate means they may be
footloose
not easy
to
assign
to
a
particular
country
Hill
(1999)
•
They are the
originals created
by
authors,
…,
engineers,
…,
film
studios
…
These
originals
are
intangibles
that
have
no
physical
dimensions or
spatial
co-ordinates
of
their
own
…
They can be
transmitted electronically
(pg
427)
•
•
lack
of a
spatial
coordinate means they may be
footloose
not easy
to
assign
to
a
particular
country
•
Hill insists that
we
distinguish
intangibles
from
services
•
•
yet the two get lumped
together in services
trade
intangibles
do
provide a
service,
perhaps long
after
creation
Hill
(1999)
•
They are the
originals created
by
authors,
…,
engineers,
…,
film
studios
…
These
originals
are
intangibles
that
have
no
physical
dimensions or
spatial
co-ordinates
of
their
own
…
They can be
transmitted electronically
(pg
427)
•
•
lack
of a
spatial
coordinate means they may be
footloose
not easy
to
assign
to
a
particular
country
•
Hill insists that
we
distinguish
intangibles
from
services
•
•
yet the two get lumped
together in services
trade
intangibles
do
provide a
service,
perhaps long
after
creation
•
Hill
advocates a
three-part
scheme: goods,
services,
intangibles
Ro
me
r
(1990)
Ro
me
r
(1990)
•
How
to bring
technology
(key to growth) into economic
analysis
•
could just as well have been about
intangibles
Ro
me
r
(1990)
•
How
to bring
technology
(key to growth) into economic
analysis
•
could just as well have been about
intangibles
•
Technology
is
a
non-rival
good
(can
use
it everywhere at the same
time)
Ro
me
r
(1990)
•
How
to bring
technology
(key to growth) into economic
analysis
•
could just as well have been about
intangibles
•
Technology
is
a
non-rival
good
(can
use
it everywhere at the same
time)
•
Rival factors generate constant
returns
•
technology generates
increasing
returns
Ro
me
r
(1990)
•
How
to bring
technology
(key to growth) into economic
analysis
•
could just as well have been about
intangibles
•
Technology
is
a
non-rival
good
(can
use
it everywhere at the same
time)
•
Rival factors generate constant
returns
•
technology generates
increasing
returns
•
Value
of
technology (incentive to invest) via
excludability
•
institutions like patent protection
•
imperfect competition
and mark-up
pricing
Implications
Implications
•
Implication
for
economic theory:
•
to treat technology right, change modeling
fundamentals
•
constant returns in rival factors
only
•
imperfect competition to
support
innovation
•
in the past
30
years we’ve made substantial
progress
Implications
•
Implication
for
economic theory:
•
to treat technology right, change modeling
fundamentals
•
constant returns in rival factors
only
•
imperfect competition to
support
innovation
•
in the past
30
years we’ve made substantial
progress
•
Implications
for
economic measurement:
•
to treat intangibles right, change measurement
fundamentals
R
eca
p
•
SNA 2008
contains
a
clear discussion
of
intangibles
•
But, ducks the
profound
implications
of
non-rivalry
•
I
could find
no
reference to non-rivalry in
SNA
2008
•
What’s
gained
by a
more fundamental rethinking
of
intangibles?
Suggestions
Suggestions
•
Treat
intangibles as non-rival
technology
•
a
source
of
TFP growth,
not a
factor
of
production
Suggestions
•
Treat
intangibles as non-rival
technology
•
a
source
of
TFP growth,
not a
factor
of
production
•
Consider imperfect competition
•
helps to integrate
MNE
data into national
accounts
•
justifies price exceeding
marginal
cost, and
profit
Suggestions
•
Treat
intangibles as non-rival
technology
•
a
source
of
TFP growth,
not a
factor
of
production
•
Consider imperfect competition
•
helps to integrate
MNE
data into national
accounts
•
justifies price exceeding
marginal
cost, and
profit
•
Tie
together investments in intangibles with returns to
intangibles
•
resolves
who
counts the returns as
a
services
export
Conclusions
•
Its easy to find fault in any measurement
system
•
Its
not
easy to to
do
better
•
…
if
you’re
honest about the data constraint (Zvi
Griliches)
•
My
comments may
sound
naive in this
sense
•
I hope
they lead to
a good
discussion
This paper discusses how globalization affects economic measurement, focusing on the challenges posed by intangibles such as patents, trade secrets, and intellectual property in national accounts. The handling of these assets is crucial for accurate economic analysis and reporting, especially in the context of multinational enterprises (MNEs).
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Presentation Transcript
Towards an Update of the Balance of Payments and System of National Accounts Manuals by Francien Berry, Michael Connolly, Padma Hurree-Gobin, Jennifer Ribarsky, and Paul Roberts Comments: Samuel Kortum
Overview How does globalization affect our measurement of the economy?
Overview How does globalization affect our measurement of the economy? This paper takes a broad look at that question tractable issues: remember GNI not just GDP less tractable issues: complications from MNE s and SPE s
Overview How does globalization affect our measurement of the economy? This paper takes a broad look at that question tractable issues: remember GNI not just GDP less tractable issues: complications from MNE s and SPE s My discussion will focus on intangibles a common thread through the less tractable issues
Intangibles Intangibles show up in the accounts as: assets: patents, trade secrets investments: intellectual property products returns: royalties
Intangibles Intangibles show up in the accounts as: assets: patents, trade secrets investments: intellectual property products returns: royalties Intangibles create challenging measurement issues they ll come back to bite us if we don t treat them right!
Intangibles Intangibles show up in the accounts as: assets: patents, trade secrets investments: intellectual property products returns: royalties Intangibles create challenging measurement issues they ll come back to bite us if we don t treat them right! Intangibles are central to MNE s, but also have a life of their own
Hill (1999) They are the originals created by authors, , engineers, , film studios These originals are intangibles that have no physical dimensions or spatial co-ordinates of their own They can be transmitted electronically (pg 427) lack of a spatial coordinate means they may be footloose not easy to assign to a particular country
Hill (1999) They are the originals created by authors, , engineers, , film studios These originals are intangibles that have no physical dimensions or spatial co-ordinates of their own They can be transmitted electronically (pg 427) lack of a spatial coordinate means they may be footloose not easy to assign to a particular country Hill insists that we distinguish intangibles from services yet the two get lumped together in services trade intangibles do provide a service, perhaps long after creation
Hill (1999) They are the originals created by authors, , engineers, , film studios These originals are intangibles that have no physical dimensions or spatial co-ordinates of their own They can be transmitted electronically (pg 427) lack of a spatial coordinate means they may be footloose not easy to assign to a particular country Hill insists that we distinguish intangibles from services yet the two get lumped together in services trade intangibles do provide a service, perhaps long after creation Hill advocates a three-part scheme: goods, services, intangibles
Romer (1990) How to bring technology (key to growth) into economic analysis could just as well have been about intangibles
Romer (1990) How to bring technology (key to growth) into economic analysis could just as well have been about intangibles Technology is a non-rival good (can use it everywhere at the same time)
Romer (1990) How to bring technology (key to growth) into economic analysis could just as well have been about intangibles Technology is a non-rival good (can use it everywhere at the same time) Rival factors generate constant returns technology generates increasing returns
Romer (1990) How to bring technology (key to growth) into economic analysis could just as well have been about intangibles Technology is a non-rival good (can use it everywhere at the same time) Rival factors generate constant returns technology generates increasing returns Value of technology (incentive to invest) via excludability institutions like patent protection imperfect competition and mark-up pricing
Implications Implication for economic theory: to treat technology right, change modeling fundamentals constant returns in rival factors only imperfect competition to support innovation in the past 30 years we ve made substantial progress
Implications Implication for economic theory: to treat technology right, change modeling fundamentals constant returns in rival factors only imperfect competition to support innovation in the past 30 years we ve made substantial progress Implications for economic measurement: to treat intangibles right, change measurement fundamentals
Recap SNA 2008 contains a clear discussion ofintangibles But, ducks the profound implications of non-rivalry I could find no reference to non-rivalry in SNA2008 What s gained by a more fundamental rethinking of intangibles?
Suggestions Treat intangibles as non-rival technology a source of TFP growth, not a factor ofproduction
Suggestions Treat intangibles as non-rival technology a source of TFP growth, not a factor ofproduction Consider imperfect competition helps to integrate MNE data into national accounts justifies price exceeding marginal cost, and profit
Suggestions Treat intangibles as non-rival technology a source of TFP growth, not a factor ofproduction Consider imperfect competition helps to integrate MNE data into national accounts justifies price exceeding marginal cost, and profit Tie together investments in intangibles with returns to intangibles resolves who counts the returns as a services export
Conclusions Its easy to find fault in any measurement system Its not easy to to do better if you re honest about the data constraint (Zvi Griliches) My comments may sound naive in this sense I hope they lead to a good discussion
