     January 

Robert Eisner, –

Robert Eisner’s Contributions to Economic Measurement

 ,  . Kenan Emeritus Profes- problems in the measures of income and output and of sor of , died late last year. He investment, savings, and deficits. He pointed out that will be remembered for his many contributions to the conventional income and output measures excluded understanding of investment and consumption behav- household production, capital gains, the services of ior, macroeconomic theory, and fiscal and monetary consumer durables and government capital, and the policy. At the Bureau of Economic Analysis () effects of inflation on asset values and that these exclu- and at economic statistics agencies around the world, sions affected our view of trends in income, output, he will also be remembered for his work on exten- and productivity. For example, the entry of women sions of the national economic accounts, which, in into the labor force may result in a decline in meas- some sense, may be his most fundamental contribu- ured labor productivity if they disproportionately fill tion. Indeed, his approach to economics is illustrated lower paying or lower productivity jobs. However, it by his choice of topic for his  presidential address may result in an increase in actual productivity if these to the American Economic Association—“Divergences jobs are more productive than the unpaid jobs that of Measurement and Theory and Some Implications they performed in the home.  for Economic Policy.” A decade earlier, he reminded In addition, Eisner pointed out that assessing the other economists that while we may “know the pitfalls adequacy of either public or private investment and of measurement without theory...we may occasionally saving requires that investment measures consistently forget the strength and life that theory must draw from  include all purchases of goods and services that pro- measurement.” His empirical work continuously in- duce a stream of benefits over time. For instance, fluenced his approach to theory, and his theoretical the purchase of a building by the government should work led to his passionate calls for improvements in be counted as investment, just as the purchase of economic statistics. a building by a business is counted as investment. In the last two decades, many of Eisner’s policy He also argued that investments in natural resources prescriptions for the budget deficit, trade, and social and in intangibles such as human capital (education) security were based on adjustments to related meas- and technology (research and development) should be ures that he had advocated and that he had made to treated as investment. Additionally, he stressed the correct for the effects of inflation and other distor- importance of adjustments for inflation and of mea- tions. But his interest in measurement issues dates suring both flows and changes in the value of stocks to much earlier in his career (see the selected bib- in assessing the adequacy of saving and investment. liography). While he was working as an economist and statistician for the U.S. Government and earn- The effects of implementing Eisner’s proposed ing his master’s degree in economics from Columbia changes can be significant. For instance, as he pointed University and then his doctorate from Johns Hop- out, establishing a capital account for government and kins University, he participated in discussions about adjusting the Federal debt for the effects of inflation the importance of measurement to theory. In , would produce a significantly different picture of the he commented that survey data “should prove of in- Federal budget deficit and would significantly reduce creasing value in giving empirical content to economic the gap between the U.S. saving rate and foreign na- theory,” and by the early ’s, he was an active par- tional saving rates. Establishing measures of private ticipant in the long-standing (and continuing) debate saving and investment that treat purchases of auto- about expanding the conventional measures of income mobiles and other consumer durables as investment and output. would significantly raise the measures of private sav- Eisner’s later work on expanding the national ac- ing. Moreover, presenting changes in the stock of counts was motivated by the effects of measurement wealth as part of a framework that also shows meas- on theory and policy. In his  presidential ad- ures of saving from current income would help make dress, he stated his belief that many of the Nation’s those measures particularly useful for understanding economic concerns were at least partly the result of savings behavior today, as the recent drop in personal savings from current income is undoubtedly related . See “Divergences of Measurement and Theory and Some Implications to the unprecedented stock-market-related gains in for Economic Policy” in the selected bibliography. household wealth. Finally, adjusting the value of for- . See “New Twists to Income and Product” in the selected bibliography. . See the Comment on “The Contribution of Consumer Anticipations eign direct investments for the effects of inflation in Forecasting Consumer Demand” in the selected bibliography. would significantly reduce the size of the U.S. position     January   • as a net debtor nation and would thus mitigate con- ’s Integrated Economic and Environmental Satel- cerns about the adverse effects of the mounting trade lite Accounts.  is both indebted and grateful to deficits. him for his encouragement, support, and advice over Eisner’s calls for improvements did not fall on deaf the years. ears. His research has left its imprint on the economic accounts of the United States and of other countries Selected Bibliography of Robert Eisner around the world. His work on household produc- tion, the capitalization of expenditures on research “Capital and Labor in Production: Some Direct Es- and development, investment in human capital, and timates.” In The Theory and Empirical Analysis of environmental accounting inspired a large volume of  Production. Studies in Income and Wealth, vol. work at  and internationally. In addition, his ,editedbyMurrayBrown,–.NewYork: work significantly affected a number of ’s key eco- Press, . nomic aggregates. In ,  revalued its estimates “Capital Gains and Income: Real Changes in the of the international investment position along the lines Value of Capital in the United States, –.” In he suggested. As part of the  comprehensive re- The Measurement of Capital. Studies in Income and vision of the national income and product accounts, Wealth, vol. ,editedbyDanUsher,–.  moved toward a symmetric treatment of govern- Chicago: University of Chicago Press, . ment investment with private investment. And in the Comment on “The Contribution of Consumer An- upcoming comprehensive revision,  plans to better ticipations in Forecasting Consumer Demand,” by integrate its income and wealth estimates and to move Irving Schweiger. In Short-Term Economic Forecast- toward the capitalization of computer software. ing. Studies in Income and Wealth, vol. , –. Eisner’s influence on accounting conventions is also Princeton: Princeton University Press, . reflected in the improvements in the most recent in- Comment on “A Framework for the Measurement ternational guidelines for national accounting, which of Economic and Social Performance,” by F. Thomas were published in the System of National Accounts Juster. In The Measurement of Economic and Social . These guidelines emphasize the importance Performance. Studies in Income and Wealth, vol. , of integrating income and wealth accounts, the need edited by Milton Moss, –. New York: Columbia to distinguish between nominal and real changes in University Press, . wealth (and in debt), the need to capitalize computer software and other intangible investments, and the “Divergences of Measurement and Theory and importance of satellite or supplementary accounts in Some Implications for Economic Policy.” Presidential developing expanded sets of accounts. address to the American Economic Association, New Eisner’s lasting influence reflects not only his re- York (December , ). search but also his willingness to roll up his sleeves  (March ): –. and work with statistical agencies. Over the years, How Real is the Federal Deficit? New York: The he served as a trusted consultant, adviser, critic, and Free Press, . friend to .In, he provided comments to  “Interview and Other Survey Techniques and the on its satellite accounts, offered advice on long-term Study of Investment.” In Problems of Capital Forma- plans, and served as a distinguished member of the tion. Studies in Income and Wealth, vol. , –. National Academy of Sciences blue-ribbon panel on Princeton: Princeton University Press, . The Misunderstood Economy: What Counts and How . Eisner was not alone in his advocacy of extended income and product to Count It. Boston: Harvard Business School Press, accounts. Richard and Nancy Ruggles, and , and John Kendrick, among others, all proposed extensions of the accounts. . Like Eisner, they also constructed new frameworks of accounts that illustrated “New Twists to Income and Product.” In The Eco- the effects of their proposed modifications. Their alternative frameworks pro- vided the underpinnings for further research at . For example, see Arnold nomic Accounts of the United States: Retrospect and J. Katz, “Valuing the Services of Consumer Durables,” Review of Income and Prospect. S  C B ,part, Wealth ,no.  (December ): –; J. Steven Landefeld, Frank Martin, th anniversary issue (July ): –. and Janice Peskin, “Estimates of the Service Values and Opportunity Costs of Government Capital, –,” Review of Income and Wealth ,no.  Social Security: More Not Less. New York: Century (September ): –; Martin Murphy, “The Value of Nonmarket House- Foundation Press, . hold Production: Opportunity Cost Versus Market Cost Estimates,” Review of Income and Wealth ,no.  (September ): –;J.StevenLan- “State of the Union: Black Holes in the Statistics.” defeld and James R. Hines, “Valuing Non-Renewable Natural Resources in Challenge (January-February ): –. the Mining Industries,” Review of Income and Wealth ,no.  (March ): –; J. Steven Landefeld and Carol S. Carson, “Integrated Economic and “Total Incomes in the United States,  and .” Environmental Satellite Accounts,” S  C B  (April Review of Income and Wealth,series,no. (March ): –; and Carol S. Carson, Bruce T. Grimm, and Carol E. Moylan, ): –. “A Satellite Account for Research and Development,” S  (November ): –. “The Total Incomes System of Accounts.” S . System of National Accounts . Brussels: Commission of the  C B  (January ): –. European Communities, International Monetary Fund, Organisation for Eco- nomic Co-operation and Development, United Nations, and World Bank, The Total Incomes System of Accounts. Chicago: . University of Chicago Press, .  January      •

“Transfers in a Total Incomes System of Accounts.” United States, –.” Review of Income and Wealth, In Economic Transfers in the United States.Studiesin series ,no. (March ): –. Income and Wealth, vol. ,editedbyMarilynMoon, With Emily R. Simons, Paul J. Pieper, and Steven –. Chicago: University of Chicago Press, . Bender. “Total Incomes in the United States, –: With David H. Nebhut. “An Extended Measure A Summary Report.” Review of Income and Wealth, of Government Product: Preliminary Results for the series ,no. (June ): –.