1/4/2017 A Memoir of My Work with the International Comparison Program (ICP) and the Penn World Table (PWT Alan Heston* Preface Chapter 1: Phase 1: Antecedents and Early Meetings Background of the ICP A. ICP Predecessors (1) Before Colin Clark’s 1940 The Conditions of Economic Progress (2) The period 1940-65 (3) Early Methods of Comparing PPP B. Phase I of the ICP: 1968-70 (1) Some Early Decisions on the Framework of the ICP Comparisons (2) New Bolton Meeting, June 1969 (3) Bellagio I, October 1969 Chapter 2: Organization and Implementation of ICP Phase I A. Phase I Activity 1970-71 (1) Division of Labor with the UNSO (2) Robert Summers on Board in 1970 (3) Gathering and Processing Prices and Expenditures: 1970-71 (4) Extended Visit to India and Short Visit to Japan (5) Obtaining US Expenditures and Prices (6) Equipment Goods (7) Construction B. Experimenting with Aggregation Methods on Preliminary Data: 1972-4 (1) Below the Basic Heading Level (2) Aggregating the Basic Heading PPPs: GEKS and Geary-Khamis (3) To Obtain More Support You Need to Show Results (4) A digression on Men of Affairs (5) Organization of Phase II and Completion of Phase: SOEC (6) The Rest of the ICP World (7) A Digression on the 1967 Comparison Chapter 3: Responses to the Phase I Report A. Response of Reviewers. Scholars and the Media (1) Book Reviews (2) The Media B. Response of the International Organizations 1 (1) The World Bank (2) The European Union (3) The International Monetary Fund (4) The Regional Banks and Economic Commissions of UN System Chapter 4: Completion of the Phase II Report A. Measures of Imprecision B. Putting Together the 1970 and 1973 ICP Estimates C. Consistency Over Time of ICP Estimates D. Geary International Prices Chapter 5: Signing Off- Phase III Report A. Services in the ICP B. The Contributions of in-kind Aid in the form of Advisors C. Augmented Binary Comparisons D. Analysis of the 1975 Results (1) Bridge Country Binaries (2) Demand Analysis E. Estimates for non-benchmark years F. A Digression on 1980 (1) China’s Purchasing power (2) The Hill Report (3) Other Meetings (4) The Latin American Region (5) The 1975 EU Report Chapter 6: Estimation of GDP of Non-benchmark Countries and Sectoral Output A. Origins of the Penn World Table (PWT) B. The Beginnings of the ICOP Studies at Groningen Chapter 7: ICP after Penn - Regionalization and 1980 and 1985 Comparisons A. The Integration of the OECD into the 1980 ICP (1) The Problem Posed by the US CPI Revision in 1978 (2) Putting Together the OECD and the 1980 ICP World B. The 1985 ICP Round; Plans and Implementation (1) The Best Laid Plans (2) The Latin America Problem (3) Leadership (4) Picking up the pieces of the 1985 ICP Chapter 8: Exit and Voice A. The World Bank and the ICP in the 1980s 2 B. The Philadelphia Meeting, August 1990 C. A Digression on Kravis, Summers and Penn D. The Unhappy Life of the Phase VI Global Comparison (1) The Regional Comparisons (2) Official Global Report on 1996 ICP: a no-Show E. The Castles and Ryten Reports of 1997 (1) The Castles Report (2) The Ryten Report Chapter 9: Finding a Home for PWT, Part I A. Initial Efforts to Pass the Torch B. China and the International Monetary Fund: Any Port in the Storm C. Rise of Empirically Tested Growth Theories D. Aside on the Big Mac Index Chapter 10: Getting the 2005 ICP Aloft and Landed A. The First Two Years: Reality Sets In (1) The Initial TAG Members (2) The Coding Issue B. Price Validation in the Regions (1) The World Bank Price Validation Software (2) The Tool-Pack C. Linking the Regions at the Basic Heading Level in ICP 2005 (1) The CPD and GEKS Methods at the Basic Heading Level (2) Using the Ring Country CPDs to Link the Regions (3) Aggregating the Regions in the 2005 ICP (4) China’s 2005 Participation D. The Final Results of the 2005 ICP (1) The Form of Presentation (2) The Ikle Method of Aggregation used in Africa (3) Did the 2005 ICP Results Produce Surprises? Chapter 11: Reflections on the ICP and the PWT A. Transferring the PWT to Groningen B. The 2011 ICP (1) Digression on Regions (2) The 2011 Results and the Poverty Fracas (3) China Redux C. Moving the ICP Towards Annual Updates (1) You’ve Come a Long Way Baby (2) Rolling Benchmarks (3) Governance D. In Good Hands 3 *Emeritus Professor, University of Pennsylvania ABBREVIATIONS ADB Asian Development Bank AfDB African Development Bank BEA (US) Bureau of Economic Analysis BLS (US) Bureau of Labor Statistics CAR Country Aggregation and Redistribution (method) CPD Country Product Dummy (method) CPI Consumer Price Index CSO (Indian) Central Statistical Office DDG (World Bank) Development Data Group DGINS Directors General of Institutes of National Statistics DGTT (Indian) Director General of Technology and Trade ECA (UN) Economic Commission for Africa ECE (UN) Economic Commission for Europe ECIEL Program of Joint Studies on Latin American Economic Integration 4 ECLAC (UN) Economic Commission for Latin America and the Caribbean ECSC European Coal and Steel Community EKS Èltetö Köves Szulc (method) ELIs Entry Level Items ESCAP (UN) Economic and Social Commission for Asia and the Pacific ESCWA (UN) Economic and Social Commission for Western Asia EU European Union Eurostat Statistical Office of the European Communities (SOEC) FAO Food and Agricultural Organisation GDP Gros Domestic Product GEKS Gini Èltetö Köves Szulc (method) GGDC Groningen Growth and Development Centre GK Geary Khamis (method) IADB Inter-American Development Bank IARIW International Association for Research on Income and Wealth ICOP International Comparisons of Output and Productivity (program) ICP International Comparison Program ICSC International Civil Servants Commission IMF International Monetary Fund INSEE Institut national de la statistique et des études économique 5 ILO International Labor Organisation MPS Material Product System NSF National Science Foundation NBER National Bureau of Economic Research NSS (Indian) National Sample Survey OEEC Organisation for European Economic Cooperation OECD Organisation for Economic Cooperation and Development OU Oriental (currency) Unit PISA Programme for International Student Assessment PPP Purchasing Power Parity PPS Purchasing Power Standard PWT Penn World Table SNA (UN) System of National Accounts SOEC Statistical Office of the European Communities TAG Technical Advisory Group UN United Nations UNESCO United Nations Educational Scientific and Cultural Organisation UNSC United Nations Statistical Commission US United States USAID US Agency for International Development UNSD United Nations Statistical Division WWI World War I WWII World War II 6 WDI World Development Indicators WHO World Health Organisation 7 Preface My children, Alex and Laura, called the International Comparison Project (ICP)1 The Project because it was my principal research activity during their school years and since. Their mother, Wilma Heston, (Pic 1)2 contributed to the first report on the ICP before she pursued a series of translations from Persian and Pushtu literatures, both popular and literary. The first ICP report was authored by Irving B. Kravis, Zoltan Kenessey, Alan Heston and Robert Summers (1975) with the assistance of many others named in that volume and discussed below. There are two related aspects of the project that had caught my interest prior to 1968 when I joined the ICP. I had taken a course on the Russian Economy at the University of Washington taught by Frank Holtzman in 1956. Frank did his undergraduate work at the University of North Carolina on a tennis scholarship graduating in 1940 and stationed in World War°II in a US air base in Poltava, Ukraine, where his interest in Russian studies began. He then did his graduate work at Harvard where he was a student of Alexander Gershenkron and Wassily Leontief, both experts on the Soviet Economy. Leontief received the Nobel prize in 1973 for his work on input-output tables and Holtzman was associated with that project while finishing his Ph.D. I mention Holzman and tennis because he was a frequent partner on the University courts while I was in Seattle. He was a better player but the points were always competitive and where he was nip and I was tuck. An East Coast product after taking a position at Tufts, he spent part of each summer on Cape Cod where my colleague Summers and son Larry came to know him on the tennis court. What I remember most from Holzman’s course was the Gershenkron effect that illustrated the inherent index number problem that weighting matters if you are computing measures of change over time. Gershenkron had compared the differences in the growth in the Production Index of Russia from 1919 to 1939 using the official version employing 1919 sectoral weights with the his version using 1939 weights. Neither is a true measure but the differences were large. A second study that caught my attention while doing my graduate course work at Yale was that of William Hollister (1958) on the size of the Chinese Economy circa 1952 when the United States did not recognize the new Communist government. Mainland China was supporting the North in the Korean War and the US Defense agencies wanted to know the size of the Mainland economy. Hollister carried out his study with intelligence financial support and gave an answer that they liked but Hollister, being well trained, also gave an alternative answer they would prefer not to have seen. Essentially Hollister estimated sectoral PPPs weighting them first by US weights, which made the Mainland economy to be significant in size relative to the United States, the result wanted by the 1 It was renamed International Comparison Program in 1989.