[OPE-L:5895] NIPA (1) A practical proposal arising from a good discussion

Alan Freeman (a.freeman@GREENWICH.AC.UK)
Sun, 28 Dec 1997 10:19:38 +0000

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Seasons' Greetings to all and sorry I haven't been able to take part more.

The seasons' end also gives me a breathing space to catch up on some of the
discussion so expect a few posts end on end. Since several deal with NIPA
I'll number these in the order I wrote them to minimise confusion.

I very much liked the discussion on NIPA for two reasons: first, because I
think it is always more useful to turn outwards to the critique of
political economy instead of inwards to the criticism of Marx.

I have separately posted a short paper that I wrote on NIPA for a book to
be published by a group based in the UK called Radical Statistics. They run
a small list and have a regular publication, and an annual conference which
Julian Wells and myself went to. Many points made here amplify or repeat
points in that article which also applies my proposals to the case of the

The discussion seems to confirm what I have thought for some time, that
largely as a result of the pioneering work of Anwar and his co-workers, but
also because of many individual contributions, particularly Fred's, there
is now a substantive consensus about the re-construction of many Marxian
quantities from NIPA data, notwithstanding the disagreements about the use
of input-output statistics and the transformation of monetary magnitudes
into labour magnitudes.

This leads me to make a suggestion. I think it should be possible to
establish some kind of broad collaboration whose purpose is to produce
'authoritative' transformations of NIPA data according to principles
that form a consensus among a large number of researchers working with
Marx's categories. I think that such an authoritative data set would have
a number of tremendous advantages over the individual studies so far
completed, but would build on these individual studies. Above all it
would facilitate inter-country *comparisons* and possibly even, for
the first time, systematic measurements of inter-country value transfers.
Moreover it would provide a clear framework to explore the questions
now in dispute among Marxist researchers, and in particular the
further transformation of this monetary data into labour-time

The basic consensus that I think is emerging is the following: the only
source of value-added is waged labour-power engaged in the production of
new use-values in the form of commodities.

What can we agree on?

I think we would find agreement on the *monetary* measures of
value that would result, but not on their transformation into hours of
socially-necesary labour-time. That is, I think we could reach agreement
(or a clear statement of differences) on such things as the size of
variable capital or the unproductive costs of the finance sector expressed
in dollars or pounds, even though we cannot agree how much labour these
dollars or pounds represent.

I think that the only monetary magnitudes on which we would find
substantive disagreements (I will define 'substantive' below) would
be measurements of capital stock and consequently the rate of profit.

Moreover, insofar as there are disagreements questions that I will define
as not substantive I think it might well turn out that these can be
expressed in terms of a number of 'variant' transformations of NIPA data
based on varying assumptions.

In short - and it's been a dream of mine for a long time - I think it is a
perfectly possible research proposal to produce 'definitive' accounts of a
similar status (in terms of scholarly precision and care) to the Penn World
Data, although there is a great deal of practical and difficult work
involved, since it is by no means simple to produce long time-series of
NIPA data which is measured in a consistent manner. I think this would be
an enormous contribution to Marxist scholarship. It is also something that
by definition no single individual could hope to accomplish, since only a
collective endeavour could impose the necessary standards of scholarship
(cross-checking, independent verification, etc).

A research programme which enforces collaboration and the suppression of
individual egos would be no bad thing for Marxists, and no bad example to
set to official academic economics.

Just to summarise what I think appears to be a possible consensus, more as
a Request For Comments than an attempt to legislate:

The essential critique to be made of the NIPA presentation is IMO that it
incarnates a *theoretical assumption* as follows: that the ownership of
land and the ownership of capital constitute an independent source of value
added. Accordingly, the NIPA accounts calculate total value added as the
sum of all incomes (in some cases imputed) by owners of these 'factors of
production', since money income is considered to be the measure of the
value-added by the factor.

All other money payments (such as state pensions) are treated as transfers.
This leads, for example, to the following contradiction: if I save all my
life for a state pension, the payments I then receive are counted as a
transfer. But if, the day before I retire, the state pension is privatised
and the accumulated payments given to me as a capital sum on which I
receive interest, then this instantly changes my receipts into a part of
value-added and hence a contribution to National Product.

Our own disputes about what should count as productive and unproductive
pale into insignificance compared with this kind of contradiction, which
is rooted in the theoretical futility of attempting to conceive of capital
as a factor of production. If the Marxists could divert half of the time
which they currently spend finding holes in Marx to this sort of critique,
I think their contribution to general world well-being would be greatly
more useful.

What makes the NIPA treatment apologetic and vulgar is in the first
instance the presuppositions it makes (that capital and land are a source
of value); but what makes it unscientific is its assertion that the
results are unchallengeable facts, instead of consequences of these
theoretical presuppositions. As a result they *throw away* the data
needed to investigate any alternative presuppositions; for example, data
on intermediate product flows (constant capital).

Accordingly I think we have two tasks. We should not only produce
alternative accounts but lay bare the assumptions made, in such a manner
that further development or changes to our accounts can be made by other
researchers who wish to experiment with other assumptions. The data has
to be presented in such a way that this is facilitated and I can now
define a 'substantive' difference as a difference that cannot be reduced
to a simple re-organisation of the accounting categories that we will
come up with and the re-allocation of money flows from one account to

The transformation of the NIPA accounts in line with Marx's critique of
political economy amounts to preparing a different presentation based on
a different theoretical assumption, namely (to repeat and extend):

Thesis: Only waged labour-power engaged in the production of new use-values
in the form of commodities is a source of value-added. All other money
payments are transfers, so that, for example, profits are transfer payments
out of the value added by labour power.

I have deliberately put the matter in this way (my article goes into this
in more detail) to indicate that the critique of Marx is a valid critique
of *existing* political economy and, operating with the very categories
that are used by existing political economy, we can draw the same essential
distinctions that Marx makes. What we are engaged in is not, therefore, a
cultish attempt to establish a separate dogma but a scientific critique
of an existing dogma, which begins by demonstrating that what the existing
dogma presents as irrefutable facts are in reality transformations of the
raw data according to definite theoretical presuppositions. The task of a
critique (as opposed to a mere criticism) is to uncover these theoretical
presuppositions and display them in such a way that the non-specialist can
comprehend them.

It is consequently possible and legitimate to present alternative
transformations - alternative 'versions of the facts' based on different
theoretical presuppositions. The scientific character of this enterprise
lies not in the fact that the results are definitive, absolute or 'the'
Marxist version of the facts, but in the fact that the theoretical
categories we apply are clearly developed, explicit and that, insofar
as we claim they are Marx's categories, we provide evidence for this
claim by tracing their origin to Marx's own writings.

This leaves other researchers free to make their own alternative
interpretations based either on different readings of Marx or on different
theories from Marx's.

The thesis I propose (which I also think is Marx's, but this doesn't have
to be a point of agreement) leads, I think, to the following conclusions
which are not my own invention, but are an attempt to summarise ideas
developed by many individuals.

(a) profit in all forms(dividend, rent, interest, CEO income and retained
earnings) should not be counted as a source of value added but as a
transfer income, and the accounts transformed accordingly.

(b) all economic activities which merely circulate existing use-values
should likewise be counted as transferred income. In particular this covers
the financial sector and that part of the commercial sector confined to the
circulation of use-value (thus excluding activities grouped under retail
that nevertheless modify use-value, such as transport and warehousing). The
accounts should be transformed accordingly.

(c) (perhaps more contentious); the NIPA accounts should be extended to
cover the annual output of *gross* (C+V+S) as well as *net* (V+S) value
created during the year.

(d) in consequence the *gross* costs of the nonproductive sectors must be
recognised as transfer incomes and the magnitude of profit, net output and
gross output amended accordingly by recognising that the money spent on
banking and commerce as a whole is a cost deducted from the value added by
labour and in particular, surplus value.

(e) that part of the labour of the state which is not consumed in the form
of commodities (services provided as of right, such as free health care,
state education, fire, police, etc) is a transfer income but of a different
kind, since it creates new use-values that are not sold privately but
distributed, as Rubin points out, according to principles of law and right.
They are therefore not 'sold as commodities' and have to be accounted
for distinctly. (Paul describes this as 'communist', which I wouldn't
necessarily quarrel with, but I would add that we must be careful not to
define a capitalist army - whose 'services' are also not distributed
as commodities - as communist. A necessary additional qualification is to
identify which social class benefits). These services, however, are
ultimately paid for in money from the income of one or another class, via
taxes, and consume (as intermediate inputs) a part of
capitalistically-produced value, to which they add new labour organised as
wage-labour but on a non-profit principle. IMO they are an intermediate
form, best treated as a redistribution of existing value. I suggest simply
that the net-tax procedure developed by Anwar and Ertugrul Tonak is the
best generally-accepted procedure available and should be applied in order
to identify the classes that receive the benefits of this use-value and
impute a money magnitude to it, and to identify the classes that finance
the labour which creates them.

(f) an important point requiring further work (both empirical and
theoretical) is the treatment of capital stock and depreciation. On this
there is no general consensus and, in my opinion, much of the work is yet
to be done.

Where do we disagree?

Some of the above points will be the subject of disagreements I think
we can usefully treat as minor or 'not substantive'.

For example consider the disputes, such as that between Fred and Mike,
relating to whether various activities are unproductive.

My point about most such disputes is that we can provide appropriate
disaggregated breakdowns of our 'transformed' NIPA data, where the above
transforms are contentious (eg on the allocation of the results of
commercial activities). It would then be an easy matter for a researcher
to calculate alternative figures on a different basis. Thus someone who
did not want to treat commercial activities as unproductive could simply
move this quantity from one place to another in our accounts and arrive
at the figures they wanted. I think it would be an important aspect of the
'usability' of our data by other researchers, that we would provide such
disaggregated information to facilitate alternative presentations of the

[We should however note, as Anwar and Ertugrul point out, that the I/O
statisticians implicitly treat the activity of retailing as unproductive in
that they record what are called 'producer prices': prices before
commercial mark-ups are applied. Whatever procedure is adopted, therefore,
we would have to be careful about consistency].

A second example concerns nomenclature. Fred tends to use the word
'profit' to apply to surplus value *after* deducting unproductive expenses.
I would prefer to call this 'observed profit' and I think that Marx's
category of profit extends to the whole of surplus value including that
part which is then unproductively spent on circulation and other things
(the army, etc). But there is no reason that this should be an obstacle
to jointly presenting a set of accounts in which we simply record that
one researcher has adopted one nomenclature, and another researcher
has adopted a different nomenclature.

A more fundamental point of disagreement obviously is the translation of
money magnitudes into magnitudes of socially-necessary abstract labour
time. In order not to confuse two discussions that can remain distinct
for the purposes of collaborating, I'll try to deal with this in a separate