Counterparties: The value of ideas
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The Bureau of Economic Analysis is “essentially rewriting economic history” all the way back to 1929, according to the bureau’s head of national accounts. By adding in the value of American companies’ intellectual property to the way it calculates GDP, the bureau is increasing its estimate of the size of the US economy by roughly 3%. That’s an increase equal to the size of the Belgian economy, Robin Harding points out.
“On a purely technical level, this should more precisely match GDP in any one quarter to the actual economic value the nation generates in that span,” says Neil Irwin. But perhaps more importantly, it points to a shift in how governments value the role intangible ideas play in economic growth. The US is one of the first to adopt a new international standard for GDP accounting, set by the UN in 2008.
The new data reclassifies R&D as a capital investment akin to a company buying a new tractor or factory, rather than simply the cost of doing business. Estimates from the BEA show this change alone increased GDP by $300 billion (nearly 2%) in the base year of 2007.
The accounting change also includes creative works — the intellectual property behind movies, music, books, and even paintings. In another post, Harding suggests this part of the change may be controversial, as it “will amount to the first official estimate of the value captured from the laws of copyright.”
The American economy is increasingly intangible. Last year, the US Department of Commerce detailed the impact of IP-heavy industries: they employ 40 million people in the US (27.1 million directly and 12.9 million indirectly) and contribute just over a third, or $5.06 trillion, to US GDP. Those IP-intensive jobs also pay 42% more than other industries. – Shane Ferro
On to today’s links:
The hot new tax-avoidance trend: Classifying your business as a REIT – NYT
The economic case for an Internet sales tax – Economist
eBay is emailing its users to help kill a proposed Internet sales tax – Reuters
The tax treatment of “ice cream cakes and similar items” – State of Wisconsin
And, of course, there are many more links at Counterparties.