Counterparties: The value of ideas
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The Bureau of Economic Analysis is â€śessentially rewriting economic historyâ€ť all the way back to 1929, according to the bureauâ€™s head of national accounts. By adding in the value of American companiesâ€™ 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 equalÂ to the size of the Belgian economy, Robin Harding points out.
â€śOn 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,â€ť saysÂ 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 Â is one of the first to adopt a new international standard for GDP accounting,Â 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,Â Harding suggests this part of the change may be controversial, as it â€świll amount to the first official estimate of the value captured from the laws of copyright.â€ť
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. â€“Â Shane Ferro
On to todayâ€™s links:
The hot new tax-avoidance trend: Classifying your business as a REIT â€“ NYT
The economic case for an Internet sales tax â€“ Economist
eBay is emailing its users to help kill a proposed Internet sales tax â€“ Reuters
The tax treatment of “ice cream cakes and similar items” â€“ State of Wisconsin
And, of course, there are many more links at Counterparties.