Counterparties: The value of ideas

April 22, 2013

Welcome to the Counterparties email. The sign-up page is here, it’s just a matter of checking a box if you’re already registered on the Reuters website. Send suggestions, story tips and complaints to

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:

7 lessons on how to fix an economy – David Wessel

The story of the Boston bombing wasn’t “whatever our readers happen to be finding on the Internet” – Reuters

How underwater mortgages killed the economy – WaPo

Tax Arcana
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

Investors are pouring billions into the latest hot housing asset: rentals – Bloomberg
This is exactly what the housing market needs – Matthew Yglesias

EU Mess
European austerity isn’t working – debt is up and growth is flat – Guardian
Bill Gross: austerity is not the “way to produce real growth… You’ve got to spend money” – FT

The Koch brothers may buy the LA Times and Chicago Tribune – NYT

The securities industry isn’t a fan of its employees’ privacy – WSJ

Find Your Own Meaning
Goldman Sachs hosts a hedge fund conference at Yankee Stadium – NY Post

It’s Academic
“An attempt to describe intelligence as a fundamentally thermodynamic process” – Inside Science

Primary Sources
Teachers unions rethink investing in funds that publicly advocate slashing pensions – American Federation of Teachers

Herdon responds to R&R’s response to Herdon’s takedown of R&R – Business Insider

Probably True
Microsoft Office is the “quiet villain of global finance” – Breakingviews

And, of course, there are many more links at Counterparties.

No comments so far

Comments are closed.