[OPE-L:5737] RE: Question about NIPA

andrew kliman (Andrew_Kliman@CLASSIC.MSN.COM)
Wed, 19 Nov 97 01:04:33 UT

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Many thanks to Jerry, Fred, Allin, and Juriaan, whose posts helped confirm my
suspicions about the "final goods" issue. Thanks in particular to Fred, who
saved me the trouble of having to go to more and more authoritative sources,
having done so himself.

The basic conclusions I draw from this discussion are (1) that the NIPA
measure value added correctly, ceteris paribus, because (2) what actually gets
counted as "final" goods and services is different from what the category
"final" seems to mean -- the category is either misleading or ill-defined.

I suspect that the latter (ill-defined) is the case. In particular, I find
the passage that Fred quotes remarkable. To call something "final" because it
is *added to wealth* instead of *used up*, if it were applied consistently,
would exclude the larger part of what are considered to be "final" goods and

I further suspect that although the category of "final" is unable to be
defined in precise conceptual (vs. operational) terms, it survives and remains
little scrutinized for ideological reasons. It conforms to the doctrine that
the end-purpose of economic activity is consumption, not accumulation for its
own sake.

In answer to Fred's question about how I happened upon the problem: it's not
that I'm doing any study or anything at the moment. Rather, I've just taught
this stuff for the umpteenth time, and I have an interest in it because I keep
wondering about these claims that Marx's transformation (Ch. 9, Vol. III,
*Capital*) is guilty of double-counting. So sitting down and figuring it all
out has been a "back-burner" project for a while. Since I knew that Iv + Is >
IIc, and since I understood "final" to mean (basically) the output of Dept.
II, I had long suspected that the NIPA were wrong because they underestimated
value added. I was wrong about that.

Instead, "final" doesn't mean what they tell us it means. Or, what they count
as "final" is not what is actually final.

Andrew Kliman