LINKAGES BETWEEN MACRO AND MICRO BUSINESS ACCOUNTS: IMPLICATIONS FOR ECONOMIC MEASUREMENT

The paper shows the relationship between microbusiness accounting based on double-entry bookkeeping and macroeconomic accounting based on quadruple-entry bookkeeping. In order for microaccounts to successfully aggregate into macroaccounts (i.e. preserve macro/micro linkages), quadruple-entry bookkeeping requires that the traditional double entries, recorded by transacting microbusiness units, be "consistent" with each other. In fact national economic accounting implicitly assumes that such consistency is maintained when national "aggregates" are uniquely extracted from national accounts and when national "identities" are claimed to hold true.
The main purpose of the paper is to show important examples where quadruple-entry consistency is not satisfied. These examples typically involve "complex" economic transactions between business units in which the legal form of the transactions do not necessarily represent their economic substance. When this occurs, different business units have genuinely divergent conceptions and perceptions with respect to their mutual economic transactions. Therefore, microbusiness accounts cannot be successfully aggregated into macroeconomic accounts without violating the integrity of microdecision making records.
The conclusion of the paper introduces a new theory called Perpetual Imbalanced Accounting. The theory shows that inconsistent (or imbalanced) economic accounting does tend to become consistent (or balanced) over sufficiently long time periods. Therefore, we must adopt a more dynamic view of national accounting if we desire to preserve successful macro/micro linkages. However, the problems of imbalanced macroaccounting and its statistical consequences cannot be entirely avoided no matter how long the accounting time period is taken. All of the above have important implications for the revision of the United Nations System of National Accounts.     

Introducing a certified economic accountant (CEA) degree or diploma program: Would Nancy and Richard Ruggles approve?

This paper is inspired by the work of Nancy and Richard Ruggles promoting national economic accounting in academic and non-academic areas. They were concerned with both compilation and use of national accounts as well as developmental issues. Now that the subject has matured with the 1993 SNA standards, the compilation, development and understanding of the accounts require special training and experience, but national economic accounting has become a multidisciplinary matter that cannot easily fit into one academic department. Hence we advocate a Certified Economic Accountant (CEA) degree or diploma program to gain enhanced recognition and greater understanding for national economic accountants and their work. The paper includes an annotated list of 50 references, covering the period 1942–2002, that might form a syllabus, and a section outlining the mechanics and problems of organizing such a program.     

THE 1993 REVISED SYSTEM OF NATIONAL ACCOUNTS: WHERE DO WE GO FROM HERE?

The 1993 System of National Accounts is a remarkable document, but the System also has some major imbalances and omissions. The present paper spells out four aspects of the SNA that require further development: (1) accounting for the costs of economic change; (2) delineation of information as an economic commodity; (3) overhaul of the methodology underlying input-output accounts; and, (4) consequences of the System's implicit use of compacted accounting. These developments can be incorporated in a Supplementary Document in the near future. We need not wait 25 years.     

MICROBUSINESS ACCOUNTING AND MACROECONOMIC ACCOUNTING: THE LIMITS TO CONSISTENCY*

The paper is concerned with analyzing the consistency problem that arises when the macroenterprise sector of a nation's accounting system is put on a microdata foundation. This foundation is composed of sets of microbusiness accounts, after some appropriate rearrangements and reclassifications. We pose the question: can the macroenterprise sector accounts be regarded as a consolidation of (observed) microbusiness accounts? The answer is positive from a purely conceptual viewpoint, but negative from a statistical viewpoint which preserves the decision-making records of microbusiness units. The latter phenomenon is referred to as the limits to (statistical) consistency while attempting to maintain the viability of a national accounting system. The analysis proceeds by exploiting the structural properties of market transactions matrices for a nation's economy. The results are sufficiently general to encompass the case where the transaction matrices are initially characterized by both sectoral discrepancies and transaction flow category discrepancies. In this general context it is shown that the statistical inconsistency potentially resulting from the replacement of the macroenterprise sector by an aggregation of microbusiness units has certain properties with economic meaning. This leads to a discussion that explains the ultimate rationale of statistical inconsistency: the fact that different microeconomic decision units may have different views and knowledge of common market transactions. The paper concludes with some implications for future research that appear to follow from the historical development of the subject matter.     

THE CONTRACTING-OUT PROBLEM IN SERVICE SECTOR ANALYSIS: CHOICE OF STATISTICAL UNIT

The contracting-out problem in service sector analysis is defined and considered from the viewpoint of choice of statistical unit. It is shown that both the enterprise statistical unit and the establishment- based unit are unsatisfactory for economic analysis. This leads to the recommendation for an "intermediate" statistical unit, namely the "division." The division, by construction and definition, is shown to have desirable properties for analysis of the contracting-out problem (and own-account problem) relating to services. Some empirical evidence with respect to the Canadian service sector economy supports the analysis and suggests a new interpretation of conventional service sector growth statistics.     

NEW DEVELOPMENTS TOWARDS RESOLVING THE COMPANY-ESTABLISHMENT PROBLEM*

The paper begins by stating various aspects of the national economic accountant's “company-establishment problem.” Six possible approaches to the problem are briefly outlined. The paper concentrates on one approach based on new developments in business accounting theory and practice, namely divisional-reporting procedures. The division represents the smallest operating entity capable of reporting both a complete set of production (income) statistics and a set of related financial (balance-sheet) statistics. When companies are owned and controlled by the same interests, namely the enterprise, each division reports on an enterprise-wide basis. In this important case, the traditional company-establishment problem has an enterprise-division-establishment resolution. There is considerable emphasis on clarifying the issues needed for systematic development of divisional-reporting to meet the requirements of a national statistical agency. Key aspects are the provision of appropriate conceptual distinctions relating to statistical structure of corporate organizations and patterns of intercorporate ownership consolidation. Practical experience gained by the U.S. Federal Trade Commission's line of business reporting program is also highlighted. Two tables show details with respect to a proposed divisional income statement and balance-sheet statement that a systematically developed division-reporting unit can provide. The tables are related to existing statistics yielded by traditional company- and establishment-reporting units. In effect the paper is part of a movement giving national economic accounting more microdata dimensions. Future research must integrate the proposed new statistical reporting unit within systems of national accounts presently constructed on the basis of a dual sectoring classification.     

PROBLEMS OF IDENTIFYING AND MEASURING INTERMEDIATE (PRODUCER) SERVICES IN THE COMPILATION AND USE OF INPUT-OUTPUT TABLES*

The paper is mainly concerned with statistical problems relating to intermediate services that arise in the construction of national input-output (I–O) tables. Though these problems are sometimes discussed in the literature, their precise nature is usually not spelled out in any detail and this is done in the paper. The problems are closely related to the company-establishment statistical dichotomy permeating the ultimate sources and allocation of intermediate services. Important examples can be found regarding the statistical treatment of head offices, research and development expenditures, and international trade of intermediate services. Presently used procedures for Canadian and U.S. I–O compilation show evidence of statistical inconsistencies and lack an appropriate framework to utilize full information. The paper suggests a possible approach for reconciling company and establishment data based on industrial organization linkage studies at the microlevel. Considerable empirical support is offered, using various official Canadian statistical publications, to show that the suggested approach is both feasible and has desirable properties. The paper goes on to argue that the contemporary information technology revolution has profound implications for I–O compilation and use with special reference to intermediate services. Four major implications are explained in the context of the growing microelectronics technological change and related literature. Some basic suggestions are put forward with regard to joint-cost allocation and inter temporal comparisons problems with respect to I–O compilation. It also appears that some fundamental rethinking of commonly accepted standard industrial classification conventions may be called for in the near future if I–O tables are to remain relevant and viable. The paper thus features a somewhat broader view of I–O statistical problems than usual and attempts to show that this view is potentially appropriate to questions of economic policy formulation.