HE absence of any observable flow of net in the world argues for exclusive adherence to an income-originating interpretation of the value added by particular industries or sectors. Yet, the merit of the quest for a net production measure cannot be gainsaid. The notion of splitting up gross national product into the constituent contributions made by individual sectors of the economy carries persistent appeal despite the fact that the finalgoods and services produced by many industries never actually enter the physical flow of GNP. It has motivated recent efforts by the Office of Business Economics at the Department of Commerce to construct a set of accounts showing measures of the physical volume of the gross national product originating in the various industries of the Nation, which in principle aggregate to the physical volume of obtained by deflating final expenditures.' This appeal is, of course, buttressed by the same conventions against double-counting that underlie the current dollar GNP concept. Paralleling the concern with the total economy's capacity to produce 'goods and services to satisfy final demand, there is an abiding reluctance to attribute the results of the application of factor services at all the preceding production stages to that activity which happens to come last in the sequence of fabrication. Hesitancy on thispoint is reinforced by the 'knowledge that the degree of integration varies among industries at any moment in time, as well as over the course of time within individual industries. Given variations of the latter kind, a disinclination to accept the movements of an actual physical series as an indication of the contribution made to GNP by the industry in auestion is thoroughlv reasonable. What is wanted is a measure which excludes the contribution made to the given industry's physical by inputs purchased from other industries. A measure of real net output in that sense would be entirely meaningful. Having reaffirmed the usefulness of the theoretical notion of net commodity output, it is all the more necessary to acknowledge that during an earlier exercise in conceptual tub cleaning undertaken by the writer,2 the proverbial baby seemed to slip out along with the bath water. On that occasion it was shown that the residual, or double-deflation approach to the ideal index of net output suggested by Fabricant and Geary leads to an unfamiliar and rather harrowing index number problemone which manifests itself in the appearance of negative value added estimates.3 The index number problem in question will arise even in the absence of aggregation, because the relative product and materials prices pertaining to a given industry at a specified date reflect a particular technological nexus (between the quantity of input and output) which need not be appropriate to the production conditions prevailing at some other date. Eschewing resort to the Fabricant-Geary formula, and all the difficulties of interpretation associated with the index numbers it

W ITHIN recent years several lines of adI,/'VTvance in quantitative economic research have converged to focus attention upon the deflation of value added and, where the data relating to the desired social accounting concept are available, gross product originating by industry. The common proximate goal of such endeavors has been to secure measures of the contribution made by various industries or sectors of the economy to real national product. Estimates of real product on an industry basis are held to be useful on a number of counts. They may be aggregated to provide a check on the results of the deflation of gross national product by expenditures on goods and services in the major categories of final demand. Moreover, not only do they offer a means of analyzing the industrial composition of historical and contemporary changes in total real and aggregate productivity, but they form a basis for the incorporation of industrial detail into current economic projections.' Working toward these ends, the Canadian Dominion Bureau of Statistics has prepared annual and quarterly indices of industry net output by deflating census value added. The indices have been used to project estimates of gross domestic product by industry of origin available for bench-mark dates.2 The United States has not been inactive on this front. A cooperative governmental project, undertaken at the request of the Interagency Subcommittee on Production and Productivity (Office of Statistical Standards, Bureau of the Budget) has carried out exploratory work developing annual estimates of constant dollar gross product originating by industry.3 In still another quarter, American economic historians have recently been presented with estimates of major sector real commodity in the United States during the latter two-thirds of the nineteenth century. These were prepared by Robert Gallman through the deflation of (state and federal) census value added data.4 In the light of these developments wlhich not only portend, but seem certain to encourage, continued pursuit of the industry real product approach, it will perhaps be useful to consider the implications of the accepted statistical procedure for deflating value added and gross product originating. As it is usually defined, current dollar value added is the value of gross sales, at producers' prices, less the cost of raw materials (including fuel and energy) purchased from other industries (and/or firms within the same industry), at delivered prices. Gross product originating can be defined as the market value of the industry's output, less the expenditure on purchases of all intermediate goods and services.5 It is a direct step from the current value definition to the derivation of constant dollar value added, CDVA, by the ith industry in year t as

The Cold War’s ending has brought mounting pressures to recognize national science and technology research systems. Yet, by comparison with what has been learned already concerning institutional arrangements and business strategies affecting corporate RD investments, surprisingly little is known about the economic origins and effects of the corresponding institutional infrastructures shaping the world of “academic” science, and the organization and conduct of publicly supported RD more generally. The desirability of closing this particular lacuna in the economics and economic-history literatures has been just as evident to economists concerned with extending the analysis of modern institutions as to those who have begun to approach the whole area of science and technology studies from the perspectives and methods of industrial-organization economics. [1] Even before the “new economics of science” had begun to direct attention to such a program, Douglass North (1990 p. 75) saw a significant challenge and a promising opportunity in explicit exploration of “the connecting links between institutional structures... and incentives to acquire pure knowledge.” The research reported here has accepted that challenge (see also the other papers in this session: Timothy Lenoir [1998], Christophe Lecuyer [1998], and Marjory S. Blumenthal [1998]). It is focused upon key episodes in the institutional evolution of “public science,” and its complex and changing relationship to the other organizational spheres of contemporaneous scientific activity: those in which research was conducted under “proprietary rules” for industrial profit-goals, and “defense-related” science and engineering knowledge was sought under conditions of restricted access to information concerning methods, findings, and their actual and potential applications.

The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox Author(s): Paul A. David Source: The American Economic Review, Vol. 80, No. 2, Papers and Proceedings of the Hundred and Second Annual Meeting of the American Economic Association (May, 1990), pp. 355-361 Published by: American Economic Association Stable URL: http://www.jstor.org/stable/2006600 Accessed: 08/12/2010 01:40