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Published online by Cambridge University Press: 07 November 2014
Ten years ago, almost to the day, a memorandum describing the conceptual framework of Canada's National Accounts was presented at a special session of the annual meeting of this Association held in Kingston and its substance appeared soon afterwards as chapter 1 of the first of the series of publications on the National Accounts, Income and Expenditure issued by the Dominion Bureau of Statistics. The present occasion therefore marks the tenth anniversary of Canada's National Accounts, and it seems appropriate to commemorate it with something of a stock-taking and a glimpse into the future. We have been prompted to undertake this task not merely by reasons of sentiment but primarily by a very practical consideration. For various reasons noted below, the Bureau is commencing work on a revised volume of the National Accounts which it plans to release two years from now. We hope that the present discussion will help to make this document as useful as possible by promoting a cross-fertilization of ideas between the users and producers of the data.
However, not all the matters discussed here will be incorporated in the forthcoming volume. Indeed much of the work in progress described here is developmental and will take many years to complete. Furthermore, some matters to be discussed are still speculative and hypothetical, introduced primarily to illustrate interesting possibilities which may or may not take the form of published statistical series. It is difficult to draw the line clearly or with confidence in all cases but we hope that, in general, it will appear from the context which parts are likely to be included in the forthcoming report, which parts represent developmental work that eventually will see the light of day, and which parts have a more uncertain fate.
This paper was presented at the annual meeting of the Canadian Political Science Association in Toronto, June 2, 1955. The views expressed here are the personal responsibility of the authors.
1 The memorandum, prepared by an interdepartmental committee, incorporated, substantially, the decisions arrived at in the discussions between representatives of the United Kingdom, the United States, and Canada which had been held in Washington in September 1944. See Denison, Edward F., “Report of Tripartite Discussions of National Income Measurement,” Studies in Income and Wealth, X (New York: National Bureau of Economic Research, 1946), 3–23.Google Scholar For a brief historical summary of national income work prior to 1945 see Goldberg, Simon A., “The Development of National Accounts in Canada,” this Journal, XV, no. 1, 02, 1949, 34–8.Google Scholar
2 In the course of this revision an attempt will be made to present the statistics in such manner as to facilitate comparison with the standard tables recommended by the Statistical Office of the United Nations.
3 The National Accounts of Canada have benefited substantially from developments in other countries, particularly the United Kingdom and the United States. The work of the Statistical Office of the United Nations, the International Association for Research in Income and Wealth, and other organizations is also proving increasingly useful.
4 For a comprehensive discussion of national accounting from the point of view of major uses see Ohlsson, Ingvar, On National Accounting (Stockholm: Konjunkturinstitutet, 1953).Google Scholar
5 See Stone, Richard, “Use and Development of Income Estimates” in Chester, D. N., ed., Lessons in the British War Economy (Cambridge, 1951), 93.Google Scholar
6 See the interesting discussion by Burdett, D. K., “Social Accounting in Relation to Economic Theory,” Economic Journal, 12, 1954.CrossRefGoogle Scholar
7 A major problem in the industrial distribution of the national income is that of classification: the data on labour income and net income of unincorporated business are classified on an establishment basis while corporation profits and other investment income are classified on a company basis. The more detailed the industrial classification the more serious is the conflict in the two bases of classification. Despite the difficulty of breaking down profits and other investment income by establishments in a meaningful way, consistency in industrial comparisons of national income would be increased if this were done.
8 See United Nations, A System of National Accounts and Supporting Tables, ST/STAT/SER.F/No. 2 (New York, 1953), 5, 6, 36.Google Scholar
9 Depreciation of non-farm residential property is now estimated as a percentage of gross rentals. This procedure is under review at the present time.
10 The main difference would be that gross national product would not be altered in the case of the depreciation valuation adjustment because the amount deducted (added) from depreciation would be offset by an identical amount added (deducted) to national income.
11 This appears to be the only feasible method. Balance sheet information on the book value of physical assets available from published statements contains well-known pitfalls.
12 Goldsmith, Raymond W., “A Perpetual Inventory of National Wealth,” Studies in Income and Wealth, XIV (New York: National Bureau of Economic Research, 1951).Google Scholar See also Denison, Edward F., “Quality Change, Capital Consumption, and Net Capital Formation,” paper presented to the Conference on Research in Income and Wealth, 10, 1953 (New York: National Bureau of Economic Research, 1953), mimeo.Google Scholar; Redfern, Philip, “Net Investment in Fixed Assets in the United Kingdom, 1938–1953,” paper read before the Royal Statistical Society, 01 19, 1955 Google Scholar, to be published in the Journal of the Royal Statistical Society.
13 An estimate of replacement-cost depreciation of residential property is contained in Firestone, O. J., Residential Real Estate in Canada (Toronto, 1951).Google Scholar
14 Extensions in the direction of studies of inter-industry flow are the subject of a separate paper at this meeting by Mr.Sawyer, J. A.. See “The Measurement of Inter-Industry Relationships in Canada,” this Journal, XXI, no. 4, 11, 1955, 480–97.Google Scholar
15 Two important projects may be mentioned to illustrate the kind of extension of detail of the main aggregates we have in mind. First, the present method of estimating personal expenditure on consumer goods, which relies heavily on sales data, is being supplemented by the “synthetic method,” which estimates final purchases of commodities by a lengthy process involving a synthesis of statistics on Canadian production, imports, expoits, taxes, transportation charges, dealers' markups, inventory change, and estimates of purchases for non-personal use. This “synthetic” method will make available considerably more detail than was possible when the sales method was used exclusively. Similarly, “family-budget” statistics are being used to give more details about personal expenditure on services. Second, the need for inventory data in the analysis of short-term fluctuations has led to great emphasis being placed on improving the quality of the statistics and increasing the amount of detail shown. A monograph which will bring together and analyse all available statistics on inventories is in the course of preparation.
16 See Barber, Clarence L., “The Concept of Disposable Income,” this Journal, XV, no. 2, 05, 1949, 227–9Google Scholar; and Goldberg, Simon A., “The Concept of Disposable Income: A Reply,” this Journal, XV, no. 4, 11, 1949, 539–42.Google Scholar
17 The Dominion Bureau of Statistics also initiated late in 1952 small sample surveys of expenditure, the main purpose of which is to keep up to date and improve the weights in the consumer price index.
18 See, for example, National Accounts, Income and Expenditure, 1950–1953 (Ottawa, 1954), 26.Google Scholar
19 Humphreys, D. J. R., “Personal Savings in Canada, 1939–1953” in American Statistical Association, Proceedings of the Business and Economic Statistics Section, 114th annual meeting of the Association, Montreal, 09, 1954 (Washington, D.C., 1955), 207–11.Google Scholar
20 Ibid., 211.
21 See Bank of Canada Statistical Summary (monthly) (Ottawa: Bank of Canada).Google Scholar
22 Actually the direct-industry aggregate is measured on a domestic product rather than a national product basis; that is, in the course of calculating the index, the interest and dividends paid to non-residents by each industrial group are not subtracted and the interest and dividends received by Canadian residents from abroad are not added. Since the adjustment for net investment income paid to non-residents can easily be made (though on a rough basis) to either of the two aggregates to transform it to the other, the following discussion is formulated in terms of the more familiar concept of gross national product.
23 Strictly speaking, factor cost plus property taxes (and miscellaneous business taxes), since the latter are not removed; however, since these taxes are fairly widely distributed among industries, the omission is not serious.
24 The “census value added” estimates are at the present time arrived at by subtracting cost of materials (including fuel, purchased electricity, and supplies consumed) from the gross value of production in each industry. They therefore differ from net income originating plus depreciation in that they include purchased services such as transportation, advertising, telephone, insurance, repair and maintenance, and similar purchases from other industries. To the extent that the relative importance of the (deflated) value of these services purchased by the producing industry in question has increased as a proportion of (deflated) income originating plus depreciation, the use of “census value added” figures gives rise to an overestimation of the relative contribution of the industry to the total volume of output and to an exaggerated estimate of the total (and vice versa). Indeed, a comparison of the movements of the net value of commodity production (census value added in current dollars) with income originating plus depreciation (in current dollars) indicates that these movements are considerably different. The input-output work may make possible an approximate exclusion of purchased services in the base year but a satisfactory adjustment would require a special survey of producers' operating costs. The discrepancy in the two output aggregates arising from the effects just discussed are regarded in this paper as “statistical” and they may be larger than the one due to the tax weighting factor. Another statistical difference arises from the fact that the two aggregates of real output fail to take account of changes in quality to the same extent. For example, if there is a shift in purchases from low-quality to high-quality components represented in a particular current value item, the price for each component remaining constant, the deflated G.N.E. figures will show an increase in volume, assuming that the price index used in the deflation represents the total price movement; on the other hand, this kind of improvement in quality is not reflected in the measurement of direct output volume to the extent that the commodity detail necessary to reflect these changes in “product mix” is lacking. See also Berlinguette, V. R., “Measurement of Real Output,” this Journal, XX, no. 1, 02, 1954, 59.Google Scholar
25 It should be noted, however, that to the extent that the initial size of the residual itself determines the intensity with which subsequent probing of the sources and methods is carried out before publication, the initial size may in itself be a factor in determining the final error of the various components. However, as far as possible, an attempt is made not to permit the initial size of the error to hinder objective analysis of the statistical results for consistency and significance.
26 United Nations, A System of National Accounts and Supporting Tables, 1.Google Scholar