The Misunderstood Economy: What Counts and How to Count It

In this lucid study, Eisner addresses major econometric issues and poses iconoclastic questions about how the U.S. counts data. Washington, he argues, maintains a system that simultaneously undercounts (such as excluding nonmarket volunteer service outputs at hospitals) and overcounts (such as including coal used to produce steel used in cars), creating disturbing discrepancies. Eisner ( The Total Income System of Accounts) contends that accuracy can be achieved by including in the gross domestic product only the ``final product'' of the economy. The government's accounting procedures are unsettling, he notes, since few people have any notion how the deficit is measured. He postulates that if ``federal accounting conformed to private business practice . . . the resulting U.S. federal budget deficit on current account . . . would at this time be little, or not at all, less than the overall deficits generally reported.'' Eisner's detailed coverage of transfer payments, taxes, interest rates and social security is impressive. (Apr.)