The System of National Accounts and Gross Domestic Product as a consilience metric method
Please cite the paper as:
Verónica Cañal-Fernández and Manuel Hernández-Muñiz, (2013), The System of National Accounts and Gross Domestic Product as a consilience metric method, World Economics Association (WEA) Conferences, No. 1 2013, The political economy of economic metrics, 28th January to 14th March, 2013
What is wrong in the System of National Accounts (SNA)? This paper offers a new and simplified view of the role of national accounting methods and the metric used in empirical estimation of current economic activity (gross domestic product). To keep the things simple and to take the opportunity to explain this complex topic to students and people, we go back to basics. We focus on the most simple idea: the notion of identity and the arithmetic theory to construct the concept of macroeconomic identity. We propose to establish a link between Euclides, Paccioli and Keynes to show the inter-temporal consilience between overlapping generations. These last use the double accounting method as a representation form of empirical economic activity. This frame deflects a generalised mistake in the contemporary literature about the idea that GDP can serve as a measure of social welfare. That is a misuse of this metric. Taking seriously Keynes, the standard GDP definition offers us a simple measure and a sound basis to have an empirical estimation of economic activity: it is a macroeconomic figure of synthesis that provides us an approach to observe the business cycle. The key point is the right side of the identity definition of ‘Y= C+I’, especially ‘investment’ and its inclusion in the big formula.