National accounts are a means for connecting public policy to empirical information. No other set of statistical data is referred to more often in political rhetoric. The most ubiquitous indicator in the national accounts, the Gross Domestic Product, usually holds center stage. The word growth has become practically synonymous with a positive change in GDP. A recent book published by the OECD states that
“The most important use made of national accounts is to forecast the following year in order to provide the macroeconomic framework for the government budget. The prime aim is to evaluate the volume growth in GDP for the following year (…).” (OECD p.308)
and
“All the main public finance indicators are expressed as percentages of GDP (…).” (OECD p.248)
Clearly then, the political importance of the GDP aggregate can hardly be exaggerated. However, I will argue in this essay that national accounting is a problematic enterprise. It is by no means clear what features of the economy the aggregates like GDP truly reflect.
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