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U.S. Statistics Do Help Spot Economic Trends

July 13, 1986

In his column of June 29 ("America's Future Rests With Competitive Industry, Not Shift to a Service Economy"), Lester Thurow takes the reader on a complex statistical tour of the U.S. balance of payments accounts. The impression he leaves is that the official figures obscure recent trends. In an era in which government statistical programs are being trimmed for budgetary reasons, such an impression provides unwarranted--if unintended--support for these cutbacks.

Thurow asserts that "investment income is only counted as an export of services if Americans bring their earnings back to the United States." In fact, for direct investments the official accounts include both repatriated and non-repatriated earnings. More than half of the reported income from U.S. direct investment abroad in 1985 was non-repatriated. The accounts provide the same treatment of foreign direct investment income in the United States. For other forms of investment, unfortunately, such treatment is not possible given current resources.

Military transactions, Thurow complains, are included with services. In the context of the article, the reader might believe that this treatment exaggerates the U.S. service surplus, perhaps deliberately. Actually, it reduces the surplus (by $2 billion in 1985).

More importantly, the Commerce Department's tables are sufficiently detailed to allow analysts easily to rearrange the figures to suit their needs, as Thurow himself did. Finally, Thurow argues that the fee and royalty receipt surplus in 1985 reflected only "a past American technological edge." The inference is that these receipts ought not be included with current data. But it will always be the case that such income partially reflects the past; any return on investment does. That is no reason for exclusion. Furthermore, the surplus has continually risen during the 1980s, suggesting that new U.S. technology is still in demand on world markets.

Readers may or may not agree with Thurow's other economic propositions. But they should not be left with the sense that official statistics are either hopelessly deficient or presented in a misleading format. If more resources are put into statistics gathering, what deficiencies there are can be reduced. And we will all be better equipped to discuss economic policy.

DANIEL J. B. MITCHELL

Santa Monica

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