University:
Massachusetts Institute of Technology
Course:
2.964 | Economics of Marine Transportation Industries
Academic year:

2019
Views:

293

Pages:

2
Author:

timddslx2

2.964: Economics of Marine Transportation Industries Lecture Notes: National Income & Product Accounts (NIPA) National Income Accounting Definition of recession: negative GDP (Gross Domestic Product) growth for 2 consecutive quarters “GDP growth = good” Why? - people wealthier - population growth – more people share Excessively rapid growth Æ inflation Managing growth (done by Federal government, Central Banks): - Monetary policy (interest rates / money supply) - Fiscal policy (taxation / government spending) What does GDP really measure? Economic well-being or health? National Income & Product Accounts (NIPA): GDP = C + I + G + X = consumption + gross investment = production = income where: C = Personal consumption I = Net private investment G = Government purchases X = Net exports NDP = net domestic product = GDP – capital depreciation GNP = gross national product, includes overseas activities of "US" firms Savings GPO = value added N ⎡ ⎤ = ∑⎢Si − (L i + ∑ I''i ⎥ i=1 ⎦ i=1 ⎣ N Si = sales of industry i Li = labor inputs purchased by i Ii = intermediate G + S purchased from other industries GDY = compensation + profits + rental payments + proprietor’s income Therefore, GDP measures the level of money flowing through the economy per year, defined as either: - consumption - production (value added) - income How good a measure is it of sustainable economic activity? Of true economic wellbeing? NDP is a bit better, but: - some of NDP is due to drawing down resource stocks - N/GDP does not include non-market value added - N/GDP includes negative or defensive expenditures Example: Gallon of oil extracted, refined, sold at station and used in vehicle. NDP includes $1.30 for final sale of gas (so by NDP measure, more oil used is better), but: - nation is poorer by oil extracted - environmental amenities reduced? Drilling, production, transport - money spent cleaning up, time in cars/delays, cost of pollution of air from combustion Æ all boost GDP Solutions? - asset “satellite” accounts to track resource stocks o changes in “market” resource stocks non-renewable (minerals…) renewable (timber, fish…) o changes in non-market resources (more controversial) clean air clean water BEA efforts underway for years on mineral accounts, but political opposition – coal states. UN, European nations are further along on this - we know how to do it better, but… Indices of true economic welfare: - “quality of life” measures - arbitrary, but so is NDP - tend to show flat/declines since 1970s Æ Optimal scale of human activity? Unclear, but perpetual growth? Of what? Ecological economics – measure material + energy flows rather than $ Growth from efficiency, not more raw material throughput

National Income & Product Accounts (NIPA)

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