The Misunderstood Economy: What Counts and How to Count It - Hardcover

Eisner, Robert

Hardcover

ISBN 10: 087584443X ISBN 13: 9780875844435

Publisher: Harvard Business School Pr, 1994

Synopsis

Explains how economic and social progress should be measured, arguing that government accounting is fundamentally flawed since it fails to distinguish between current and capital expenditures

About this title

About the Author

Robert Eisner is a professor of economics at Northwestern University.

Reviews

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.
Copyright 1994 Reed Business Information, Inc.

Best known for maverick views on federal deficits and the national debt, Eisner (Economics/Northwestern Unviersity; How Real is the Federal Deficit?, not reviewed) makes his signature subjects a centerpiece of this contrarian and somewhat unfashionable audit of the domestic economy. While Eisner stops well short of claiming that budget shortfalls don't matter, he does argue that government figures overstate the case, inter alia, by failing to take economic growth and investment (in education, infrastructure, etc.) into account. Nor, the author complains, do they distinguish between operating outlays and capital expenditures. He goes on to point out that deficit abatement is not an end in itself; the government's principal objective is--or should be--to improve the well-being of the American people. To further his point, Eisner weighs widely used measures of the US economy and finds them wanting. Starting with GNP, he cautions that it's necessary to look beyond official data to get an accurate picture of activities not included in market transactions, e.g., housework, research, and the volunteer services provided nonprofit institutions like museums, schools, and churches. He also discusses investment's links to savings, the realities of America's putatively reprehensible status as a debtor nation, foreign-trade balances, the considerable gains that can accrue from reducing unemployment below its so-called natural rate (above which, many other economists believe, inflation is inevitable), monetary policy, the effect of tax increases, the issue of whether government spending is high enough, and why prosperity (or the lack thereof) could have more to do with the country's capacity to care for the elderly than the condition of Social Security trust funds. An informed and informative guide to the US economy's strengths and weaknesses for those perplexed or offended by the major media's invariably shallow, frequently mistaken interpretations. -- Copyright ©1994, Kirkus Associates, LP. All rights reserved.

Eisner makes it clear that much of economics is controversial and suggests that values and misconceptions often cloud the economic picture. In How Real Is the Federal Deficit? (1986) he argued that oft-cited figures for the national debt were substantially distorted upward because of inflation and high interest rates. Here he similarly makes his case that when analyzing budget deficits, unemployment, Social Security, inflation, etc., either we do not measure what is most relevant or we utilize incomplete or incorrect measures. Eisner warns that it is a mistake to equate financial principles that apply to individuals with those for the economy as a whole. Especially suited to public libraries. David Rouse

Eisner ( How Real Is the Federal Deficit? , LJ 5/15/86) has a simple if controversial thesis on how the U.S. economy should function. He maintains that worries about the national debt and the current federal deficit are misplaced and even exaggerated. The problem is that there isn't enough investment to spur the economy along. Logically, it follows that without sufficient investment (i.e., spending) there is inadequate job creation and that unemployed people consequently don't have income to spend or save. His solution? Debt is a good thing. Backed by extensive documentation, Eisner's arguments have a great deal of validity. Unfortunately, the result is economic overkill for the average reader. But since Eisner has the ear of President Clinton, his ideas may soon enter the economic mainstream and affect us all. Recommended for large business and economics collections.
- Richard Drezen, Merrill Lynch Lib., New York
Copyright 1994 Reed Business Information, Inc.

Edition details

• Publisher: Harvard Business School Pr
• Publication date: 1994
• Language: English
• ISBN 10: 087584443X
• ISBN 13: 9780875844435
• Binding: Hardcover
• Edition number: 1
• Number of pages: 224