Improving how we track the economy

After months of input from a panel of top academics and business leaders, a Commerce Dept. report on Innovation Measurement was just released. The primary issue at hand has been to accurately track an economy now based more on services and innovation than one based on manufacturing. Some summary highlights from the press release (and where you can also find a link to the entire report):

The United States today is more than 75 percent wealthier in terms of real GDP per capita than it was 30 years ago, which is largely attributable to productivity gains driven, in large part, by innovation. However, until now, few steps have been in place to allow the United States to measure and understand innovation—and therefore develop polices that foster it...

Secretary Gutierrez called for immediate steps and participation from other groups based on the report’s findings, including:

• The Bureau of Economic Analysis (BEA) will work with the Bureau of Labor Statistics (BLS) to provide a comprehensive accounting of the effect of high-tech goods and services on growth and productivity.This will set the stage for the development of integrated estimates for major sectors and detailed industries. Although total factor productivity growth is not a direct measure of innovation, correctly capturing productivity at the sectoral level will greatly improve our understanding where innovation occurs.
• BEA will design a supplemental innovation account by January 2009. This account will be a framework for directly measuring how much of the overall increase in productivity is due to increased investments in innovation. It will include investments in intellectual property (including patents, copyrights, and trademarks) and in human capital. In addition to directly measuring the impact of innovation on growth, such a measure would take into account the fact that knowledge, just like other property, is wealth—and those policies that increase knowledge increase the wealth of our society.
• Building on their successful efforts in developing measures of the impact of R&D on GDP growth, partners at the National Science Foundation are asked to maintain and expand their commitment and effort to the collection of data on research and development and innovation-related inputs. These efforts will provide an important piece of the puzzle of what drives innovation in the U.S. economy.
• Recognizing the clear benefits that can be achieved through better statistical coordination and data synchronization, Secretary Gutierrez pledged to work with the Council of Economic Advisors, the Office of Management and Budget, the Departments of Treasury and Labor, and Congress to see whether a framework that meets everyone’s data confidentiality concerns is achievable.
• The Committee members expressed a desire for the dialogue to continue after the release of these recommendations. In particular, the Secretary indicated he would direct the bureaus in Commerce to conduct various workshops on the drivers and impediments to innovation.