Measuring Non-market Output in the National Accounts by: Robin Lynch Discussant notes Peter van de Ven

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General introduction Non-market services – SNA 1993: Services produced by government and NPISHs that are supplied free or at economically insignificant prices – ESA 1995: Sales < 50% of costs of production No economically significant prices available By convention: value of output = sum of costs: – Intermediate consumption – Wages and salaries – Depreciation – (User cost of capital)

General introduction, continued Volume measurement of non-market services: Input methods: –(Detailed) deflation of inputs –Deflation of wages and salaries using e.g. collective wage agreements By definition: (multifactor) productivity = 0 Criticism: input methods do not properly reflect the change in the volume of services provided => output indicators –SNA 1993: para and –Handbook on Price and Volume Measures in NA –Atkinson Review

Measurement of healthcare in UK InputsOutputProductivity

General introduction, continued Issues and problems related to output methods: – Individual versus collective services – Unit of measurement –Activity (e.g. days in hospital, operations) –Output (e.g. treatments) = outcome attributable to the relevant productive activity –Outcome (e.g. life expectancy) – Measurement of quality –Direct survey –Quality of inputs –Outcome indicators – Additional benefits from public services as a consequence of additional (future) income and/or assets

Robin Lynch:

Main criticism of Robin Lynch Output methods assume an equivalence between non- marketed output and marketed output => non-marketed output is fundamentally different: – Inconsistent with fundamentals of the 1993 SNA  No price is charged => no value can be observed  No market mechanism for the determination of the nature of the services => consumer marginal utilities are not properly reflected – Often, one has to rely on activity indicators => such indicators are not representative – Quality changes impossible to capture Economically more meaningful concept: capacity to deliver = deflated inputs

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Questions and remarks – Collective versus individual services important:  Collective services: “capacity to deliver”  Individual services: price and value of the output may not be observable, but what about the volume of the output? – Inconsistency with SNA?  In value terms, government is recognised as producer of services – No market mechanism?  Consumer preferences via democratic elections?  Many non-market services have inflexible demand  By and large, consumer preferences are reflected – Activity indicators, quality change?  Fundamentally different for market services? – How to deal with additional benefits?