Investing in intangibles: is a trillion dollars missing from the GDP?

Leonard Nakamura examines this paradox of low savings accompanied by increased wealth.Saving and investment

Is the U.S. economy really growing too slowly?

Has American economic progress slowed dramatically—or even stopped? Or are the statistics wrong: has the U.S. economy been experiencing strong growth, but our official measures fail to reflect it? In this article, Leonard Nakamura explores how economic progress is measured and discusses some of the policy implications that arise from alternative measures of our rate of growthBusiness forecasting ; Economic conditions - United States

Intangibles: what put the new in the new economy?

Generating new products requires corporations to spend very large sums of money. These expenditures often lead to the development of intangible assets, such as patents and copyrights, that can add considerably to a company's coffers and stock market value. However, in general, our accounting conventions do not recognize these expenditures as investments--a holdover from the days when these types of investments were a negligible portion of total investment. Leonard Nakamura argues that these conventions cause profits and savings to be understated and that correcting them makes U.S. economic and financial performance more comprehensibleCorporations - Finance ; Research and development

CEOs, clerks, computers, and the rise of competition in the late 20th century.

Leonard Nakamura suggests that a new era of heightened creative destruction that began in the late 1970s also ushered in a new era of heightened competition. Such intensified competition has made leaders of large industrial enterprises vulnerable to a level of uncertainty previously reserved for managers of small and new firms. Consequently, managerial careers now less often have benign endings. The story was much different during the previous 100 years. From the 1870s to the 1970s, however, the large industrial corporation was highly stable partly because of investments in a corporate structure that centered on a sales and administrative staff. In "CEOs, Clerks, Computers, and the Rise of Competition in the Late 20th Century," Nakamura argues that the electronics revolution of the 1970s sharply reduced the value of this corporate asset and made corporations more susceptible to competition.Corporations ; Competition ; Computers

What is the U.S. gross investment in intangibles? (At least) one trillion dollars a year!

This paper argues that the rate of intangible investment – investment in the development and marketing of new products – accelerated in the wake of the electronics revolution in the 1970s. The paper presents preliminary direct and indirect empirical evidence that US private firms currently invest at least $1 trillion annually in intangibles. This rate of investment roughly equals US gross investment in nonresidential tangible assets. It also suggests that the capital stock of intangibles in the US has an equilibrium market value of at least$5 trillion.Gross domestic product ; Investments

Underestimating advertising: innovation and unpriced entertainment

Leonard Nakamura states that despite consumers’ lack of respect for advertising, it nonetheless plays a significant role in the economy. For one thing, it helps consumers find out about new products, and new products have been rising in economic importance. It also plays a role in subsidizing broadcast entertainment and news programs. Ultimately, Nakamura shows that although advertising contributes to consumer welfare, its contribution is missing from our measures of output.Advertising

Let a hundred flowers bloom! Decentralization and innovation

Which is more likely to encourage creativity and innovation: a centralized or a decentralized system of support? That is, should large organizations and recognized experts determine who gets funding for their ideas? Or should small businesses, patrons, and foundations provide the primary support for innovation? In " Let a Hundred Flowers Bloom! Decentralization and Innovation," Nakamura looks at the case for both sides using economic analysis, empirical studies, and anecdotal evidence

Intangible assets and national income accounting

In this paper I focus on three related and difficult areas of the measurement of national income. I argue that the economic theory underlying measurement of these items is currently controversial and incomplete.National income

Economics and the new economy: the invisible hand meets creative destruction

In the 18th century, Adam Smith offered his theory of the invisible hand and the view that perfect competition is the main spur to economic efficiency. The theory of the invisible hand, as it has evolved in modern economic thought, treats creative activity as being outside the scope of economic theory. In the 20th century, Joseph Schumpeter offered an alternative perspective: creativity is an economic activity. He argued that a capitalist market system rewards change by allowing those who create new products and processes to capture some of the benefits of their creations in the form of short-term monopoly profits, a situation that promotes what Schumpeter called "creative destruction." What should the fundamental paradigm of economics be: creative destruction or the invisible hand? In this article, Leonard Nakamura offers some possible answers to this question.[Adobe Acrobat (.pdf)Economic development ; Productivity ; Wages

Advertising, intangible assets, and unpriced entertainment

This paper addresses two aspects of advertising: its role in supporting entertainment and news, and its role as an investment. The author argues that in both roles advertising’s contribution to output is being undermeasured in the national income accounts. In some cases one unit of nominal advertising input should be counted as two units of real output. In rough orders of magnitude, he argues that it is plausible that two-thirds of advertising expenditure represents unmeasured contributions to output, and the level of real GDP should be increased accordingly.Advertising ; Intangible property