Business Week article on intangbles in GDP

A new Business Week article on treating intangibles as investments gets it absolute right.

The Rise of the Intangible Economy: U.S. GDP Counts R&D, Artistic Creation

On July 31, the U.S. Bureau of Economic Analysis will rewrite history on a grand scale by restating the size and composition of the gross domestic product, all the way back to the first year it was recorded, 1929. The biggest change will be the reclassification—nay, the elevation—of research and development. R&D will no longer be treated as a mere expense, like the electricity bill or food for the company cafeteria. It will be categorized on the government’s books as an investment, akin to constructing a factory or digging a mine. In another victory for intellectual property, original works of art such as films, music, and books will be treated for the first time as long-lived assets.

It’s a great idea, if late. The BEA has the 20th century economy down cold. It can tell you about personal income trends in Anchorage, Alaska, or America’s annual output of rubber products and plastics. Now the agency is putting more attention on R&D—the lifeblood of the 21st century economy—by moving it from an experimental “satellite” account into the heart of measured GDP.

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Comment by Kenan Jarboe on July 22, 2013 at 12:04pm

Key here to me is the mindset change. If the macro-economists start treating intangibles as an investment, then other may follow -- including policymakers and business leaders.

Comment by Mary Adams on July 22, 2013 at 9:54am

I also agree with Peter Coy on this. It's good to improve the data but the whole approach isn't that helpful.

For me, this underlines why we need ICounting. Financial metrics don't come close to explaining what's going on in the intangible economy. Stakeholder metrics do. They show if/how/how much value an organization is creating for its stakeholders.

(BTW, I have an article coming out on this in a month or so--I'll share when it is published)

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