Concluding Remarks

Dale W. Jorgenson

Harvard University

Expressing his appreciation to all involved, Dr. Jorgenson rated the day’s session as far exceeding expectations that had been high to begin with. He extended special thanks to Dr. Raduchel, whose intellectual leadership on behalf of the STEP Board had been reflected in the meeting’s high quality; and to Dr. Wessner, as well as to his staff, for putting together a stimulating program of discussion on very interesting issues.

Dr. Jorgenson noted that the subject of the series of which this conference was a part, “Measuring and Sustaining the New Economy” was an area discovered by economists only in 1999, when, the U.S. Bureau of Economic Analysis (BEA) had introduced the capitalization of software. This was “really quite remarkable” in light of the fact that the computer had entered into commercialization some four decades before. Since economists had been lagging in that area, a matter on which various viewpoints had been provided by the day’s group of distinguished speakers, the question confronting them was: “How are we going to fill this gap?”

UNDERSTANDING THE ECONOMICS OF THE COMPUTER SECTOR

The first necessity was understanding what the subject was and what role it played, issues that had been discussed very elegantly by Dr. Raduchel. Dr. Lam had then imparted a great deal of knowledge about the current frontier of com-



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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium Concluding Remarks Dale W. Jorgenson Harvard University Expressing his appreciation to all involved, Dr. Jorgenson rated the day’s session as far exceeding expectations that had been high to begin with. He extended special thanks to Dr. Raduchel, whose intellectual leadership on behalf of the STEP Board had been reflected in the meeting’s high quality; and to Dr. Wessner, as well as to his staff, for putting together a stimulating program of discussion on very interesting issues. Dr. Jorgenson noted that the subject of the series of which this conference was a part, “Measuring and Sustaining the New Economy” was an area discovered by economists only in 1999, when, the U.S. Bureau of Economic Analysis (BEA) had introduced the capitalization of software. This was “really quite remarkable” in light of the fact that the computer had entered into commercialization some four decades before. Since economists had been lagging in that area, a matter on which various viewpoints had been provided by the day’s group of distinguished speakers, the question confronting them was: “How are we going to fill this gap?” UNDERSTANDING THE ECONOMICS OF THE COMPUTER SECTOR The first necessity was understanding what the subject was and what role it played, issues that had been discussed very elegantly by Dr. Raduchel. Dr. Lam had then imparted a great deal of knowledge about the current frontier of com-

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium puter science. “We have to understand as economists,” commented Dr. Jorgenson, admitting that this was a “parochial” view, “what computer science is and what computer engineering is, and what the difference is, and how that is going to develop.” Economists like Dr. Varian were taking the lead in trying to understand the economics of this subject, which was both “very, very important” and, for economists, “very, very new.” Quite a bit had been accomplished in the course of the day, as a “very firm story” had been laid out concerning the unbelievably rapid progress being made in the science and technology of the area. Drs. Berndt and White had provided guidance through the landscape of prepackaged software, discussing where to measure it: at the Microsoft gate as it leaves Redmond, Washington, or when it arrives where somebody is actually going to put it to use. Taking quality change into account was extremely important, Dr. Jorgenson observed, even if that might be objected to as a “pretty esoteric point.” While conceding that it was an example of economics jargon, he noted that taking quality change into account involved incorporating computer science and computer engineering into the economics of software. “That is our agenda,” he declared, praising Dr. Berndt and White for their elegant illustration of it. ACCOUNTING FOR COMPUTER-RELATED COSTS: A “GOOD-NEWS STORY” Dr. Jorgenson then addressed the concern lest this enterprise be “just too complicated.” It may start out with a mere shrink-wrapped package, but how could measurements capture such associated costs as installation, business reorganization, and process reengineering? “Calmer heads prevailed,” he assured the audience, and the result had been “a thoroughly good-news story.” He recalled the discussion of accounting rules by Mr. Beams and Ms. Luisi, which had made clear that these problems had been thought through and that agreement had been reached on accounting rules and on how they were to be applied. “Admittedly, there are a lot of ambiguities,” he said, “but the accountants are the people we depend on, and they have delivered.” There was more good news. As Mr. Wasshausen had mentioned, the U.S. Census Bureau, “in its wisdom” and “just in time,” was fielding a first-ever survey that would determine where investment in software was going, how much software was being produced in the United States, how much was being imported, and how much the country was exporting. The results of the survey were to become available in the first quarter of 2004. “Wait a minute!” Dr. Jorgenson exclaimed. “We discovered this problem in 1999, and only 5 years later we’re getting the data!” Furthermore, that data were to be certified by the Financial Accounting Standards Board.

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Measuring and Sustaining the New Economy: Software, Growth, and the Future of the U.S. Economy - Report of a Symposium BUILDING UNIFORM DATA INTO NATIONAL ACCOUNTS Dr. Pilat, he noted, had “started off on a somewhat sour note” by describing the picture across the Organisation for Economic Co-operation and Development (OECD), whose member countries have different methods of accounting, as “pretty chaotic.” But an OECD task force has delivered a report, and all the national statisticians have gone back to their home countries to mount surveys in the aim of beginning to build these data into their national accounts in the way that the BEA had built them into the U.S. national accounts beginning in 1999. This meant that international comparisons were in the offing, even if they were not to be expected right away. Their availability—that Dr. Jorgenson foresaw within 12 to 24 months—would make it possible “to supply the missing link: moving offshore.” It would then be possible to ascertain what was moving where. There had been unanimous agreement among the members of Panel IV that the starting point for any discussion had to be that data were not yet available. But the data were on the way, which meant that policy would not have to be debated without the illumination of careful economic measurement. Dr. Jorgenson again thanked all participants for their contributions to what he called a “very clearly focused picture of the challenges that lie ahead of us, the opportunities, and the potential resolution of what has become a very, very tense and therefore a very interesting debate.”