Foreword
Peter Hill

The papers in this volume span nearly half a century. Both the earliest and the latest papers appear in Part One of the volume, devoted to the evolution of national accounting. The earliest, by Richard Ruggles on ‘National Income Accounting and its Relation to Economic Policy’, was written in 1949, in Paris, for the Economic Cooperation Administration, or ECA, (the precursor of the OEEC and OECD). The two latest papers were written in 1993, one of which, ‘National Income Accounting: Concepts and Measurement. Economic Theory and Practice’, presented in 1993 at a conference in Siena, traces the origins of national accounting back over three centuries.

The first set of papers in this volume is mainly concerned with the evolution of national accounting in the present century, however, and particularly with the last 50 years.

The role of Richard Stone in the years following World War II is well known. His 1947 League of Nations report transformed national accounts from the compilation of a few macroeconomic aggregates into a complete system of interrelated economic accounts. However, other people were also active and made important contributions during this formative period for national accounts, not least Nancy and Richard Ruggles, who worked intermittently in Paris and Cambridge, England, between 1949 and 1953. The ECA needed comparable, analytically useful and policy, relevant information about the economic recovery of different countries which could also be used as the basis for allocating Marshall Plan aid. In other words, they needed a set of internationally comparable national accounts. In response to these policy needs, the Ruggles were instrumental in setting up, with ECA funding, a new National Accounts Research Unit in Cambridge under Stone’s direction. The Ruggles also contributed to the work of the unit. The eventual output from this activity was the OEEC’s Simplified System of National Accounts which was published in 1951. The United Nations System of National Accounts, or SNA, which was essentially the same system but with a few modifications, followed soon afterwards in 1953. Over the subsequent 40 years this system has evolved into the complex and sophisticated international system of accounts, the 1993 SNA, now used by almost all countries in the world, including the countries of the former Soviet Union. The 1993 SNA, the direct descendant of the 1951 OEEC and 1953 UN systems, which regrettably, but inevitably, is not quite so simple as they were, was produced and published jointly by five major international organizations, consisting of the IMF, World Bank, OECD and European Union in addition to the United Nations.

As in the postwar period, Nancy and Richard Ruggles continued to be among those who were most active in promoting the improvement and development of the SNA in the 40 years between 1953 and 1993. Nancy Ruggles worked for the UN on more than one occasion and, as Assistant Director of the UN Statistical Office, was in charge of the National Accounts Division from 1975 to 1980. Part Three of the present volume is devoted to papers on the subject of updating and revising the SNA. Two papers in particular, one by Richard Ruggles on ‘The System of National Accounts: Review of Major Issues’, completed in 1982, and one by Nancy Ruggles on ‘Financial Accounts and Balance Sheets: Issues for the Revision of the SNA’, published in 1984, significantly affected the direction which the planned revision of the SNA would take. Although signed individually, these papers reflected the views of both Nancy and Richard Ruggles, who may be presumed to have discussed these issues between themselves occasionally.

Although it may be appropriate to emphasize, especially for readers in the United States, the major and sustained contribution that Nancy and Richard Ruggles have made to the creation, elaboration and improvement of international standards in the field of national accounts, the major work in the present volume has to be their 1982 paper on ‘Integrated Economic Accounts for the United States, 1947–80’. This paper, which has had to be shortened somewhat for the present volume, is a remarkable achievement. It presents the results of an ambitious research project which took some years to complete. Its purpose was to modify and extend the US national income and product accounts to achieve an accounting framework which could accommodate ‘economic and social data at different levels of aggregation, from micro to macro, and embracing stocks as well as flows’. A second objective was ‘to simplify and clarify the presentation of the transaction flows between the sectors and their relation to the major economic constructs’. Uniquely, an entire issue of the Survey of Current Business published by the Bureau of Economic Analysis (BEA) of the US Department of Commerce, that for May 1982, was devoted to the paper and its accompanying tables, together with comments from leading national accountants and economists in the United States and Canada. It is appropriate to quote from the Editor’s Note (which is not reproduced in the present volume).

This issue . . . is devoted to the presentation and discussion of an integrated set of national income and product accounts and balance sheets for the United States. . . . These experimental accounts were developed by Richard Ruggles and Nancy D. Ruggles. Their qualifications for this undertaking are unique: familiarity with the intricacies of the U.S. national income and product accounts that may be unparalleled outside BEA; association with work in economic, social and demographic statistics at the United Nations; participation in the activities of the professional organizations in the field, especially the International Association for Research in Income and Wealth and its Review of Income and Wealth; and service as consultants on statistical programs in the United States and abroad. Their willingness to ‘take the plunge’ of putting together an integrated set of accounts, when — because of the size and nature of the task — it was clear that not all issues could be resolved, is another notable qualification.

Nancy and Richard Ruggles began by pointing out that national accounts should have three major functions. ‘They serve as the coordinating and integrating framework for all economic statistics; they give timely and reliable key indicators on the performance of the economy; and they illuminate the relationships among the sectors of the economy that are fundamental to an understanding of its functioning’. The emphasis on the accounts providing an integrating framework, which is the core of the Ruggles’ paper, was echoed ten years later in the opening sentences of the 1993 SNA which read: ‘The System of National Accounts (SNA) consists of a coherent, consistent and integrated set of macroeconomic accounts, balance sheets and tables. . . . It provides a comprehensive accounting framework within which economic data can be compiled in a format that is designed for purposes of economic analysis, decision taking and policy making’. The integration is twofold. The same set of concepts, definitions and classifications used, based on economic theory, must be used throughout the entire system of accounts. Secondly, the data, which are typically derived from a wide range of quite different statistical sources, must be numerically reconciled with each other, this providing a powerful check on the reliability of the accounts and aggregates.

Another point stressed by Nancy and Richard Ruggles, which is also echoed in the 1993 SNA, is that the accounts can be compiled at any level of aggregation and not just for the economy as a whole: that is, for individual economic units such as households or enterprises; for groups of such units, i.e., sectors; or for all the units in the economy, i.e., national accounts. The term ‘national’ accounts has, by now, actually become an unfortunate anachronism because it perpetuates the myth that the main purpose of the accounts is to estimate one or two aggregates for the economy as a whole, such as GNP or national income, notwithstanding the fact that Stone was awarded a Nobel prize for his work half a century ago in developing a system of accounts which maps the flows taking place between different transactors, and groups of transactors, within the economy. The adjective ‘national’ was deliberately dropped from the title of the official accounts used within the European Union some time ago, the revised version of which (based on the 1993 SNA) is now described simply as the European System of Accounts, or ESA 1995. (The previous version, incidentally, was described as the European System of Integrated Economic Accounts.)

Given that economic accounts can be compiled at any level of aggregation, Nancy and Richard Ruggles went on to argue that: ‘The ultimate objective should be an overall statistical system that would embrace economic, social, demographic and environmental data at all levels of aggregation.’ This vision of an overall system integrating micro- and macrodata has dominated most of their later work. The 1982 paper points out that ‘one of the most striking statistical developments over the last 20 years has been the increasing availability of microdata relating to individuals’. It also notes that ‘the computer has changed the ways data are processed, stored and disseminated and has opened up administrative data sources not previously accessible’. This was written in the early 1980s when few, excepting the Ruggles, would have predicted the power of the computers routinely available on office desks today. Aligning micro- and macrodata is obviously desirable. The Ruggles repeatedly argued that it is also feasible.

They explain that ‘the integration of the microdata with the sector accounts does not imply that the sector accounts should be aligned with or derived from any single microdata set. The macroaccounts, drawing upon many different sources, provide the control totals to which a variety of microdata sets can be aligned. Conceptual consistency between the sector accounts and the corresponding microunit information would make it possible to move back and forth among the different levels of aggregation and among related types of economic, social, and demographic data.’ The advantages of such an overall system would be enormous. For example, economic growth at the level of GDP is no longer accepted as sufficient for judging the success or failure of economic policies as it is also necessary to know how the benefits, or losses, have been distributed among different socio-economic groups, how the environment has been affected, and so on.

The concern with micro- as well as macrodata led Nancy and Richard Ruggles to question certain concepts traditionally used in macroaccounting on the grounds that they may not accord with the perceptions of the individuals concerned and lead to data which are not useful for analytic purposes at a microlevel. For example, the Ruggles have criticized the conventional national accounting treatment of private pensions and insurance on these grounds. While there may be economic logic in the conventional treatments at a macrolevel, the results may sometimes be paradoxical at a microlevel. The Ruggles have repeatedly reminded national accountants that their conventions do not become justified merely because they are traditional and that some conventions remain rather more controversial than many national accountants would care to admit.