Leonard Nakamura of the Philadelphia Fed followed up his 2001 paper on intangibles with this 2009 one.
These data show U.S. industries, consumption expenditures, and investment expenditures, all changing very substantially away from mass production and toward new product development, with only some of the new products being ones that can be mass produced. Properly analyzing this economy requires new measures and new theory.
There needs to be a paradigm shift to reflect the increasing importance of new products. He concludes:
How should economists and noneconomists think about the possibility of a
paradigm shift in economics? British economist and Nobel laureate John Hicks
(1983) argues that economic science must adapt to the nature of the economy. The growing importance of creative endeavors appears to be what’s new in the economy.
If so, this represents a significant change in the nature of the U.S. economy, one that is difficult to align with the paradigm of perfect competition. This new economy is highly competitive, but creative destruction is the center of the competition. This implies, in line with Hicks’s views, that for understanding economics now, Joseph Schumpeter’s “creative destruction” paradigm may be superior to Adam Smith’s “invisible hand.” Economic theory and economic measurement will need to develop together if economists are to understand the economic sources of economic growth.
The national income accounts framework was initially constructed on the basis of more than a half-century of industry and plant-level studies and a detailed analysis of consumer welfare that incorporated insights from Pigou to Hicks. To develop new economic measures that are able to quantify the economic sources of aggregate economic growth we will need a similar foundation of industry and plant-level studies.
The changing economy needs substantially changed economic accounting, even before we think of counting happiness or environmental sustainability in national well-being.
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