1. Measuring Non-market Output in the National Accounts by: Robin Lynch Discussant notes Peter van de Ven

2. Fokke & Sukke want railway company back in government “One can say a lot about civil servants, …. but they always leave on time”

3. General introduction Non-market services – SNA 1993: Services produced by government and NPISHs that are supplied free or at economically insignificant prices – ESA 1995: Sales < 50% of costs of production No economically significant prices available By convention: value of output = sum of costs: – Intermediate consumption – Wages and salaries – Depreciation – (User cost of capital)

4. General introduction, continued Volume measurement of non-market services: Input methods: –(Detailed) deflation of inputs –Deflation of wages and salaries using e.g. collective wage agreements By definition: (multifactor) productivity = 0 Criticism: input methods do not properly reflect the change in the volume of services provided => output indicators –SNA 1993: para. 16.133 and 16.134 –Handbook on Price and Volume Measures in NA –Atkinson Review

5. Measurement of healthcare in UK 80 90 100 110 120 130 140 19951996199719981999200020012002 InputsOutputProductivity

6. General introduction, continued Issues and problems related to output methods: – Individual versus collective services – Unit of measurement –Activity (e.g. days in hospital, operations) –Output (e.g. treatments) = outcome attributable to the relevant productive activity –Outcome (e.g. life expectancy) – Measurement of quality –Direct survey –Quality of inputs –Outcome indicators – Additional benefits from public services as a consequence of additional (future) income and/or assets

7. Robin Lynch:

8. Main criticism of Robin Lynch Output methods assume an equivalence between non- marketed output and marketed output => non-marketed output is fundamentally different: – Inconsistent with fundamentals of the 1993 SNA  No price is charged => no value can be observed  No market mechanism for the determination of the nature of the services => consumer marginal utilities are not properly reflected – Often, one has to rely on activity indicators => such indicators are not representative – Quality changes impossible to capture Economically more meaningful concept: capacity to deliver = deflated inputs

9. Robin’s Island YearQualificationNo of pupils Salary teacher Exam passes 2000Standard350,0001 2001Standard350,0003 2002Standard050,0000 2003Higher055,0000 2004Higher155,0000 2005Higher255,0000

10. Questions and remarks – Collective versus individual services important:  Collective services: “capacity to deliver”  Individual services: price and value of the output may not be observable, but what about the volume of the output? – Inconsistency with SNA?  In value terms, government is recognised as producer of services – No market mechanism?  Consumer preferences via democratic elections?  Many non-market services have inflexible demand  By and large, consumer preferences are reflected – Activity indicators, quality change?  Fundamentally different for market services? – How to deal with additional benefits?