Evolution of the Production and Asset Boundaries in the System of National Accounts

Ever since the concept of national income was first formulated in the seventeenth century by Sir William Petty (1665) in England and by Pierre le Pesant Sieur de Boisguillebert (1707) in France, the question of which economic activities are productive and which are not, has been debated and this has been reflected in the system of national accounts (SNA). An example of this is the System of Material Product Balances (MPS) which was used in the formerly centrally planned economies. In MPS approach, industry, agriculture and construction were fully included in the production boundary. Other activities were included in the production boundary only partially, for example, transportation only freight haulage; communications only services provided to producers; trade only operations that continued the production process in the sphere of distribution (such as storage, packing, wrapping, etc.). Also included in that sphere were certain forms of wholesale trade that existed under the centrally planned economy, such as state procurement of agricultural product, material and technical supplies (i.e. centralised state deliveries of production resources), and some other industries (publishing, making copies of motion pictures, etc.). All other economic activities were treated as unproductive and consequently did not form part of the material product. Like the development of thought on other important economic questions, development of different notion of the nature of production and national income has long history of about three and half centuries. With a view to compile and present the national account statistics by countries on comparable basis, the United Nations adopted a system of national accounts in 1953, popularly known as 1953 SNA, which amongst other things defined the production and asset boundaries. The production boundary and hence the asset boundary of the system of national accounts have been enlarged since the adoption of the 1953 SNA. An attempt has been in this paper to examine the evolution of the production and the asset boundaries of the SNA through its various revisions.