The government is considering a change in the way it calculates the price of computer products in determining the nation's gross national product, a move that could have increased real GNP by as much as 1 percentage point in each of the last three years.
Both government and private economists assert there has been an underestimation in recent years of the contribution of computer equipment to inflation-adjusted GNP -- the nation's real output in goods and services. However, the economists differed on how large a change in real output would result if computer prices had been appropriately accounted for.
"There is a serious measurement error in the constant dollar measure of GNP that is growing at a high exponential rate," according to an internal paper on the subject by a staff member of the Council of Economic Advisers.
"This error feeds through many statistics" such as productivity, producer price index data and industrial production," the paper said. "Given rapid growth in home computers and other consumer purchases of computing equipment in autos, watches, video and appliances , real retail sales and related data will become increasingly suspect."
According to Robert Parker, associate director for the national economic accounts for the Commerce Department, calculations of computer contributions to real GNP have been based on the prices of computers remaining unchanged over the years, rather than declining drastically as they have over the past decade.
The practice of not accounting for price changes was established many years ago and is based on the assumption that increases in prices just about matched the cost of quality improvements so the real cost didn't change.
However, in the mid-1970s, manufacturers introduced new computer models that had lower price tags than earlier models and improvements in quality. Additionally, the costs of existing models also declined, which the government had not taken into account, Parker said.
Until about 1975, computers did not make up a large part of GNP. However, by 1982 business purchases of electronic computers in the United States were $17 billion, or, 8 percent of private purchases of producers' durable equipment. It was also 0.5 percent of GNP unadjusted for inflation, Parker said.
"In 1970, electronic equipment was almost negligible" as part of GNP, said David Berson, an economist with Wharton Econometrics. "The only ones with main frames computers were the government and large corporations."
Since then, small and medium-sized businesses have bought computers as well as households, Parker said.
When measuring output adjusted for changes in prices, the government takes estimates of goods in current dollars and adjusts them using a price index.
"When prices started to decline, we were not including the price decrease in our price statistics," Parker said. The government is attempting to come up with a new price index for computers which could be introduced when other overall changes are incorporated into the GNP figures this December, Parker said.
The calculation of computer prices in GNP also carries over into other areas such as productivity, said Robert Gough of Data Resources Inc. Productivity gains in the services industries in which the use of computers has exploded in recent years is "very, very difficult to measure," and probably has been underestimated, Gough said.
Gough said he agreed that the calculation of computer contributions to GNP was not accurate, but he said he didn't know how a change in the calculation would affect real output.
In determining the affect a change in the handling of computers would have on GNP, the CEA staff assumed a 10 percent decline in computing equipment prices each year. Real investment would be higher by about $86 billion in 1984 assuming such a price decline, according to the staff study. "The change in the computer deflator adds more than a full percentage point to real GNP growth in each of the last three years," the CEA paper said. The change would also reduce the overall producer price index, which measures price changes near the wholesale level, the paper said.
The Commerce Department plans to change its GNP calculations later this year because new census data will become available using 1982 as the base year rather than 1977, Parker said. These changes will mitigate any problems in the computer calculations, Parker said.