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University of Chicago Press
The National Balance Sheet of the United States, 1953-1980

The National Balance Sheet of the United States, 1953-1980

by Raymond W. Goldsmith, Goldsmith


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In what constitutes a landmark in the field of national accounts, Raymond W. Goldsmith gives detailed estimates of the nation's assets and liabilities year by year from 1953 through 1975 and for the benchmark years of 1900, 1929, and 1980. Special features of this work include presentation of data sector by sector, which casts light on the changing roles of financial institutions, and Goldsmith's expression of data in the form of ratios rather than in absolute dollar values, a device that makes the material both more informative and easier to absorb.

The most comprehensive and extensive study of national wealth ever attempted, The National Balance Sheet will be a rich resource for researchers and users of national accounts.

Product Details

ISBN-13: 9780226301525
Publisher: University of Chicago Press
Publication date: 09/01/1982
Series: National Bureau of Economic Research Monograph Series
Pages: 234
Product dimensions: 6.00(w) x 9.00(h) x 0.70(d)

About the Author

Raymond W. Goldsmith is Emeritus Professor of Economics at Yale University.

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The National Balance Sheet of the United States, 1953â"1980

By Raymond W. Goldsmith

The University of Chicago Press

Copyright © 1982 The University of Chicago
All rights reserved.
ISBN: 978-0-226-30157-0


Secular Overview

The summary of the findings of the study consists of two parts. The first, presented in this chapter, is centered on a set of tables which provide information on the structure of the national balance sheets for 1900 and 1929 to give historical perspective, as well as for 1980 to bring the picture as far up to date as possible. The second part, which constitutes chapter 2, is limited to the years 1953–75 with which chapters 3–7 deal, but covers this period in greater detail and on an annual basis.

Similarly detailed balanced sheets for additional benchmarks between 1900 and 1953 (1912, 1922, 1933, 1939, and 1945) and for each year between 1945 and 1958 can be found in an earlier study (Goldsmith, Lipsey, and Mendelson 1963, vol. 2). The corresponding basic statistics are available on an annual basis for the years following 1975, for reproducible tangible assets in the Survey of Current Business (Musgrave 1976, 1979, 1980, 1981), and for financial assets in the Federal Reserve Board's flow-of-funds accounts. These are summarized in chapter 8.

Three concepts of national assets are used in this study. The narrowest concept, illustrated by table 1, is limited to land, nonmilitary structures and equipment, consumer durables, and inventories. The broader concept, illustrated by table 2, includes in addition consumer semidurables, military structures, equipment and inventories, standing timber, subsoil assets, collectors' items, capitalized research and development expenditures, unfunded pension claims, the difference between the adjusted book and the market value of corporate stock, and households' equity in unincorporated farm and nonfarm business enterprises and in bank-administered personal trust funds, the last three because these enterprises and funds are treated as separate sectors. An intermediate concept, used throughout chapters 3–6, does not include standing timber, subsoil assets, colllectors' items, research and development expenditures, unfunded pension claims, and the stock valuation difference.

The additional items included in the broader concept are of very different character. Four of them — military structures, equipment, and inventories; standing timber; subsoil assets; and collectors' items — represent tangible assets which conceptually should be included in national wealth and hence in national balance sheets but which are usually omitted because of the difficulty of measurement and the necessarily very large margin of error in the estimates. Capitalized expenditure on basic and applied research may be regarded as a type of reproducible asset embodied in tangible assets, particularly equipment, and thus contributing to output. The inclusion of two others — equities in unincorporated business and in personal trust funds — depends on whether or not farm and nonfarm unincorporated business enterprises and personal trust funds administered by banks and trust companies are regarded as separate sectors or are consolidated with the household sector. Inclusion of the unfunded liabilities of social security and other pension funds is determined by the degree to which they are viewed by creditors, households, and debtors as part of their assets and liabilities, and how they influence portfolio policies and consumption and investment decisions.

The question naturally arises which of these three concepts is preferable. The answer will depend on the purposes that analysis of the figures is to serve; on the span, the frequency, and the up-to-dateness of the estimates; and on the margin of error in the estimates the user is willing to tolerate. On the last two criteria the broad concept ranks last, but it comes nearer to meeting the requirements of a comprehensive system of national account than the narrow and intermediate concepts. In the United States the narrow concept has the advantage that the official estimates of reproducible tangible and financial assets, though not of land, are available on an annual basis from 1925 and 1946 on respectively and that the narrow — as well as the intermediate — concept is being kept up to date. The intermediate concept has been adopted in chapters 3–6 on an annual basis for the period 1953–75 because it is regarded as conceptually preferable to the narrow one, even though it can be applied before 1953 for only a few benchmark years.

To put the changes in the structure of the national balance sheet of the United States between 1953 and 1975, which constitute the subject of this study and are discussed in chapters 3–6, into historical perspective, comparable estimates are provided in this section for 1900 and 1929. A preliminary estimate for 1980 is added to bring the pictures as much up to date as possible. The choice of the benchmarks of 1900 and 1929 was dictated by the availability of estimates of national balance sheets in an earlier study (Goldsmith, Lipsey, and Mendelson 1963, 2:72ff.), but is also justified by the fact that 1900 is near to the mid-1890s, which are often regarded as a watershed in American economic development, while 1929 constitutes another important turning point in economic and financial history, the two benchmarks bracketing the upward phase of a long (Kondratieff) upswing. Table 1 shows the structure of the national balance sheet of the United States for four benchmark dates between 1900 and 1980 in current prices using the narrow concept of national assets, and thus permits us to follow changes in the composition of the balance sheet over the last eight decades. Table 2 provides the same information for the broad concept of national assets. Since in the aggregate liabilities are equal to claims except for the relatively small net foreign balance, while tangible assets are equal to net worth, the two tables also reflect the structure of the other side of the national balance sheet. Changes in the distribution of national assets among components are the result of differences in the rates of growth between benchmark dates. Columns 5 to 7 of tables 1 and 2 therefore show these rates for both the narrow and the broad definitions of national assets. Changes in the current value of the components of the national balance sheet may be regarded as the combination of changes in the "quantity" and the price of these components, and the current values may be expressed in terms of constant prices. The result of these calculations are shown in table 3, though because of conceptual and statistical differences only for the three main components of national assets — land, reproducible tangible assets, and financial assets — and in table 4 for eight components of reproducible assets.

1.1. Trends in the Distribution of National Assets in Current Prices

The changes in the structure of the national balance sheet of the United States are evident, first, in the shares of the three main components of national assets, which are of different economic character.

The share of land decreased, using the broad concept of national assets of table 2, sharply from 17 percent in 1900 to 7 percent in 1953, continuing the downward movement observed during the nineteenth century (Goldsmith, forthcoming), but then recovered slowly but steadily to fully 10 percent in 1980. Most of the decline was accounted for by agricultural land whose share has remained slightly below 2 percent of the national assets during the last three decades compared to one of nearly 8 percent in 1900. The share of other land has moved irregularly and slightly downward since the turn of the century, held up by a large expansion of urban land and, in the later part of the period, very substantial price increases. The value of subsoil assets declined in comparison to national assets until the 1960s but rose sharply in the second half of the 1970s reflecting increases in the price of oil, gas, and coal, with the result that their share in 1980 was slightly higher than it had been at the turn of the century.

Reproducible tangible assets have on the average accounted for slightly more than 30 percent of national assets, declining slowly from 34 to 29 percent. If attention is concentrated on differences in the share of the various components in the value of all reproducible tangible assets between 1900 and 1980, the outstanding change is the increasing importance of government structures and equipment, whose share rose from less than 5 to nearly 20 percent, only one-fifth of the increase being attributable to military items. This increase was offset primarily by reductions in the share of private nonresidential structures from about one-fourth to one-eighth, and secondarily by declines in the shares of timber, inventories, livestock, and consumer semidurables. Residential structures, the largest single component, accounted for about one-fourth of all reproducible capital throughout the period.

Through most of the period financial assets increased more rapidly than tangible assets so that their share in total national assets rose from one-half in 1900 to three-fifths or slightly more in the postwar period. The sharp difference in the structure of financial assets between the two halves of the period was due to the large proportion of all financial assets accounted for during the second half by unfunded pension claims. Apart from them, the main differences between 1900 and 1980 were the doubling of the share of currency and deposits and of funded insurance and pension claims from 11 to 22 percent; the increase in the share of mortgages from 7 to 11 percent and that of government securities from 3 to fully 10 percent; and the declines in the share of corporate bonds from 7 to less than 4 percent, and that of the household sector's equity in unincorporated business enterprises from 30 to 12 percent. The share of corporate stock happened to be about the same in 1980 and in 1900 — fully one-tenth on the basis of market prices, but about one-sixth if allowance is made for the excess of adjusted book over market value — though it showed wide fluctuations in the intervening eight decades.

1.2. Differences between Broad and Narrow Concepts of Assets

The differences in the structure of the national balance sheet according to either the narrow or the broad concept, i.e., between tables 1 and 2, arise primarily from the inclusion in the latter, but not in the former, of two financial assets: household's equity in unincorporated farm and nonagricultural enterprises and their unfunded pension claims. These differences are large in both halves of the eighty-year period, but their effect is mitigated by the fact that the one (equity in unincorporated businesses) is large though declining in the first half of the period, while the other (unfunded pension claims) is very large but fairly stable in the postwar period, but negligible before the 1930s.

The share of land declines by about one-third under both the narrow and the broad concepts, and the fall is only slightly less pronounced in the former case. If the narrow, and conventional, concept of national assets is used, as in table 1, the share of reproducible tangible assets is virtually the same in 1980 as in 1900, while it declines by about two-fifths under the broad definition of national assets, but the lowest point is reached in both cases in the mid-1960s. The distribution among the various types of reproducible assets is very similar under both concepts.

Because of the elimination of households' unfunded pension claims and their equity in unincorporated business and in personal trust funds and of the stock valuation adjustment, which account for 20 percent of total financial assets broadly defined in 1900 and for nearly 30 percent in 1980, the shares of all other financial assets are under the narrow concept considerably higher than under the broad concept, and more so in 1980 than in 1900, but their relative sizes are the same in both cases. The differences in the structure of national assets under the two concepts are summarized below (percent of total assets).

1.3 Changes in the National Balance Sheet in Constant Prices

The changes in the structure of national assets, as well as the growth rates shown in tables 1 and 2, are all based on values in current prices and thus are the combined results of changes in the price levels of the different components and in their quantities. One would, therefore, for purposes of analysis want to separate these two factors, i.e., to show estimates in constant prices, as proxies for quantity measures that are impossible to obtain and are conceptually not additive. The available statistical data, as well as theoretical considerations, however, permit the derivation of price indices, and hence of estimates in constant prices only for reproducible tangible assets under the narrow concept. Even these are affected by a larger margin of uncertainty than the estimates in current prices because of the many well-known statistical and conceptual problems, particularly the doubt that the price indices used make sufficient allowance for quality improvements resulting in overstatement of price rises and consequently understatement of rates of growth in constant prices, i.e., in "quantities." In the case of financial assets probably the only available and to some degree meaningful index is that of the general price level represented by the implicit deflator of gross national product or possibly of consumer expenditures. This leads to an expression of all components of financial assets in terms of the purchasing power of money of the base year of the indices, and hence does not alter the relative shares of growth rates of the various components. In the case of land, three approaches may be considered. The estimates in current prices may be expressed, like financial assets, in terms of the base period's purchasing power. Or the current value of land in the base period may be used for all dates on the argument that the "quantity" of land is by definition unchanging, though allowance may be made for changes in the share of the different types of land. A third approach, the deflation of the value of the different types of land by the use of land price indices is more in line with the procedures applied to reproducible tangible assets, but is difficult to implement statistically, except for agricultural land. In the case of land underlying residential and other structures, a fourth possible approach is to apply the land/structure ratios derived from current price figures to the constant price estimates of structures.

In order to permit at least a rough picture of the secular changes in the national balance sheets in constant prices table 3 shows the rates of growth of the three main components of the national balance sheet using specific deflation for reproducible tangible assets and the national product deflator for land and financial assets. The resulting rates of growth for total national assets for the entire period are only half as large as those expressed in current prices, and the difference is largest for the postwar period. Since the deflators for reproducible tangible assets do not greatly differ from the national product deflator, which is applied to about three-fifths of national assets, the distributions of national assets among the three main components — land, reproducible tangible assets, and financial assets — are quite similar.

The changes in the distribution of the stock of reproducible tangible assets in constant prices and the divergences in the underlying rates of growth, shown in table 4 differ somewhat from those in current prices. These differences reflect those in the relative prices of the various components. In particular, the generally less rapid rise in the prices of equipment compared to those of structures results in the share of equipment and consumer durables in total reproducible assets increasing more rapidly in constant than in current prices. Thus the share of structures declined between 1900 and 1980 by 1 percent of reproducible assets in current prices but by 11 percent in constant prices, while the share of equipment and consumer durables increased by 3 and 13 percentage points respectively.

1.4. Sectoral Distribution of Assets

The past eight decades have also witnessed considerable changes in the distribution of national assets, which reflect differences in sectoral rates of growth. These can be followed in table 5 in current prices for the narrow concept of national assets.


Excerpted from The National Balance Sheet of the United States, 1953â"1980 by Raymond W. Goldsmith. Copyright © 1982 The University of Chicago. Excerpted by permission of The University of Chicago Press.
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Table of Contents

List of Tables

1. Secular Overview
1.1. Trends in the Distribution of National Assets in Current Prices
1.2. Differences between Broad and Narrow Concepts of Assets
1.3. Changes in the National Balance Sheet in Constant Prices
1.4. Sectoral Distribution of Assets
1.5. Decomposition of Rates of Growth of National Assets
1.6. National Balance Sheet Ratios
1.6.1. Capital/Output Ratios
1.6.2. Other Balance Sheet Ratios
2. Summary of Findings for the 1953-75 Period
3. Problems of Constructing National and Sectoral Balance Sheets
3.1. Sectoring
3.2. Categories of Assets and Liabilities
3.3. Valuations
3.4. Deflation (Reduction to Constant Prices)
3.5. Consolidation
3.6. Sources

4. The National Balance Sheet of the United States for 1975
4.1. The Overall Balance Sheet
4.1.1. Sectoral Distribution
4.1.2. Main Assets and Liabilities
4.2. The Structure of Sectoral Balance Sheets
4.3. Distribution of Assets and Liabilities among Sectors
4.4. The Financial Interrelations Ratio
5. Trends and Fluctuations in the National Balance Sheet, 1953-75
5.1. The National Balance Sheet
5.1.1. Annual Fluctuations
5.1.2. Rates of Growth Types of Assets and Liabilities Different Sectors
5.1.3. Structure of Assets and Liabilities
5.1.4. Sectoral Distribution of Assets
5.2. Revaluations
5.3. A Comparison of Three Estimates

6. Trends and Fluctuations in Sectoral Balance Sheets, 1953-75
6.1. Sectoral Distribution of Assets, Liabilities, Equities, and Net Worth
6.2. Two Financial Ratios
6.3. The Balance Sheet of All Nonfinancial Sectors
6.4. Households
6.4.1. Trends and Cyclical Movements of Total Assets
6.4.2. Structural Changes
6.4.3. Rates of Growth of Assets and Liabilities
6.4.4. Liquidity
6.4.5. Leverage Ratio
6.4.6. Subsectors of the Household Sector Top 1 Percent of Wealthholders Households of Different Size of Wealth Households of Different Income Households of Different Age Male and Female Wealthholders The Influence of Children The Influence of Schooling The Influence of Race Regional Differences
6.5. Nonprofit Organizations
6.6. Farm Enterprises
6.6.1. The Sector as a Whole
6.6.2. Differences among size Classes of Farms
6.6.3. Regional Differences
6.7. Nonfinancial Nonfarm Unincorporated Business Enterprises
6.8. Nonfinancial Corporations
6.8.1. The Sector as a Whole
6.8.2. Main Subsectors
6.8.3. Two Financial Ratios
6.9. Federal Government
6.10. State and Local Governments
6.11. Rest of the World
6.12. Financial Institutions

7. Broader Definitions of National Assets
7.1. Standing Timber
7.2. Fish and Game
7.3. Collectors' Items
7.4. National Monuments
7.5. Subsoil Assets
7.6. Research and Development Expenditures
7.7. Patents, Copyrights, and Goodwill
7.8. Unfunded Liabilities of Pension and Retirement Funds
7.9. Human Capital
7.10. An Estimate of Extended National Assets
8. Developments in 1976-80
8.1. Movements of National Assets
8.2. Changes in Distribution among Components: Overview
8.3. Reproducible Tangible Assets
8.4. Financial Assets
8.5. National Balance Sheet Ratios

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