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Chapter 1 - Gross Domestic Product > EVOLUTION OF AN INDICATOR
EVOLUTION OF AN INDICATOR
Measuring a nation’s output and performance is known formally as national income accounting. This process was pioneered largely by Simon Kuznets, an economist hired by the U.S. Department of Commerce in the 1930s—with additional funding from the National Bureau of Economic Research—to create an accurate representation of how much the U.S. economy was producing. Up until that time, there was no government agency calculating this most critical of economic statistics.
The initial national income estimates produced by Kuznets in 1934 were representations of income produced, measures of the national economy’s net product, and the national income “paid out,” or the total compensation for the work performed in the production of net product. At that time, no in-depth breakdown of components existed. In fact, Kuznets didn’t even have a detailed representation of national consumption expenditures. This was the first step of several in the creation of a formal method of national income accounting, and yet was still a far cry from today’s highly detailed representation of the macroeconomy.