The Index Number Problem in the Measurement of Soviet National Income

Abstract

Listen

Translate article

Abram Bergson's recently published The Real National Income of Soviet Russia Since I928 1 is the most keenly anticipated book to come out of the field of Soviet economics. The result of more than a decade of research on the measurement of Soviet national income and its growth, Bergson's study is the definitive work in an area which has been the subject of several other highly competent studies. Bergson's findings are in no way startling. They serve to corroborate the general picture of Soviet performance which has been built up by Western scholars, Bergson among them, during the last several years. While his results provide scant support for official Soviet growth claims, they provide equally scant comfort to Western scholars who have hoped that the apparently high rate of Soviet growth might prove a statistical illusion. Bergson concludes that the real national income of Soviet Russia since i928 has increased at an average annual rate of 4.7 or 6.7 per cent when valued by alternative measures. This amounts to an average of 3.8 or 5.7 per cent per capita. This rate of growth exceeds contemporary U. S. growth, and either matches or surpasses U. S. growth for periods during which the national incomes of the two countries were at comparable levels. If the results seem familiar, the underlying theory and methodology raise interesting problems. The two main theoretical issues involved in Bergson's computations are his use of factor cost weights and the effects of index number relativity on his final results. While Bergson's use of factor cost weights to reflect marginal rates of transformation has already been the subject of detailed discussion, the index number problems which play a major role in his results deserve further attention. This review is primarily concerned with the methodological and practical issues raised by Bergson's use of index numbers. It examines the relationship of Bergson's formal discussion of index number theory to his empirical treatment of it. Bergson relies mainly on two measures of Soviet growth, one which values output using weights of a fixed base year, 1937, and one called the composite index, which values output using weights of the given year. His composite index results in estimates of average annual growth which are consistently about 2 per cent higher than base-year estimates. Although a 2 per cent difference is sizableindeed, rival estimates of Soviet national income have contested far smaller divergences-such variation is not uncommon between measures which use different weights. Still, the divergence becomes more surprising when the series are