Tracking Cultivated Assets in Measures of Capital

Americans invested $72 billion in cultivated assets in 2019.  By category, investment was: $7 billion in long-lived food animals, $2 billion in horses, $10 billion in farm plants, and $53 billion in landscaping plants.  System of National Accounts 2008, the internationally agreed guidelines for national accounts, explicitly recommends that cultivated assets should be tracked in measures of capital (United Nations Statistics Division 2008, sec. 10.88–10.96).  This recommendation has been widely accepted and most European Union countries currently track some cultivated assets in their measures of capital (Jager 2017).  In addition, the U.S. agricultural productivity accounts have considered tracking cows in their measures of capital (Ball and Harper 1990).  However, this recommendation is not currently implemented in either the U.S. National Economic Accounts (Bureau of Economic Analysis 2019) or the U.S. agricultural productivity accounts (Shumway et al. 2015).

This paper explores how capitalizing those cultivated assets changes the U.S. National Economic Accounts from 1929 to 2019 and the production accounts from 1948 to 2019.  First, real gross domestic product (GDP) growth before 1990 decreases slightly when cultivated farm assets are capitalized.  Second, the 2000s housing bubble and bust appears more dramatic when cultivated landscaping is capitalized along with other real estate investment.  Third, measured real estate sector productivity growth falls noticeably when cultivated landscaping is tracked as capital in the production accounts.
This paper explores on how capitalizing cultivated biological resources might change economic statistics from 1929 to 2019.  To start out, investment in cultivated farm assets grew slower than overall gross domestic product (GDP) before 1990.  As a result, real GDP growth before 1990 decreases by 0.01 percentage point per year when cultivated farm assets are capitalized. Second, the housing bubble and bust during the 2000’s appears more dramatic when landscaping plants are capitalized along with other types of real estate investment.  Third, measured real estate sector productivity growth falls noticeably when landscaping plants are tracked in the joint BEA-BLS production accounts.

• Appendix B