Estimating the Size of the Soviet Economy Summary of a Meeting (1991) / Chapter Skim
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Meeting Sessions
Meeting Sessions
Pages 1-12
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From page 1... ...
Abram Bergson argued that although a case could still be made for using the AFC method to measure both the relative size and rate of growth of Soviet GNP, one of the main problems with this method is its quasiconventional nature as an adaptation of the ideal standard. Theoretically, the AFC method corresponds to this ideal standard only if there is no misallocation of resources in production in the Soviet system.
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It was suggested that these similarities provide a basis for the comparison of Soviet GNP with the GNPs of other countries. In addition to the traditional adjustments performed in measuring GNP in Western countries, the AFC methodology as applied by the CIA removes profits from Soviet prices and factors in a uniform for all sectors average return on capital.
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The quality issue is particularly difficult to resolve because different sectors sometimes exhibit divergent trends with respect to the quality of their output. For example, researchers who focus on the service and defense sectors have claimed that the CIA estimates systematically understate improvements in quality, whereas those who investigate other sectors of the Soviet economy contend that the CIA has overstated Soviet GNP because it does not make allowances for the generally poor and apparently deteriorating quality of Soviet goods.
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Uncertainties as to the future course of change in the Soviet system prevented any resolution of this issue. SESSION II: AN ANALYSIS OF THE DATA USED IN ESTIMATING THE SIZE OF THE SOVIET ECONOMY Until quite recently the conventional wisdom in the field maintained that with few exceptions, the data published by the Soviets in physical units were generally reliable, but the data furnished in current prices were of only limited utility.
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From page 5... ...
It was pointed out that even if the official Soviet data have become increasingly inflated, it does not necessarily follow that GNP estimates have to be adjusted downward. For an example, the padded distances and loads recorded for motor transport do not necessarily represent complete fabrications as these vehicles are frequently engaged in hauling freight for the second economy.
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From page 6... ...
Although he noted that the so-called CIA estimates should more accurately be termed the estimates of the field of Sovietology -- since many researchers had a hand in establishing the general framework -- he argued that the agency had taken the generally accepted mechanism and proceeded to work on its own, making decisions about the details without either adequate scrutiny or feedback from other practitioners in the field. He further asserted that neither the papers contributed by CIA analysts to the Joint Economic Committee's publications on the Soviet economy nor the CIA's own publications made completely clear the rationale behind particular decisions as to how the agency handles specific data.
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From page 7... ...
According to his calculations, the two sets of CIA estimates produce significantly different results with the discrepancies ranging from 1-2 percent a year. Bergson asserted that it would be useful for the CIA to produce an alternative estimate on the basis of the deflation of current ruble data, and Steinberg added that from a strictly methodological point of view double deflation would be even better.
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From page 8... ...
Other participants asserted that better practical alternatives to the AFC method already existed, and that they had demonstrated their capacity to produce more accurate estimates. William Lee stated that he had been able to produce better estimates for the defense sector both now and in the past by basing his calculations on the official ruble numbers published by Soviet statistical agencies.
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It was noted that black market prices may be quite different from free market prices, that world market prices may be difficult to use over long periods of time due to fluctuations that have nothing to do with conditions on internal markets and that the valuation of services in terms of comparable world prices may obscure important differentials in quality and productivity between different countries. Moreover, there are goods and services within the Soviet Union that are not traded on the world market and for which there are no adequate world price equivalents.
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From page 10... ...
Others raised questions as to the extent to which the alternative methods under examination actually provided estimates that were significantly different from those produced by the conventional methodology. The CIA generated estimate of Soviet GNP as roughly 50 percent of that of the U.S.
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From page 11... ...
estimates of the size and growth of the Soviet economy and the methodologies used to generate them is a result of what Gregory Grossman has termed Cognitive dissonances This dissonance resulted from the apparent contradiction between the prima facie evidence available to both experts and casual observers that demonstrate that the Soviet economy is in a crisis and the CIA's analyses throughout the Cold War period that maintained that the Soviet economy was performing reasonably well and exhibiting respectable growth rates. A variety of factors were suggested to account for this: .
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From page 12... ...
12 THE SOVIET ECONOMY stressed the importance of keeping in mind the particular goal of the exercise in evaluating the utility of alternative methodologies; it would not be reasonable, for example, to expect a method designed to measure the welfare of the population to adequately encompass the total production of goods and services in the Soviet economy. It was suggested that alternative methodologies can coexist and should be used to answer different questions.
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