USSR: Measures of Economic Growth and Development, 1950-80

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VII
definition raises theoretical problems. The most important is that the Soviet
Union does not have market determined prices. Instead, it uses, for the most
part, centrally fixed prices which may be quite far removed from the values
that would obtain in a market-oriented economy. Market prices reflecting real
resource costs of each product are needed to derive theoretically correct infer-
ences about the real growth and distribution of GNP. An important. segment
of Part I is devoted to computing a set of alternative, factor-cost prices used
to replace Soviet prices. The latter are seriously distorted by taxes and sub-
sidies and by their failure to incorporate accurately the costs of land and re-
producible fixed assets. The factor-cost prices are intended to represent more
accurately the actual cost of resources used to produce each category of goods
and services.
The indices of the growth of GNP and its three major components are
computed as weighted averages of subcomponent indices. The weights are 1970
expenditures or value added as derived in the 1970 GNP accounts (Part I.
Appendix D). The subcomponent indices are developed from ph_vsical produc-
tion or consumption data. The index of industrial production is computed
from production data on over 300 products. These are grouped first into 10
branches of industry and then into an aggregate index. The index of agricul-
tural production. computed by combining production data for 452 types of crops
or livestock products. represents the value of all output less that used by
agriculture itself—primarily feed and seed. The index of consumption is
divided into three major categories of goods and eight categories of services.
Each category is further divided into individual products or services. The
index of GNP by sector of origin is formed by combining the indiccs of indus-
trial and agricultural production with similar indices for the remaining pro-
duction sectors——transportation, communications. domestic trade. and services.
Similarly. GNP by end use is computed by adding indices of investment and
other government expenditures, including most of defense outlays.
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The construction of the independent measures encountered numerous prob-
lems. Some are. universal to all aggregate measures of economic performance
and some are peculiar to the Soviet case. The treatment of quality change. for
example. is a universal problem. Most elements of the industrial index are
expressed in physical units such as tons or number of items. This procedure
may understate quality improvements over time. especially in machinery
products. On the other hand. official data, expressed in rubles or as index
numbers. are used where physical production data are not available. As indi-
cated above. these data clearly overstate growth. Because the biases in official
and physical data are offsetting, however. their use in combination should pro-
vide a truer measure of real growth. Similarly. the index of housing services
in the consumption index is based on the number of square meters of housing
without a quality adjustment. In this case. all evidence points to remarkably
little improvement in the quality of Soviet housing and there is likely not a
serious bias in the housing index.
Compiling consistent. data for the period 1950—80 presented a challenge.
Manv of the official data series are incomplete or published in differing formats.
requiring many interpolations and strong assumptions about relative prices.
Other data are not published at all or not on a regular basis. Instead. they
have to be culled from the specialized monograph and journal literature. For
example, data on the amount of waste included in the gross output data of
agricultural products are not published regularly or in a consistent framework.
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Just as aggregate measures of V\"este-rn economic performance are used
in many d1fi'erent applications. so the results of these studies can be employed
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