Toward a New Economic Approach

In the 1990s, Americans' savings rate fell badly, but their wealth increased at an astonishing pace. What underlies this economic paradox?

This question was posed by Leonard Nakamura in his 4Q 2001 PhilyFed Business Review article. Nakamura concludes that the divergence between saving and wealth gains derive from capital gain's treatment in the U.S. national income accounts. As U.S. corporations retained more of their earnings in the form of intangible investments, dividend payments slumped together with investor's wealth (only dividends and interest payments are accountable for investment income, capital gains are excluded). Nakamura's study also elaborates on the importance and magnitude of intangible investments in the U.S. economy and their potential impact on national accounts.

Nakamura's wonderful body of work on the intangible economy is a necessary first step for those who wish to understand intangibles' role in today's economy and businesses. A fundamental reference is his work on U.S. intangible investments (download it!), where he presents preliminary direct and indirect empirical evidence that U.S. private firms currently invest at least USD 1 trillion annually in intangibles, almost the same amount as in plant and equipment.

We provide a link to Leonard Nakamura's homepage in the right sidebar, where you can download most of his work related to intangibles' impact in the U.S. economy.