Accounting for productive investment and value creation

Noting that the contribution of R&D is being integrated into national accounts just as these come under criticism for potentially overstating output, this paper uses a re-assessment of the concept of value to examine scope for under- and over-statement in conventional GDP. It assesses ways in which R&D may generate value without registering an income flow, and ways that other activities (notably financial innovation, speculation and outsourcing) might generate income without adding value; and examines equity markets’ role in valuation.