Speech

Welcoming Remarks at the 10th IMF Statistical Forum: Measuring the Tangible Benefits of Intangible Capital

November 16, 2022

Thank you very much Bert. I am sorry I cannot join you in-person today, but it is my privilege to welcome everyone to the 10^th IMF Statistical Forum Measuring the Tangible Benefits of Intangible Capital.

A significant portion of innovation in the last several decades relates to products we cannot touch– vaccine formulae, blockchain, data, artificial intelligence. This intangible capital is playing an increasingly important role in the economy.

And global innovation continues to accelerate.

In the not-too-distant future, we may be holding our Statistical Forum in the metaverse where we can interact from the comfort of our homes!

There are still big questions to answer. One of the biggest is how can we measure things we cannot touch?

Think about the largest companies in the world– software, Internet, online retailers, and pharmaceutical companies– the difference between their market capitalization and the value of their tangible capital (buildings, machines, and equipment) is large.

The difference is largely due to valuable intangible capital. Things like research and development, software, data, organizational capital, and brands are assets often missing from balance sheets. They are not only missing from business accounts, they are also only partially available in our economic data.

But why are they missing? One reason is that intangible capital is HARD to measure.

This is where statisticians need to be BOLD! While progress has been made in measuring some intangible capital, such as research and development and software, information on other intangible assets is lacking.

This is why this Forum is important. Better measurement of intangible capital is critical in helping us to understand the drivers behind economic growth. Informed measurement will help us make better policies to promote sustainable economic growth and equality.

Comprehensive estimates of capital investment help policy makers understand what is driving economic growth today and the sustainability of that growth into the future. Our statistics must reflect the shift from investing in things we can touch to things we cannot touch.

An excellent example of why this is important is the mRNA COVID-19 vaccines. They were critical in helping pull the world economy out of one of the largest declines in output in recent memory. The rapidity with which this vaccine was developed leveraged decades of research and development. ^[1] Ensuring intangible assets, such as the COVID-19 vaccines (and the way they are shared between countries) is properly recorded in our macroeconomic statistics, , is critical in understanding the drivers behind sustainable growth and equality.

This brings me to my second point: INEQUALITY.

There is growing concern that certain types of intangible capital and the income they generate are concentrated in a small set of large firms.

From a policy perspective, we need to better understand how growth in intangible capital impacts the distribution of income. For example, how does the increased use of artificial intelligence impact the labor market? Does intangible capital enhance economic mobility? Is there a way to design policies that help ensure economic growth driven by intangible capital is inclusive?

To answer these questions, we need to measure intangible capital so we can increase the tangible benefits to society.

Let me conclude on a hopeful note. I trust you will leave here with a better appreciation of the challenges and opportunities in measuring intangible capital. I believe that the excellent speakers at this Forum will motivate further improvement in our statistics.

I wish you all fruitful discussions, and I look forward to hearing what you conclude.