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the crash. (Yes, some of the strongest boom years in history came during the world
depression.)
This is not to question the need for national accounts. We could not manage without
them. But the genius of accountancy is in its reporting of cash flow items.
Depreciation, even its sophisticated form used in national accounts, is a makeshift
approximation better than nothing. I argue that it is obsoleted by our access to
market-valued capital appearing in the last few decades.
Mill’s argument was that capital growth might be explained by productivity gain as
well as by thrift in deferred consumption. The way to test between them that I will
describe takes measurements of market-valued capital, its year-to-year change in
these, and consumption at the same time. I call it the simultaneous rates method. In
any year and country where consumption restraint explains growth, although the
data show none, rise in growth rate would equal current drop in consumption rate
(consumption/capital) while rate of return (output/capital) holds unchanged. When
productivity gain is the explanation, as the data confirm so far, it is consumption
rate that holds the same while growth rate and return rise equally. That’s what I
test. Data in charts and tables for those four nations from 1870 through 2010, and
from Australia, Canada, Italy and Japan from 1970 through 2010, show that faster
capital growth coincides with higher consumption rates in the same year as often as
not. Less consumption has simply meant less output with no growth to show for it.
That is the sense in which growth is free.
These countries and periods are not cherry-picked to support Mill’s idea. They are
all | have found. My source for national accounts including market-valued capital
was the website of Thomas Piketty and Gabriel Zucman adjusting their data to
uniform accounting standards and measuring them in 2010 currency units. It also
collects recent and past research by other economists modeling what national
accounts, again including accounts of market-valued capital, would have shown in
years before they were founded in 1930 or so. Simon Kuznets, for example, who
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