A Bird's-Eye Look At the Countryside

Who benefits the most when U.S. householders buy more furniture? What would happen to sales of a paint company if the Government cut back defense spending on aircraft and missiles? Which U.S. industries stand to be hurt most by Britain's new 15% levy on imports? What effect would the proposed $500 million cut in excise taxes have on various segments of the U.S. economy?

The answers to such questions have long been difficult or impossible to come by, although the Government is spending millions every year ($118.3 million this fiscal year, up 29% over three years ago) to provide the growing flow of statistics that pour from 14 federal agencies. Despite the proliferation of statistics, no one had ever devised a master plan that would pull them all together, and even the experts were largely left in the dark about how an event in one area of the economy could affect a business or industry in another.

Last week the Commerce Department proudly brought forth a major new aid that will prove invaluable in analyzing the U.S. economy and its parts. It is called the input-output table, and its 24,044 computations are the result of five years and three-quarters of a million dollars' worth of work by a 20-man staff in Commerce's Office of Business Economics. Basically, the staff divided U.S. industry into 86 groups, painstakingly put precise numbers on the intricate interplay of sales and orders among them and tied the whole works for the first time to such basic statistical yardsticks as national income and gross national product. It thus created the first really 3-D view of the U.S. economy. "Input-output," says George Jaszi, head of the Office of Business Economics, "is a bird's-eye view of the economy, like looking at the countryside from an airplane."

Fears of Regimentation. The new view will make business and Government predictions more accurate, enable a businessman to see how a change in consumer demand, Government spending or taxes will affect his own enterprise, give him a better insight into who are his customers' customers (a notoriously foggy order) and show him where he is missing markets in which his competitors are selling. It enables a paint company, for example, to figure out its sales drop on a $3 billion defense cut in missiles and aircraft. Input-output shows that the aerospace industry uses 0.2450 of paint industry materials for every $1 of sales, and that a $3 billion drop in orders would thus mean a loss of $7,300,000 in sales to the industry. Knowing that it had 10% of the market, a paint firm could expect a sales drop of $730,000. Similarly, for each $1,000,000 rise in demand for household furniture, fabric makers can expect an extra $98,880 in sales, wood companies $182,000 and transportation and warehousing firms $65,000.

The input-output tables are the brainchild of Harvard Professor Wassily W. Leontief, whose work persuaded the Government to begin the preparation of such tables in the late 1940s. Fearing that the system would prove a wedge for Government regulation of the entire economy, a group of businessmen led by General Motors Economist Stephen DuBrul in 1953 persuaded Defense Secretary Charles ("Engine Charlie") Wilson to halt work on it. But the work got under way again in 1959 after Professor Raymond Goldsmith of Yale urged the Government to push ahead, and business fears of the tables have turned to open-armed welcome with the realization that they are an invaluable aid. Forty-five other nations are now working on their own input-output tables.

Enough Elegance. The tables will be revised every two or three years to register changes in the economy. Professor Leontief would like to see a further breakdown of the economy into 450 to 500 industries, feels that some federal statistics from which the tables are drawn are wanting (TIME, July 10). But he is pleased that his idea has been brought to the point where "the technician, not the philosopher, is needed. The tables will help end all the elegant economic theorizing that has up to now been done with too little data," he says. He is probably 85.6% correct.

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