Intangibles: what put the new in the new economy?

Abstract

this article, we will look at two key consequences of these accounting conventions. First, not only are reported corporate profits understated, they're understated more than they used to be because corporations are investing more of their cash flow in intangible assets. As a result, U.S. price/earnings ratios are overstated. Second, U.S. national income, saving, and investment are understated because a larger proportion of output is invested in intangibles. As we shall see, growing investment in intangibles also helps explain how the measured U.S. personal saving rate can be near zero even as U.S. wealth has grown considerably. U.S. economic and financial performance is less puzzling when we take this intangible investment into account