The Production Boundary Reconsidered


  • Note: This paper was funded in part by a Senshu University research grant. The author is grateful for comments from Professors Yoshimasa Kurabayashi, Masaaki Kuboniwa, Taichiro Matsukawa, and Satoshi Kanemaru as well as anonymous referees.

Itsuo Sakuma, School of Economics, Senshu University, 2-1-1, Higashimita, Tamaku, Kawasaki, 214-8580, Japan (


Hill and Hawrylyshyn rediscovered a classical contribution made by Margaret Reid as early as 1934, known now as the “third party criterion.” The general production boundary in SNA 1993 is defined by using this criterion. They considered that the property of “delegability” was the key to the concept of economic production. That is, an activity is called production in an economic sense if it can be delegated to another economic unit. The author calls due attention to the fact that the SNA includes another criterion, which he tentatively calls “World 1 criterion” meaning that an activity is called economic production only when it is a physical process, where the term World 1 is due to Karl Popper. It is claimed that this criterion can generate a more appropriate general production boundary for the SNA if it is used with “role-exchangeability” criterion, another new criterion.