Jorgenson was an advocate of a carbon tax on greenhouse gas emissions, as a means of reducing global warming; he testified to that end before Congress in 1997. His research has also been used to advocate for the FairTax, a proposal for tax reform in the United States which advocates replacing all federal payroll and income taxes (both corporate and personal) with a national sales tax and a monthly tax rebate to households of citizens and legal resident aliens. Jorgenson also designed a tax plan of his own, called the Efficient Taxation of Income, which he described in his book Investment, Vol. 3: Lifting the Burden: Tax Reform, the Cost of Capital, and U.S. Economic Growth.[7] The approach would introduce different tax rates for property-type income and earned income from work.[8]
Research
Jorgenson's 1963 paper, “Capital Theory and Investment Behavior,” introduced the important features of the cost of capital employed in subsequent literature. His principal innovations were the derivation of investment demand from a model of capital as a factor of production, the incorporation of the tax treatment of income from capital into the price of capital input, and the econometric modelling of gestation lags in the investment process. In 1971, Jorgenson surveyed empirical research on investment in the Journal of Economic Literature. In the same year, he was awarded the John Bates Clark Medal for his research on investment behavior. In 2011 Jorgenson's paper was chosen as one of the 20 best papers published in the first 100 years of the American Economic Review.[9] His other academic contributions include theories of:
The predominant role of investment. In 2005 Jorgenson traced the American growth resurgence to its sources in individual industries in his book, Information Technology and the American Growth Resurgence, co-authored with Mun S. Ho and Kevin J. Stiroh. This book employed the framework originated by Jorgenson, Frank M. Gollop, and Barbara M. Fraumeni, but added detailed information about investments in information technology equipment and software. Jorgenson and his co-authors demonstrated that input growth, due to investments in human and non-human capital, was the source of more than 80 percent of U.S. economic growth over the past half century, while growth in total factor productivity accounted for only 20 percent. Jorgenson and Khuong Vu (2005) established similar results for the world economy.
New architecture for the national accounts. Jorgenson and Steven Landefeld, director of the U.S. Bureau of Economic Analysis, have proposed a new system of national accounts that incorporates the cost of capital for all assets, including information technology equipment and software. The new system is presented in their book with William Nordhaus, published in 2006. In March 2007 Jorgenson's cost of capital was recommended by the United Nations Statistical Commission for incorporation into the United Nations’ 2008 System of National Accounts. Paul Schreyer (2009) has published an OECD Manual, Measuring Capital, to serve as a guide to practitioners. The “new architecture” was endorsed by the Advisory Committee on Measuring Innovation in the 21st Century to the Secretary of Commerce in 2008.[10] Jorgenson (2009) has presented an updated version of the “new architecture” in his Richard and Nancy Ruggles Memorial Lecture to the International Association for Research in Income and Wealth.
The World KLEMS Initiative was established at Harvard University on August 19–20, 2010. This will ultimately include industry-level production accounts, incorporating capital (K), labor (L), energy (E), materials (M) and services (S) inputs, for more than forty countries. Accounts for 25 or the 27 EU members, assembled by 18 EU-based research teams, were completed on June 30, 2008, and are presented by Marcel P. Timmer, Robert Inklaar, Mary O’Mahony, and Bart van Ark (2010). This landmark study also provides industry-level accounts for Australia, Canada, Japan, and Korea, as well as the U.S., based on the methodology of Jorgenson, Ho, and Stiroh (2005). These industry-level production accounts are now included in the official national accounts for Australia, Canada, and five European countries. The World KLEMS initiative will extend these efforts to important emerging and transition economies, including Argentina, Brazil, Chile, China, India, Indonesia, Mexico, Russia, Turkey, and Taiwan.[11][12]
Welfare measurement. In 1990 Jorgenson presented econometric methods for welfare measurement in his Presidential Address to the Econometric Society. These methods have generated a new approach to cost of living measurement and new measures of the standard of living, inequality, and poverty. This has required dispensing with ordinal measures of individual welfare that are not comparable among individuals, as persuasively argued by Amartya Sen in 1977. Jorgenson and Daniel T. Slesnick have met this requirement by substituting cardinal measures of individual welfare that are fully comparable among individuals. In 1989 Arthur Lewbel showed how the household equivalence scales proposed by Jorgenson and Slesnick can be used for this purpose.
Evaluation of alternative policies. In 1993 Jorgenson and Peter J. Wilcoxen surveyed this evaluation of energy, environmental, trade, and tax policies, based on the econometric general equilibrium models Jorgenson developed with Ho and Wilcoxen. The concept of an intertemporal price system provides the unifying framework. This system balances current demands and supplies for products and factors of production. Asset prices are linked to the present values of future capital services through rational expectations equilibrium. The long-run dynamics of economic growth are captured through linkages among capital services, capital stocks, and past investments. Alternative policies are compared in terms of the impact of changes in policy on individual and social welfare. This approach was incorporated into the official guidelines for preparing economic analyses by the U.S. Environmental Protection Agency in 2000.[13]
Personal life
Jorgenson was married to Linda Mabus Jorgenson, an attorney, with whom he had a son, Eric, and a daughter, Kari.[3] He died on June 8, 2022, in Cambridge, Massachusetts. The cause was described as respiratory ailments.[14]
^Jorgenson, Dale; Yun, Kun-Young (2002). Investment, Vol. 3: Lifting the Burden: Tax Reform, the Cost of Capital, and U.S. Economic Growth (Hardcover ed.). The MIT Press. ISBN0-262-10091-6.
^Jorgenson, Dale; Yun, Kun-Young (November 15, 2002). "Efficient Taxation of Income"(PDF). Harvard. Archived from the original(PDF) on February 21, 2007. Retrieved July 17, 2007.
^In Chapter 20 of the United Nations (2009), 2008 System of National Accounts (page 415), estimates of capital services are described as follows: “By associating these estimates with the standard breakdown of value added, the contribution of labor and capital to production can be portrayed in a form ready for use in the analysis of productivity in a way entirely consistent with the accounts of the System.”
^Jorgenson's contributions to modeling the impact of environmental policies were surveyed by Wilcoxen in 2000. As an illustration of the new approach to environmental policy analysis, Wilcoxen analyzed the hypothesis that market-based instruments for environmental policy have the potential for stimulating economic growth. Jorgenson and Wilcoxen (1993b) had shown that revenue from market-based instruments of environmental policy can be used to reduce pre-existing distortions associated with taxes on incomes from labor and capital. This can improve economic welfare even before environmental benefits are considered, generating a “double dividend”. The current version of the model of energy, the environment, and U.S. economic growth that Jorgenson developed with Ho and Wilcoxen is employed for the evaluation of legislation on climate policy by the U.S. Environmental Protection Agency (2011).
