A Note on the Use-Classification of Four Digit Industries or How to Call a Spade a Spade

Much of our understanding of structural change withindustrialization is based on empirical studies that describe patternsin the relationship between consumption, intermediate and capital goods[1; 2, for instance]. Thus, classification of an industry's output,prices, imports or exports by use is of primary importance. Even if thedata available describe individual products, there is some ambiguity inuse classification—safety razor blades (metal products) are clearlycon¬sumption goods but sewing machines (nonelectric machinery) areconsumption goods if owned by housewives and capital goods if owned bytailors. Far more serious problems, however, arise when large industrysectors, like whole four digit industries, must be classified by use. Ifthere is no basis for dividing any industry's output (or prices orimports or exports) among its alternative uses, then the entire industrymust be classified as a single lump in one of the three use categorieson the basis of some judgment— even if heroic—or else such aggrega¬tionby use must be abandoned. But ad hoc classifications that lump entirefour-digit industries under one or another heading are not appropriateif there exists a reasonable basis for dividing each industry's outputamong uses. Then, instead of assigning all metal products to capitalgoods (as did Chenery) it is possible to assign some portion toconsumption goods (representing razor blades, et al), some tointermediate goods (rivets) and some to capital goods(spades).