Posted on 05/23/2016 8:00:47 AM PDT by Academiadotorg
Despite the theory purveyed by the media, consumer spending is not the strongest catalyst of economic expansion, according to economist Mark Skousen, author of The Structure of Production.
"...Because consumer spending represents...two thirds basically of GDP you get the media constantly making, creating a myth. It’s one of the most common myths in economics…you get it from all the publications," Skousen explained at a CATO Institute forum titled "GO Beyond GDP: What Really Drives the Economy?"
Contrary to the economic assumption that spending spurs growth, Skousen asserts that businesses, which account for a mere 16% of Gross Domestic Product (GDP), actually represent society's most potent force for economic expansion. For this reason, he explained the value of examining another economic indicator called Gross Output (GO) in conjunction with traditional GDP calculations.
Skousen notes that because "...GDP just measures the value of finished goods and services…" it fails to account for "…the spending by business to get you to the finished products…"
In contrast, the GO statistic describes all of the expenses associated with creating a product by adding "Resources," "Production," and "Distribution" to the standard GDP calculation. This statistic is more sensitive to economic fluctuations than GDP and offers an entirely different view of the economy. GO shows that businesses account for 59.9% of expenditures and consumers contribute only 31.9%.
Skousen calls GO "…a paradigm shift in the way we treat macroeconomics" and the Bureau of Economic Analysis began tracking the statistic in 2014.
Alex Nitzberg is an intern at the American Journalism Center at Accuracy in Media and Accuracy in Academia. Follow him on Twitter and Facebook.
Gross output. Anything from a democrat’s mouth.
LOL.
I always go back to the foundation of Western Civilization—and Christian Worldview—the ONLY RATIONAL “faith” in human history, which gave us the US Constitution, the Age of Reason, and Modern Science. (All people have “faith” but SOME is MORE RATIONAL and JUST than others).
Christianity created the most brilliant, just “Virtue” system (the USAs) in all of history (and why the Marxist need to erase it and banned it from the public square and skools (indoctrination centers into Marxism—irrationality).
Without Virtue (and it is formed only in the Natural Family and by embedding self-reliance (thinking for self) and understanding Truth (God)......there is no flourishing economy possible. None. Nada. Skools are indoctrination (group-think) factories destroying the critical “thinking” of children with Lies and mush. (Classical Christian Curricula was removed by the sodomites in 1930, like the Humanist John Dewey and philosophy of the vile pederast, John Maynard Keynes (the “economist”).
Virtue is essential in civil societies. The Queen of Virtue is “Justice”-—and that was removed from our System-—we now are using irrational, arbitrary laws (an unconstitutional Vice System), where NO economy can flourish. As Cicero stated—without Virtue, civil society will collapse-—go into chaos or tyranny.
All Just Laws promote “public virtue” for without a virtuous people, there is no civil society (flourishing economy)-—only a cartel/Marxist, slave system).
I don’t get his distinctions - isn’t what a manufacturer uses to build his products also finished goods? Is an engine not a finished good to a car manufacturer?
In a country with a non-gold based paper money system, GDP/GNP is more a measure of the amount of spending, and is related to the total amount of money in the economic system, rather than the total physical volume of output of the economic system
Economics is too important to be left with the experts.
Ludwig von Mises
von Mises taught my old boss, M. Stanton Evans, in grad school at NYU. Human Action was his textbook.
“In a country with a non-gold based paper money system, GDP/GNP is more a measure of the amount of spending, and is related to the total amount of money in the economic system, rather than the total physical volume of output of the economic system”
In the gold poor world of colonial Virginia physical output exactly equaled the money in their economy, the money being tobacco receipts for 100-150 years. The Real Bills doctrine in banking is a similar, non-agricultural idea.
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