I made the lead story in the Wednesday, April 23, 2014, edition of the Wall Street Journal. The title: “At Last, a Better Economic Measure.” You can read it here: http://on.wsj.com/PsdoLM
The editors of the WSJ don’t allow the author to see or approve the headline or subhead, but they nailed it perfect. And I love the cartoon graphics! It’s a perfect rendition of my four stage model of the economy.
Many readers captured the essence of my message. As economic forecaster Jim Hagerbaumer of Florida wrote: “Skousen is introducing a whole new species. This is one of the most important WSJ op-ed articles in years.”
I also wrote about Gross Output (GO) in the December 16, 2013, issue of Forbes. Here’s the online version, with charts and response to critics:
My original article in Forbes Magazine (December 16, 2013):
Mark Skousen, Beyond GDP: Get Ready For A New Way To Measure The Economy, Forbes
Additional Commentary by Steve Forbes:
Steve Forbes, New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal, Forbes
Gross Output Includes B-to-B….GDP doesn’t
I was at a dinner party last night and a venture capitalist who does deals mainly in China came up to me and said, “I read your article in the Journal and couldn’t believe that B-to-B [business-to-business transactions] is left out of GDP. Unbelievable.” Yet economists dismiss B-to-B as nothing more than “double counting.” I’m sure the business community will love to hear about this put down.
Response to BEA News Release
Friday, April 25, was the big day when the Bureau of Economic Analysis released the quarterly GO data on Friday. GO — an attempt to measure spending at all stages of production — hit $30 trillion in the 4th quarter of 2013. GDP reached $17 trillion. But GO grew only 1.1% in the 4th quarter, suggesting a sluggish economy at best.
The only media who reported on the new quarterly GO was Barron’s (April 26 edition) — Gene Epstein, the economics editor, devoted his column to GO, “A New Way to Gauge the U. S. Economy,” and cited my work.
Why didn’t the New York Times, Bloomberg, CNN, CNBC, or Fox Business report on GO? Because unfortunately the BEA decided to bury the data! If you go to their press release at http://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm, you will be hard pressed to find much about GO data. Why did they refuse to highlight GO? Because, like most establishment economists, they don’t see the value in their own data. They suffer from the “double counting” bugaboo. For some reason, academic and government economists (even some free-market economists) can’t get their head around the value of B to B transactions along the supply chain. They don’t realize that a firm couldn’t exist unless it raised the gross savings/capital necessary to fund the supplies, the raw commodities, the wages, the rents, the interest, the taxes to pay for the full costs of doing business, and not just the value added or profit. Most business people and accountants get it, but economists often fail to grasp the important and size of gross saving/investment necessary to keep the economy going. Austrians know better!
Despite BEA’s reluctance currently to highlight GO data, most of the economics textbooks are planning to include sections on GO in their next editions.
I also suspect that all the G20 countries will follow the US in terms of national income accounting. I know that Anthony Evans in the UK is compiling GO data there. It’s a work in progress, but I predict that within a few years all major countries will be reporting GO along with GDP on a quarterly basis.
Response from Reader
Here’s commentary from Antony Herrey: “Your Structure of Production, with its effective and definitive explanation in chapter 6, demonstrates that consumer spending is not, in fact, the largest sector of the economy and thus is not the driving force behind economic growth. That in turn made clear to me how ignorant and clueless many ‘authorities’ are about the economy and its workings. Your work became a seminal contributor to my rejecting so much falsely received wisdom and spurred me on to look at economic issues with a completely new understanding. Wonderful to see your insights bear such valuable fruit, even if required so many years to be properly recognized.”
Thank you, Antony. I wrote “Structure” (NYU Press) in 1990 in an attempt to advance Austrian macroeconomics beyond what Hayek did in “Prices and Production” (1931), which was purely theoretical. My idea was the add the empirical data to his structure of production and now 25 years later, the BEA came through by updating GO data on a quarterly basis. But as you can see, the BEA and the profession are still not fully convinced of its value. I have more work to do.
As a result of the WSJ, Barron’s, Forbes and other write-ups on GO, Amazon has seen a nice run on “Structure”: http://www.amazon.com/The-Structure-Production-Mark-Skousen/dp/0814740502 It’s temporarily out of stock!
More updates to come.
