Mark Skousen on gross output
February 7, 2009 – 4:18 pm by JohnFrequent reader kerrjac commented on my recent post, Saving is good, not bad, for American economy with this tidbit about the opinions of economist Mark Skousen. Responding to my comment that many people claim consumption is 70% of our GDP, he said,
Recently I’ve been reading economist Mark Skousen, who has countered the popular notion that we live in a consumer-driven economy. Although statistics like that are technically true, Skousen argues, they’re more tautology than fact. This is because the calculation of GDP largely consists of consumed goods. It doesn’t include savings & investment. GDP is a product of the Keyens school, along with the undue focus on consumption. Both are still around today. And just as Keyens didn’t care much for savings & investments, neither does the GDP.
Skousen has been pushing for a metric called “Gross Output” (see http://www.mskousen.com/Books/Articles/0104go.html), which accounts for “intermediate causes” in production (e.g., savings & investments, R&D) along with consumption. Looking at gross output, he estimates that consumption only accounts for about 1/3 of our economy at most, and that patterns in consumption tend to lag Gross Output, which is just what we see with the stock market: If it dips at one time, consumption/retail sectors dip 9 or so months later.
I just wanted to put that out there because I thought it might have been overlooked by most readers, buried at the end of the comments to that post. It is pretty interesting, and I might have more to say about it or at least learn something from it in the near future.
2 Responses to “Mark Skousen on gross output”
More importantly, why should we care about any such measure?
By Francois Tremblay on Feb 8, 2009
Glad you found it helpful. I’ll be curious to learn what you find, b/c outside of Skousen’s work I haven’t seen much else of Gross Output.
I was originally introduced to the term thru his book “The Making of Modern Economics” (a light read, I’d recommend it to anyone curious about the history of economic thought w/o expertise in the area).
One suspicion I have – albeit unconfirmed – is that Gross Output hasn’t caught on b/c it underestimates the role of government. In the book, he includes a brief history of the modern use of the GDP, and apparently there was heavy debate about whether to include gov’t expenditures in it. Ultimately they decided to include gov’t activity (which has helped perpetuate the myth that war is good for the economy).
By kerrjac on Feb 14, 2009