“Skousen is introducing a whole new species. This is one of the most important WSJ op-ed articles in years.”
– James Hagerbaumer, Economic Forecaster
The editors of the Wall Street Journal gave me top billing in yesterday’s op-ed page, “At Last, a Better Economic Measure.”
The editors don’t let the author see the headline, but they captured it perfectly. The graphic cartoon was also perfect — check it out.
Basically, I contend that Gross Output (GO) is better than gross domestic product (GDP) in measuring the economy. GO is an attempt to measure spending at all stages of production. It corrects the fallacy fostered by GDP that consumer spending drives the economy. Actually, business spending at all stages of production is larger than consumer spending when you use GO as the measure of economic activity (more than 50%, compared to less than 40% for consumer spending).
I think I’m on to something. In my original work, “The Structure of Production” (New York University Press, 1990, 2007 new introduction), I suggest we need to look at the economy from the point of view of:
In a way, this approach is neo-Austrian. As Steve Forbes wrote in response to my article, "Skousen's measure of the economy will have a profound and manifestly positive impact on economic policy and politics."
Right now, GO is growing faster than GDP, the yield curve is positive, price inflation is relatively flat right now (commodity prices and consumer prices are fairly stable)… employment is sluggish… Overall, with easy-money policies in place, I remain bullish on the stock market. Mining stocks are the most volatile, being the furthest away from final consumption, while consumer retail stocks are fairly stable.
I hope my model catches on. With the Bureau of Economic Analysis (BEA), part of the U.S. Department of Commerce, releasing quarterly GO statistics starting Friday, April 25, the new approach to macroeconomics may well catch on.
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