“How can I possibly put a new idea into your heads, if I do not first remove your delusions?” – Robert Heinlein
For several years now, I have been advocated the need for adding a new national aggregate statistic called Gross Output (GO) that measures total spending at all stages of production and not just the final stage (GDP).
I believe that GO fills in a major piece of the macroeconomic puzzle. It establishes the proper balance between production and consumption, between the “make” and the “use” economy, and one that is consistent with growth theory.
Most importantly, GO and my 4-stage model of the economy are compatible with standard national income accounting and neo-classical macroeconomic analysis. You don’t have to rewrite the textbooks, just add it into the chapters.
Now for the good news. I recently received a letter from Steven Landefeld, the director of the Bureau of Economic Analysis (BEA), the official government agency that releases GDP data every quarter. He wrote me that starting next year, the BEA will begin publishing an expanded aggregate statistic that is similar to my own GO, every quarter along with GDP. [Read more…]