ANNOUNCING THE NEW THIRD EDITION OF “THE MAKING OF MODERN ECONOMICS” BY MARK SKOUSEN

March 9, 2016: Today marks the 240th anniversary of the publication of “The Wealth of Nations,” by Adam Smith. On this day Dr. Mark Skousen is also pleased to announce the publication of the new third edition of his bestselling history, “The Making of Modern Economics.”

Making of Modern Economics 3rd edAs you can see from the cover, the heroic figure in Skousen’s book is Adam Smith and his “system of natural liberty.” (Interestingly, the official pub date of the first edition of Skousen’s history was March 9, 2001.) All of the “worldly philosophers” – Ricardo, Say, Mill, Marshall, Menger, Marx, Fisher, Keynes, Schumpeter, Friedman, Krugman — are judged as defenders or critics of the great Scottish philosopher, and whether they advanced or attacked the House that Adam Smith Built.

Routledge, the top British academic publisher (famous for publishing the works of Hayek, another hero in Skousen’s work), is now the publisher of this bold history of the great economic thinkers.

What’s new in the third edition?

What’s the new edition all about?

First, Skousen expands his chapter on Adam Smith, including a new discussion and quotations from Smith’s “Theory of Moral Sentiments.” He also comments on the startling new discovery that Smith’s singular reference to the famous “invisible hand” metaphor is located in the mid-point of both “The Wealth of Nations” and “The Theory of Moral Sentiments.” Purposeful or coincident? Find out in chapter 1, “It All Started with Adam.”

Second, the third edition updates the chapter on Karl Marx, particularly the resurrection of the Marxist-inspired “liberation theology” in Latin America, with comments about Pope Francis and his severe criticism of capitalism. The growth of socialism and corruption in Latin America is discussed.

Third, the final chapter, “Dr. Smith Goes to Washington: Market Economies Face New Challenges,” has been completely revised. Here Skousen focuses on the West’s decline in economic freedom in consequence of higher deficits, taxes and regulations, and the growing debate over inequality, austerity, and the need for a new brand of capitalism following the financial crisis of 2008. The chapter ends on a positive note, with discussions on the advances in game theory, auction design, experimental economics, behavioral finance, and other aspects of the new “imperial” science.

How to Buy a Copy

The third edition (500 pages) of “The Making of Modern Economics” is available in hardback, paperback, Kindle, or audio. You can order on Amazon here: http://www.amazon.com/Making-Modern-Economics-Lives-Thinkers/dp/0765645440/ref=sr_1_6?s=books&ie=UTF8&qid=1457540102&sr=1-6

The new edition is also available directly from the author at a discount. Amazon charges $47.95 for the paperback, but you can buy directly from the author by calling toll-free 1-866-254-2057. You pay only $30 plus $5 P&H. (Orders from outside the US, please add $15 extra for airmail–$45 total.) Or order online at www.miracleofamerica.com.

Awards and Translations

In 2009, “The Making of Modern Economics” (the 2nd edition) won the Choice Book Award for Excellence in Academia. It was recently ranked #2 in the Ayn Rand Institute’s Top Ten List of “Must Read Books in Economics.” It has been translated into five languages — Spanish, Chinese, Turkish, Mongolian and Polish.

What’s Different about “The Making of Modern Economics”?

Skousen’s history is a bold, new account of the lives and ideas of the great economists–Adam Smith, Karl Marx, John Maynard Keynes, Ludwig von Mises, Milton Friedman, and many others–all written by a top free-market economist. Presented in an entertaining and persuasive style, Professor Mark Skousen tells a powerful story of economics, with dozens of anecdotes, illustrations and photographs of the great economic thinkers.

First and foremost, Skousen tells the remarkable untold story of free-market capitalism’s long-running battle against Keynesianism, Marxism, socialism and other isms. It is an account of high drama with a singular heroic figure, Adam Smith and his celebrated “system of natural liberty.” The running plot involves many unexpected twists and turns; sometimes our hero is left for dead, only to be resuscitated by his free-market friends; the story even has a surprise ending.

A Full-Scale Critique of All Major Doctrines

All previous histories tend to give a dry, disjointed, and helter-skelter account of economists and their contradictory theories. But Skousen unifies the story of economics by ranking all major economic thinkers either for or against the invisible hand doctrine of Adam Smith. Thus, Marx, Veblen and Keynes are viewed as critics of Smith’s doctrine, while Marshall, Hayek and Friedman are seen as supporters.

Using this ranking system, The Making of Modern Economics offers a full-scale review and critique of every major school and their theories, including classical, Keynesian, monetary, Austrian, institutionalist and Marxist.

A Complete History

Skousen’s history is comprehensive. He makes a point of discussing all schools of economics and not just the ones he agrees with. Too many economists have omitted major characters from the history of economics, a practice bordering on intellectual dishonesty. Robert Heilbroner’s popular book, The Worldly Philosophers, for example, virtually ignores the laissez-faire French, Austrian and Chicago traditions. (His latest edition does not even mention Milton Friedman by name!)

Think of The Making of Modern Economics as a contra-Heilbroner history.

It’s a perfect antidote to all those biased, inaccurate attacks on the free market and its proponents.

Skousen records the lives and ideas of important economists often ignored in other histories, such as Montesquieu, Ben Franklin, J. B. Say, Frederic Bastiat, Friedrich List, Herbert Spencer, Ludwig von Mises, Knut Wicksell, Philip Wicksteed, Max Weber, Irving Fisher, Roger Babson, Frederick Taylor, A. C. Pigou, Joan Robinson, Murray Rothbard, and the three Paul’s: Paul Sweezy, Paul Samuelson and Paul Krugman.

Skousen’s book also restores the vital role of the Austrian and Swedish schools in the marginalist revolution and the development of monetary economics. It emphasizes the impact of other disciplines on economics, such as evolution, sociology, and religion.

“Tell All” Biographies

Skousen’s book brings history alive with exciting new insights into the lives of the great economists through in-depth biographies and the author’s own research, revealing an amazing tale of idle dreamers, academic scribblers, occasional quacks and madmen in authority.

The Making of Modern Economics does its best to entertain, with provocative sidebars, humorous anecdotes, even music selections reflecting the spirit of each major economist. Samples:

–Why Adam Smith burned his clothes…and then burned his papers.

–The “satanic verses” of the poet Karl Marx.

–Were Malthus, Ricardo, Marshall and Keynes anti-female?

–The infamous grading technique of Chicago’s Jacob Viner (he regularly flunked a third of his class).

–The sexual scandals of Karl Marx, Carl Menger, Joseph Schumpeter and Friedrich Hayek.

–The story behind Marx the phrenologist, Jevons the astrologer,

–Keynes the palm reader, and Friedman the amateur hand-writing analyst.

–Which famous economist is buried next to rock star Jim Morrison in Paris?

–How Darwin and Wallace discover their theory of evolution after reading Malthus.

–Why Malthus and the doomsdayers have been proven wrong about overpopulation and environmental crises.

–The strange case of David Ricardo: Why Schumpeter, Keynes, and Samuelson admired him–and deplored him.

–Why Malthus refused to have his portrait made until age 67.

–Why Hayek blames John Stuart Mill, a hero of classical liberalism, for popularizing socialism among intellectuals in the 19th century.

–The real origin of the epithet “dismal science,” and why critics are now calling economics the “imperial” science, with ever-increasing applications in law, finance, history, and politics.

–How John Stuart Mill and the disciples of David Ricardo became hostage to the Marxists, and how Carl Menger and the Austrians revived the laissez faire model of Adam Smith from oblivion.

–The inside story of three multi-millionaire economists–David Ricardo, Irving Fisher and John Maynard Keynes.

–The bizarre story of Jeremy Bentham: from democratic reformist to utilitarian fascist.

–The socialist origins of the American Economic Association and the London School of Economics.

–Veblen’s incredible prophecies about World War I and II.

–Thorstein Veblen versus Max Weber: Who had a better vision of capitalism?

–How Irving Fisher became an advisor to the fascist Mussolini.

–The little-known story of how the economics establishment in the West (including economists at Cambridge, Harvard and Yale) failed to forecast the 1929-32 economic collapse.

–How Austrian economists Ludwig von Mises and Friedrich Hayek were able to predict the 1929-33 crisis, yet failed to convince the world of their theories.

–How the 1929 crash served as a catalyst for Keynes’s “general theory.”

–How Keynes saved the world from Marxism in the 1930s.

–The truth about Keynes’s homosexuality and the rumor that his Cambridge colleague, A. C. Pigou, was a Soviet spy.

–Gross Domestic Product (GDP)–how a Keynesian statistic was invented by a Russian.

–How Irving Fisher’s misinterpretation of his quantity theory of money led to his losing a fortune on Wall Street, and how Milton Friedman avoided repeating Fisher’s blunder.

–Why Friedman and the Chicago school triumphed over Mises and the Austrian school in discrediting Keynesianism and restoring the Adam Smith model of market capitalism.

Fully Illustrated with Over 100 Photos, Portraits and Graphs

Finally, The Making of Modern Economics is the first fully-illustrated history of economics, with over 100 charts, portraits, and photographs, including a picture of….

…Keynes in bed (where he made his millions),

…Eugen Boehm-Bawerk in official regalia as finance minister of Austria,

…Alfred Marshall trying to hide his oversized left hand,

…the preserved body of Jeremy Benthem in London,

…the only known photograph of Irving Fisher smiling (before he lost millions in the stock market), and

…over 75 rare and unusual photos and portraits of famous economists.

Provocative Chapter Titles

Here are the titles of each chapter of The Making of Modern Economics:

It All Started with Adam (Adam Smith, that is)

  1. The French Revolution: Laissez Faire Avance!
  2. The Irreverent Malthus Challenges the New Model of Prosperity
  3. Tricky Ricardo Takes Economics Down a Dangerous Road
  4. Milling Around: John Stuart Mill and the Socialists Search for Utopia
  5. Marx Madness Plunges Economics into a New Dark Age
  6. Out of the Blue Danube: Menger and the Austrians Reverse the Tide
  7. Marshalling the Troops: Scientific Economics Comes of Age
  8. Go West, Young Man: Americans Solve the Distribution Problem in Economics
  9. The Conspicuous Veblen Versus the Protesting Weber: Two Critics Debate the Meaning of Capitalism
  10. The Fisher King Tries to Catch the Missing Link in Macroeconomics
  11. The Missing Mises: Mises (and Wicksell) Make a Major Breakthrough
  12. The Keynes Mutiny: Capitalism Faces its Greatest Challenge
  13. Paul Raises the Keynesian Cross: Samuelson and Modern Economics
  14. Milton’s Paradise: Friedman Leads a Monetary Counterrevolution
  15. The Creative Destruction of Socialism: The Dark Vision of Joseph Schumpeter
  16. Dr. Smith Goes to Washington: Free-Market Economies Face New Challenges

What Others Are Saying

“A story rarely told….It’s unputdownable!”
– Mark Blaug (University of Amsterdam), author of Economic Theory in Retrospect

“I champion Skousen’s book to everyone. I keep it by my bedside and refer to it often. An absolutely ideal gift for college students.”
– William F. Buckley, Jr., founder, National Review

“One of the most original books ever published in economics.”
– Richard Swedberg (University of Stockholm), author of Schumpeter: A Biography

“Provocative, engaging, anything but dismal!”
– N. Gregory Mankiw (Harvard University)

“Lively and accurate, a sure bestseller. Skousen is an able, imaginative and energetic economist.”
– Milton Friedman

“Mark Skousen has emerged as one of the clearest writers on all matters economic today, the next Milton Friedman.”
– Michael Shermer, Scientific American

“Irreverent, passionate, entertaining, sometimes mischievous, like the author himself!”
–David Colander (Middlebury College), coauthor of The Making of an Economist

“I have read Mark’s book three times. It’s fun to read on every page. I have recommended it to dozens of my friends.”
John Mackey, CEO, Whole Foods Market

“I loved the book–spectacular!”
Arthur B. Laffer

“I couldn’t put it down! The musical accompaniments for each chapter are a wonderful touch. Humor permeates the book and makes it accessible like no other history. It will set the standard.”
Steven Kates, RMIT University, Australia

“Skousen gets the story ‘right’ and does it in an entertaining fashion, without dogmatic rantings.”
Peter Boettke, George Mason University

“Both fascinating and infuriating…engaging, readable, colorful.”
Foreign Affairs

“Lively….amazing….good quotations!”
Journal of Economic Perspectives

About the Author

Mark Skousen (Ph. D., economics, George Washington University) is a Presidential Fellow at Chapman University in California.  He has taught economics, finance and business at Columbia Business School, Barnard, Mercy and Rollins colleges, and Chapman University.  Since 1980, Skousen has been editor in chief of Forecasts & Strategies, a popular award-winning investment newsletter (www.markskousen.com).  He was analyst for the CIA, a columnist to Forbes magazine, chairman of Investment U, and past president of the Foundation for Economic Education (FEE) in New York.  He is the editor of his own website, www.mskousen.com, and is the producer of FreedomFest, “the world’s largest gathering of free minds,” which meets every July in Las Vegas (www.freedomfest.com).  His economics works include The Structure of Production (NYU Press), The Big Three in Economics (ME Sharpe), The Making of Modern Economics (Routledge) and Economic Logic (Capital Press).  His investment books include Investing in One Lesson (Capital Press), and The Maxims of Wall Street (Eagle Publishing).  In honor of his work in economics, finance and management, Grantham University renamed its business school, “The Mark Skousen School of Business.”  Based on his work The Structure of Production (NYU Press, 1990), the federal government now publishes Gross Output (GO) every quarter along with GDP.

THIRD QUARTER GROSS OUTPUT AND B2B INDEX REPORTS SHARP SLOWDOWN IN US ECONOMY

Washington, DC (Thursday, January 21, 2016):  Gross output (GO), the new measure of U. S. economic activity published by the Bureau of Economic Analysis, slowed significantly in the 3rd quarter of 2015. And the Skousen B2B Index actually fell slightly in real terms in the 3rd quarter. Both data suggest the possibility of a mild recession developing in 2016.

Based on data released today by the BEA and adjusted to include all sales throughout the production process, real GO grew by only 2.5% in the 3rd quarter of 2015, almost half the rate in the 2nd quarter (4.6%), but more than real GDP (2.0%) in the 3rd quarter[1]   Adjusted GO reached $39.2 trillion in the 3rd quarter, more than double the size of GDP ($18.0 trillion).

In nominal terms, adjusted GO growth rate declined from 6.3% in Q2 to 2.3% in Q3. In the same period GDP fell from 6.0% to 2.7%, illustrating the higher degree of volatility of GO compared to GDP (see chart below).  The higher volatility indicates that GO might be a better indicator of economic activity than GDP, since GO includes economic activity that GDP leaves out.

Press_Release_2016-01-21_Graph_01_OriginalSupply chain activity varied significantly in the 3rd quarter: Mining activity continued to fall by 7.6% (on top of declining 26% in Q2), but utilities reversed course and rose 7.2%.   Most other sectors grew, led by construction, which was up 7.6%. However, the wholesale market fell 6.6%, while retail trade rose 7.4% in nominal terms. Overall, price inflation remained tepid, declining 0.1%.

GO and GDP are complementary statistics in national income accounting. Gross output (GO) is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of an accounting statement. In April, 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is similar to the “bottom line” (earnings) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. The fact that the adjusted GO is now growing slower than GDP suggests that the economic recovery is losing steam and may end up in a mild recession in 2016.

Real Business Spending (B2B) Suffers Slight Decline

We have also created a new business-to-business (B2B) index based on GO data. It measures all the business spending in the supply chain and new private capital investment. B2B activity rose only 0.2% in nominal terms in the 3rd quarter, down from 1% growth in the 2nd quarter, and actually fell in real terms by 0.1%. According to the Skousen B2B Index, business spending rose to $22.83 trillion in nominal terms compared to the 2nd quarter of $22.78 trillion. Meanwhile, consumer spending rose 1.1% (0.8% in real term) in Q3.

Untitled2

“The GO data and my own B 2B Index demonstrate that total US economic activity has slowed dramatically. A recession could develop in 2016, although I expect it to be mild,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University. “B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain, and it indicates tepid growth and maybe even a downturn.”

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy.

GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was just published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s. With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “At Last, a Better Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”:

http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”:

http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

New: Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015: http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

 

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations, 1-201-788-6623, or email him at skousenpub@gmail.com.

# # #

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[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2015 3rd quarter is $31.6 trillion. But by including gross sales at the wholesale and retail level, the adjusted GO is $39.2 trillion. Thus, the BEA omits $7.6 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

 

 

 

 

FESTSCHRIFT HONORING PROF. ROGER GARRISON PUBLISHED

By Mark Skousen

I’m pleased to announce that the Journal of Private Enterprise has issued its latest volume (Winter 2015 issue) in honor of Roger Garrison, long-time friend and professor of economics at Auburn University:  http://journal.apee.org/index.php/Category:Winter_2015 

garrisonsep2012

Roger Garrison visiting Mark Skousen at his home in New York (with the Totem Pole of Economics in the background).

The festschrift, based on a session I organized at last year’s Association of Private Enterprise Education (APEE) meetings, contains four articles:

Robert F. Mulligan, “Roger W. Garrison and the Integration of Austrian and Mainstream Macroeconomics.” 

Adrian Ravier and Nicolas Cachanosky, “Fiscal Policy in Capital-Based Macroeconomics with Idle Resources” 

Mark Skousen, “Linking Austrian and Keynesian Economics:  A Variation of a Theme” (this is my first refereed paper on Gross Output, the new national statistic the federal government is now publishing quarterly along with GDP). 

Peter Boettke and Candela Rosolino, “Finding the ‘Middle Ground’ in Academia:  Important Lessons from Roger Garrison in Austrian Economics.”

SECOND QUARTER GROSS OUTPUT AND B2B INDEX: US ECONOMY MUCH STRONGER THAN GDP INDICATES

Washington, DC (Thursday, November 5, 2015):  Gross output (GO), a broader measure of U. S. economic activity published by the Bureau of Economic Analysis, accelerated in the 2nd quarter of 2015, indicating a more robust economy than GDP data reports.

Based on data released today by the BEA and adjusted to include all sales throughout the production process, real GO grew by 4.6% in the 2nd quarter of 2015, considerably more than the 3.9% annualized growth rate of real GDP.[1]   Adjusted GO reached $39.0 trillion in the 2nd quarter, more than double the size of GDP ($17.9 trillion).

In nominal terms, adjusted GO growth rate went from -2.5% in Q1 to 6.3% in Q2. In the same period GDP went from 0.8% to 6.0%, illustrating the higher degree of volatility of GO compared to GDP (see chart below).  The higher volatility indicates that GO might be a better indicator of economic activity than GDP, since GO includes economic activity that GDP leaves out.

GO_2015_q2_a_changeHowever, early-stage activity continued to show weakness in the 2nd quarter: Mining activity fell 26% and utilities declined 16%. However, most other sectors grew, led by construction, which was up 24%. Wholesale and retail sales also rose sharply, probably benefiting from lower fuel prices. Overall, price inflation remained tepid, rising only 1.4%.

GO and GDP are complementary statistics in national income accounting. Gross output (GO) is an attempt to measure the “make” economy; i. e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of an accounting statement. In April, 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is similar to the “bottom line” (earnings) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. The fact that the adjusted GO is still growing slightly faster than GDP suggests that the economic recovery is on-going.

Business Spending (B2B) Rises Only 1%

We have also created a new B2B Index based on GO data. B2B activity rose only 1% in the second quarter. According to the new Skousen B2B Index, business spending rose to $22.7 trillion in nominal terms compared to the 1st quarter of $22.4 trillion. Meanwhile, consumer spending remained stable.

GO2015q2b“The GO data and my own B2B Index demonstrate that total US economic activity has picked up, and a recession has been avoided for now,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University. “B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain, and it indicates continued growth.”

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out a big part of the economy, business to business transactions in the production of intermediate inputs,” he notes. “GO includes most B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was just published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is an important achievement in national income accounting. With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually less than 40% of economic activity, not the 70% figure that is reported by the media. Business spending is in fact almost twice the size of consumer spending in the US economy.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “At Last, a Better Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”:

http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”:

http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations, 1-201-788-6623, or email him at skousenpub@gmail.com.

# # #

________________________________________
[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are transformed and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2015 2nd quarter is $31.4 trillion. But by including gross sales at the wholesale and retail level, the adjusted GO is $38.9 trillion. Thus, the BEA omits over $7 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

New Article Links Austrian and Keynesian Economics

by Mark Skousen

The Journal of Private Enterprise has published my paper on Gross Output (GO), the new supply-side macro statistic that the federal government is now publishing quarterly along with GDP.  It is entitled “Linking Austrian and Keynesian Economics:  A Variation of a Theme.”  Go to http://journal.apee.org/index.php/Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

It’s one of four articles in the Journal of Private Enterprise honoring the work of Roger Garrison, the “Austrian” economist at Auburn U who recently retired.  I put together a Festschrift in his honor at the annual Association for Private Enterprise Education (APEE) meeting last year.

A few updates on the GO statistic since I wrote this article:

  1. I’ve dropped my own term GDE and now use “adjusted GO” to describe a more complete measure of spending at all stages of production.
  1. I’ve found an easy way to explain the relationship between GO and GDP that accountants and finance people grasp right away:  Just as a good accountant or financial analyst looks at both the “top line” (revenues/sales) and the “bottom line” (earnings/net income) of a firm’s financial statement, so now economists look at the “top line” (GO or total revenues at all stages of production) and “bottom line” (GDP or value added) of national income accounting.  In sum, GO is the top line and GDP is the bottom line of national income accounting.
  1. Top textbooks are now planning to incorporate GO into their chapters on national income accounting.   Roger LeRoy Miller was the first to write up GO in his latest “Economics Today” textbook, and plans to expand GO in the next edition.
  1. In response to the Federal government (BEA) publishing GO on a quarterly basis, NYU Press has published a new 3rd edition of my work, “The Structure of Production” (1990, 2007, 2015), with a new introduction on GO.  See the announcement here: http://mskousen.com/2015/09/announcing-the-new-third-edition-of-the-structure-of-production/