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My Schedule at FreedomFest Memphis 2023, Renasant Convention Center.

June 26, 2023 By Mark Skousen Leave a Comment

FreedomFest 2023 Memphis

Dear freedom lovers,

I’m excited about this year’s big show in Memphis.  Here’s my personal schedule.  See you there!

Wednesday, July 12:

12 noon – 12:50 pm. Main Stage #2.  “Welcome to FreedomFest,” an introduction to our Memphis show.  A fun review of what to expect at this year’s FreedomFest and Anthem film festival.  At 12:30 pm, I’ve invited Dr. Rainer Zitelmann, author of “In Defense of Capitalism,” who will talk about “Myths and Facts about Capitalism.”

1:00 – 1:50 pm.  Main Stage #2. “The Good, the Bad, and the Ugly:  A Debate Over the Modern Libertarian Movement.”  I’ll be moderating a debate between two law professors about Northwestern’s Andrew Koppelman book, “Burning the House Down: How Libertarian Philosophy Was Corrupted by Delusion and Greed.”  NYU Professor Richard Epstein will respond.  I’ve never seen Richard Epstein lose a debate.

2:00 – 2:50 pm. Rooms 202-203.  “They Say, ‘Health is Wealth,’ But Actually Health is Freedom.”  Panel moderated by Dr. Matthew Morgan, MD, and panelists Carta Gericke, Laura Spath, and Spike Cohen.  This session will address what our leaders ignored during the 2020 Covid pandemic:  healthy people survived.

3:00 – 3:50 pm. Main Stage #2. “Left, Right, Liberal, Conservative, Progessive:  Do These Labels Help or Hinder the Fight for Freedom?”  I’ll be moderating this big debate based on Hyrum Lewis’s book, “The Myth of Left and Right: how the Political Spectrum Misleads and Harms America” (Oxford University Press, 2023), which will be awarded the Leonard E. “Read This Book” Award at FreedomFest.  We will hear response from Steve Moore, Grover Norquist, and Andrew Koppelman. 

4:30 – 7 pm.  Opening Ceremonies. MC: Lisa Kennedy (Fox News)  Hear from former NBA star Enes “Freedom” Kanter, T. K. Coleman, Glorida Alvarez, a presidential candidate in Guatemala, and entertainer Daryl Davis, blues/rock n roll pianist extraordinaire.

Afterwards, enjoy the Opening Cocktail Party in the “Trade Show for Liberty” Exhibit Hall.  Enjoy over 150 exhibits of various free-market think tanks, financial services, the FreedomFest bookstore, and other freedom organizations.  Be sure to check out my “White Mates in Two Chess” problem and win a silver dollar.  Plus see Pop Up artists throughout the exhibit hall, including our own Elvis impersonator. The Anthem film festival will show the film “The Unredacted” that was censored at Sundance and Southwest film festivals.

Thursday, July 13:

7 – 8 am.  Room 205 Balcony.  Morning Yoga with Michelle Roberts.

8:50 – 9:15 am. Main Stage #1. Global Financial Summit with Steve Forbes (North America), Barbara Kolm (Europe, Russia), Preity Uupala (China and India), and Gloria Alvarez (Latin America), moderated by Garrett Baldwin (Money Map Press). 

That morning we’ll also hear from Dan Slepian, an NBC reporter who has been in the forefront of getting innocent inmates released from prison; Grover Norquist and Heather Wagenhals on tax cut strategies;
“Anti-Davos” with Brad Lips, Tom Palmer, and Magette Wade; Tulsi Gabbard, the former Democrat, on how to preserve peace in the world; and a big debate, “Have the Environmentalists Gone Too Far?,” between historian Douglas Brinkley, author of “Silent Spring Revolution,” and Michael Shellenberger, author of “Apocalysis Never!” with Michael Shermer of Skeptic magazine as the moderator.

It will be followed by a “meet and greet” luncheon with Tulsi Gabbard and Enes “Freedom” Kanter.

1:10 – 2:00 pm. I’m torn between two sessions, a panel (Main Stage #2) on the topic “Who’s Winning the Battle of Ideas: Adam Smith, Marx or Keynes?” moderated Wolf von Laer; and another panel (Ballroom E) on “Unleash Prosperity:  The Future of Tax and Spend in Washington,” with Steve Moore, Grover Norquist, and Keli’i Akina (Grassroot Institute of Hawaii).

2:10 – 3 pm. Main Stage #1.  Michael Shermer on “How Lives Turn Out: Genese, Environment, Luck, and Tools for What We Can and Cannot Change in Life.”

Or Ballroom C, Global Financial Summit, “High Yield Income” by Bryan Perry and “You Aint Seen Nothin Yet:  The Next Stock Market Tech Boom” by George Gilder. 

3:10 – 4:00 pm. RF 3-4-5. “Getting Small: The Tiny Home Revolution” with John Papola and others.

Or Room 205. “Disinherit the IRS:  How to Prepare for Tax Doomsday,” with estate planning specialist Dave Phillips.

4:00 – 4:30 pm.  Coffee break in the Exhibit Hall, autograph session with speakers at the FreedomFest bookstore, visiting exhibits and sponsors, chess game, etc.

4:30 – 7 pm. Main Stage #1, with MC Lisa Kennedy.  Matt Taibbi on “Media Misinformation”…Presidential candidate Vivek Ramaswamy….and my interview with Mike Rowe, followed by a private “meet and greet” 7-8 pm with Mike Rowe (limited to 100 attendees).

Friday, July 13:

9:00 am – 12:00 pm. Ballroom B. I’ll be attending mostly the Anthem film festival on Friday morning, watching films about the importance of fathers, followed by panel discussions with John Papola, Dan Slebian, formerly incarcerated inmate J. J. Valesquez, and Jo Ann Skousen moderating. 

12 – 1 pm.  Luncheon with Steve Forbes and his new educational series.

1:10 – 2 pm. RF 1- 2. “Wokeness in Business and Business Schools:  How Did We Get There, and How Do We Move Forward?” with Daniel Sutter (moderator), Chuck Salvo, Scott Shephard and Phil Magness.

2:10 – 3 pm. Main Stage #1.  Debate:  “Supply Side Economics, Success or Failure?” with Art Laffer vs. Lanny Ebenstein. Alex Green, moderator.  The debate will be over Art Laffer’s new book, “Taxes Have Consequences.”  Lanny Ebenstein favors taxing the rich more.

3:10 – 4 pm. Ballroom C.  “This Chart Shows Why Inflation Can Only Get Worse: What Rising Prices mean to Investors and the Dollar.”  I’ll be moderating this panel:  Steve Forbes, David Bahnsen, Alex Green, Louis Navellier. 

4 – 4:30 pm.  Coffee break in the Exhibit Hall.  Autograph session with authors at the FreedomFest bookstore, etc.

4:30 – 6:45 pm.  Main Stage #1.  MC Lisa Kennedy.  Talks by David Boaz on “Classical Liberal Response to a Growing Illiberalism”… Chinese dissidents on “Human Rights Violations,”…Larry Sharpe and Afroman on “Criminal Justice Reform”…and last but not least, the mock trial: “Open Borders on Trial,” with Michael Shermer as judge, Larry Elder as prosecuting attorney, and Christine Barnard as defending attorney, plus star witnesses.

6:45 – 7:45 pm.  Larry Elder reception and fundraiser.

7:45 – 9:14 pm.  Main Stage #2. Punch Up Comedy Show (Clean).

Saturday July 15:

7:30 – 8:30 am. Heritage Ballroom #1 Sheraton Hotel.  My breakfast talk, “How to Profit from Adam Smith’s Model of Prosperity.”  I’ll also be autographed copies of my book “The Making of Modern Economics” and “The Maxims of Wall Street.”

8:45 am – 10:30 pm.  Main Stage #1 and #2.  Sessions on politics with Ohio congressman Warren Davidson, and Presidential candidate Larry Elder….education with Corey DeAngelis, Robert Enlow, Michael Shermer, and Phil Magnus, among others.

10:30 – 11 am.  Coffee break in the exhibit hall.  Autograph sessions at the FreedomFest bookstore, chess problem, etc.

11:00 – 11:50 am.  Ballroom C.  “The Big Four in Supply Side Economics,” with Steve Forbes, Mark Skousen, Grover Norquist, and John Fund, moderated by David Bahnsen.

12:00 – 12:50 pm.  Main Stage #1.  Closing Panel #1 with David Boaz, Zilvenas Silenas, Elizabeth Nolan Brown, and Michael Beas.  Followed by Closing Panel #2 with FreedomFest Ambassadors Steve Forbes, Larry Sharpe, Spike Cohen, and Lisa Kennedy.  Then we have awards, announcement about next year’s FreedomFest, July 10-13, 2024, at the new Hard Rock Café Hotel & Resort in Las Vegas, and finally everyone who has a silver dollar (our symbol of liberty and sound money) comes up to the stage and has photos with Steve Forbes and other speakers.

2:10 – 3:00 pm. Room 204.  Brian Thomassen on “The Rise of the West: Why the West Became the Dominant Global Civilization…and Why It Will Remain So.”

3:10 – 4:00 pm.  Ballroom E. “Today Hong Kong, Tomorrow the World:  Diving Deeper in China’s Policies.”  Simon Lee and other dissidents, moderated by Li Schoolland.

4:10 – 5:00 pm.  Rooms 202-203.  Dr. Matthew Morgan (U of Utah Medical School) on “Live Simply, Live Heathy: The EASIEST Tips to Live a Heathy Life.”  Dr. Morgan is one of the few medical experts who has noted that the elderly and the unhealthy were the most vulnerable victims of the Covid-19 pandemic.  His talk will focus on the importance of diet, exercise and good sleeping habits as the best formula to avoid the next pandemic instead of depending solely on vaccines and mask-wearing.

6-7 pm.  River View Lobby.  Banquet reception.

7:00 – 10 pm.  Main Stage #1 East Hall.  Banquet, Anthem film festival awards, keynote by Larry Elder, dancing to “901 Heavy Hitters.”  Always a great way to celebrate liberty and a successful FreedomFest.

Sunday, July 16:

Elvis Presley’s Graceland Tour, 10 am – 2 pm.

There’s still time to join us.  Check out the entire schedule and individual speakers and their sessions at www.freedomfest.com.  Use code MIKEROWE77 to get $77 off the register free.

Yours for peace, prosperity, and liberty, AEIOU,

Mark Skousen

Filed Under: Articles, Main

GPT4 Gets it Right about Mark Skousen!

June 9, 2023 By Mark Skousen Leave a Comment

Tyler Cowen, GMU professor and host of the popular website http://www.marginalrevolution.com, is a big fan of the new technology GPT4, which he says is vast improvement over GPT3.

He recently asked GPT4, “What is the main contribution of Mark Skousen to macroeconomics?” and sent me the answer.

Here was GPT4’s reply:

Mark Skousen is an American economist, author, and investment analyst, known for his work in libertarian free-market capitalism and Austrian School of economics. His main contribution to macroeconomics is his critical examination of the Gross Domestic Product (GDP) as a measure of economic health and the development of the alternative measure Gross Output (GO).

Skousen has long argued that GDP only captures the monetary value of final goods and services within an economy, ignoring intermediary production transactions and business-to-business (B2B) activities. He asserts that this narrow focus on consumption fails to accurately represent the complexities and true nature of the economy, particularly the importance of production, investment, and entrepreneurship.

In contrast to GDP, Skousen’s Gross Output (GO) is a measure that comprises the total economic output, including B2B activities and intermediate goods throughout the entire production process. GO encompasses all stages of production, from raw materials to finished goods and services, providing a fuller and more comprehensive picture of the economy.

In 2014, the U.S. Bureau of Economic Analysis (BEA) began to report GO data alongside GDP as a supplementary statistic, a testimony to Skousen’s significant impact on macroeconomics. Today, economists, analysts, and policymakers commonly use this broader measure to better understand economic performance and assess the implications of fiscal and monetary policies.

Pretty accurate!  For the latest press release and media coverage, go to http://www.grossoutput.com.

Best wishes, AEIOU

Mark Skousen

Doti-Spogli Endowed Chair of Free Enterprise Chapman University
Newsletter:  www.markskousen.com
Free weekly e-letter:  https://www.markskousen.com/signups/skousen-investor-cafe/
Personal website:  www.mskousen.com

Producer, FreedomFest
“The World’s Largest Gathering of Free Minds” 
July 12-15, 2023, Memphis Convention Center
www.freedomfest.com

Filed Under: Articles, Main

Robert Lucas, Jr., Nobel Prize Winner, R.I.P.

May 15, 2023 By Mark Skousen Leave a Comment

Dear friends,
 
Another free-market economist has passed away.  Robert Lucas, Jr. (1937-2023) died today at the age of 85.  He was one of the many Chicago economists who won the Nobel prize, his in 1995 for popularizing the “rational expectations” school of economics.  He suggested that Keynesian stimulus and deficit spending may no longer be effective when people anticipate the impact of their policies by raising prices and interest rates.  
 
On a personal note, his winning the prize in 1995 created some notoriety.  His e-wife has put into their divorce agreement a clause that required him to share half the $1 million prize if he won the Nobel prize within six years.  The clause was due to expire at the end of October, 1995, and he was awarded the prize in early October 1995.  She did not attend the Nobel ceremonies in December.  
 
I made a point of visiting Bob Lucas at the University of Chicago from time to time. I toured the new business/economics center there last year, and stopped by to see him, but he was away.  
 
Bob Lucas and the rational expectations school seems to have lost some popularity.  In San Diego in January 2013, I attended and spoke at the American Economic Association (AEA) meetings, where I met with several top economists including Bob Lucas.  Here is my report:  

Keynesians vs. Monetarists: Who Won?

A telling sign at the AEA meetings was the fact that the sessions with Keynesian Paul Krugman were standing-room only, while monetarists including Michael Bordo, Allan Meltzer and Nobel laureate Bob Lucas had a small turnout. Both sessions were held at the same time on a Sunday morning. Speaking before a packed crowd, Krugman made his case for greater deficits, more inflation and higher taxes. Along with Robert Shiller and other Keynesians, he argued that “monetarism” has been discredited. In their book “Animal Spirits,” Shiller and George Akerlof don’t even mention Milton Friedman’s monetary explanation of the Great Depression.
The other session celebrated the 50th anniversary of Milton Freidman and Anna Schwartz’s monetary bible, “A Monetary History of the United States,” published in 1963. Bob Lucas and the other speakers in that session praised the work as a classic. University of California-Berkeley Professor Christina Romer, former chair of the Council of Economic Advisors under President Obama, called it “one of the greatest economics books ever written.” But the panelists contended that the 2008 financial crisis had little to do with monetary aggregates (M2 rose 10% in 2008) but rather bad regulatory policies in homeownership and government-guaranteed mortgages (Fannie Mae and Freddie Mac). But Friedman and Schwartz are still relevant, they said, because their work demonstrated that “monetary shocks” such as bank failures can have serious adverse effects in the global economy.
Meanwhile, I noted, M2 was growing at a 10% rate in 2013, taxes were rising and government was expanding.  Krugman was winning!  

The Federal Reserve as the Engine of Inflation

“No major institution in the U.S. has so poor a record of performance over so long a period, yet so high a public reputation.” — Milton Friedman
One of the most popular AEA sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.

Inflation 1775-2020

As the graph indicates, from 1775 until 1913, there was virtually no price inflation other than during brief periods of war, which caused temporary inflation. What happened in 1913? The Federal Reserve was created and we ultimately went off of the classical gold standard.
 
Professor Rogoff noted that since the Fed was created, prices have skyrocketed 30-fold, or 3,000%! This data confirms Murray Rothbard’s contention that the Fed was created to remove the barriers to inflation, not to control it.
Another “public policy” session in San Diego discussed a survey of top professional economists that looked for any consensus on international, labor, education and macro issues. The survey showed, surprisingly, that economists agree 70% of the time, such as on the idea that “vouchers help kids.”
Ironically, economists were 100% in consensus on only one issue — they disagreed with the statement, “The gold standard should be adopted.” Not a single professor said “yes.” I guess economists aren’t really serious about taming inflation.
Despite the fact that the Fed engineered all of this inflation, causing the Great Depression, and failed to regulate the mortgage banks prior to the 2008 crisis, all of the panelists gave high marks to the Fed! In fact, they praised Chairman Ben Bernanke even when I asked if any of the panelists would have fired him for the Fed’s failings. 

Best wishes, AEIOU,

Mark

Mark Skousen
Doti-Spogli Endowed Chair of Free Enterprise Chapman University
Newsletter:  www.markskousen.com
Free weekly e-letter:  https://www.markskousen.com/signups/skousen-investor-cafe/
Personal website:  www.mskousen.com

Producer, FreedomFest
“The World’s Largest Gathering of Free Minds” 
July 12-15, 2023, Memphis Convention Center
www.freedomfest.com

Filed Under: Articles, Main

Stanley Engerman, Co-Author of “Time on the Cross,” R. I. P.

May 13, 2023 By Mark Skousen Leave a Comment

Stanley Engerman, economic historian at the University of Rochester, died on May 11, 2023, at age 87: See https://brightonmc.com/obituaries/stanley-lewis-engerman/2632/

When I was a student at BYU in 1971, my economics professor Larry Wimmer arranged for me and one other student to do research for Stanley Engerman, co-author of “Time on the Cross” with Nobel prize economist Robert Fogel. I never met him but we talked on the telephone several times.

Here’s what I wrote in my diary:
“At the end of the month, I had another job opportunity for the summer—really exciting. This involved working as a research assistant for Robert Fogel of University of Chicago and Stanley Engerman of Rochester on their econometric studies of the slave trade and industry in the ante-bellum South. We were instructed to go through court and probate records in the Salt Lake Genealogical Society’s microfilm section and write down names, dates, places, description of slaves. This was surprisingly interesting work. I worked with Keith Allred most of the time, and we’d go up to Salt Lake each day. One time we made a particularly lucrative find and our joy was so apparent that several Mormons asked what we had found—when they saw we were talking about slaves, they really wondered [about our lineage].”  

The work was quite fascinating. You could see how some slaves were valued more than others, depending on their age and occupation.

Tine on the Cross

You could also see the inflation going on during the Civil War with prices going up for everything.

What surprised me the most was that slaves were still listed on probate records after the Civil War, as if nothing had happened. On the official estate records, slaves were still considered property past 1865, and well into the 1880s! It was a real shock.

Their book came out in 1974 and caused a sensation. Fogel and Engerman argued that slavery was highly profitable, so much so that it required a civil war to end it. They questioned the view that slavery would die out on its own.

Fogel won the Nobel prize in economics in 1993 as a developer of “cliometrics” (quantitative economic history). Because of “Time on the Cross,” Fogel was sometimes accused of being a racist, even though he was married to an African-American woman. Fogel died at age 87 in 2013.

Best wishes, AEIOU,

Mark

Mark Skousen
Doti-Spogli Endowed Chair of Free Enterprise Chapman University
Newsletter:  www.markskousen.com
Free weekly e-letter:  https://www.markskousen.com/signups/skousen-investor-cafe/
Personal website:  www.mskousen.com
Annual conference:  www.freedomfest.com

Filed Under: Articles, Main

FreedomFest 2019: Mark Skousen & Jo Ann Skousen – Investing for Two: How Couples Can Successfully Manage Their Finances Breakfast

April 19, 2023 By Ned Piplovic Leave a Comment

http://mskousen.com/wp-content/uploads/2023/04/FreedomFest-2019-Mark-Skousen-Jo-Ann-Skousen__Investing-for-Two_-How-Couple.mp3

Filed Under: Articles, Featured Post, FreedomFest

Three Nobel Prize Winners Endorse New Macro Statistic

April 19, 2023 By Mark Skousen Leave a Comment

by Mark Skousen

I now have three Nobel prize winners who are encouraging my development of gross output (GO) as the “top line” in national income accounting, as a complement to GDP as the “bottom line”:

Vernon L. Smith

 

 

 

 

“Mark Skousen’s gross output (GO) statistic reminds me of Irving Fisher’s ‘Q’ in the quantity theory of money (MV=PQ), where Q measures production and sale of all commodity transactions in the economy. GO provides insight into the workings of the entire production process, which can be invaluable to giving us a full picture of economic performance.”

– Vernon L. Smith, Chapman University (2002)

 

 

Finn Kydland

 

 

 

“By integrating the vital role of the supply chain into national income accounting, Mark Skousen’s development of gross output (GO) has created a more dynamic and broader view of the economy, and of the central role that business plays in national income, the business cycle and economic growth. I recommend that economists seriously consider his new approach to macroeconomics.”

– Finn Kydland, UC Santa Barbara (2004)

 

William D. Nordhaus

 

 

 

 

 

“Congratulations on your work. It has been a long slog to get the national accounts to introduce innovative measures, and Steve Landefeld [long-time director of the BEA] has been a superstar in this respect… This will open up the potential for new insights into the behavior of the economy.”

– William D. Nordhaus, Yale University (2018)

 

And this general endorsement:

“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.”

– Dale W. Jorgenson, J. Stephen Landefeld, and William D. Nordhaus, A New Architecture of US National Accounts (NBER, University of Chicago Press, 20006), p. 6.

 

Here is my latest press release: https://grossoutput.com/2023/03/30/go-growth-stalls-at-the-end-of-2022-indicating-a-potential-recession-in-2023/

Filed Under: Articles, Featured Post, Main

Supply Chain Business Still Growing: Recession Fears May Not Pass GO

September 29, 2022 By Ned Piplovic Leave a Comment

Gross Output

Washington, DC (Thursday, September 29, 2022): Today, the federal government released gross output (GO) – the measure of total spending in the economy – for the second-quarter 2022. Inflation-adjusted real GO increased 1.6% in the second period 2022. While this marks a fifth consecutive period of declining growth rates in the aftermath of sharp rebound following a pandemic-driven 40% drop in Q2 2020, the current growth rate is back to historically average levels.

In addition to returning to its “normal” range, the real Gross Output growth rate was higher once again than the real GDP, which contracted another 0.6% in Q2 2022, after declining 1.6% in the first period of the year. Furthermore, after trailing the GO growth rate over several recent periods, the Adjusted Gross Output (GO*)[1] expanded 2.0% this quarter.
In nominal terms, second-quarter 2022 GDP expanded 8.2% and GO grew 12.5%. The Adjusted Gross Output (GO*) – which includes the gross wholesale and gross retail figures (included only as net figures in the GO reported by the BEA) advanced 12.8% in Q2 2022. The difference between net and gross figures amounts to more than $11 trillion, which is missing from the government’s official GO figure, but we include it in our Adjusted GO measure.

GO Predicts Slow Growth, No Recession

First-quarter 2022 GO expanded at a higher rate than GDP as well, which generally indicate a positive outlook for the next-quarter GDP. With another period of GO advancing ahead of the declining GO in Q2 2022, we should expect positive GDP growth results when the Bureau of Economic Analysis (BEA) releases its third-quarter 2022 advance GDP estimates on October 27.

While our GO model has proven reliably accurate in projecting next quarter’s GDP direction under normal economic circumstances, several extraordinary still lingering from pandemic-related issues, such as continued supply-chain shortages, inflation, or rising interest rates, can cause minor deviation in the model.

Nevertheless, another factor for optimism about GDP growth in the next period is the continued and steady increase in business-to-business (B2B) spending, which continues to outpace consumer spending in real terms. This is an indication of the business sector’s confidence that the economy should sidestep a recession and should be on its way to a satisfactory recovery, as opposed to a severe recession projected just a couple of periods ago.
As indicated by the graph in the “Business – Not Consumers – Drives the Economy”, B2B spending is expanding at a faster rate than consumption, which is positive indicator for the future.

“GDP is the X-ray of the Economy; GO is the CAT-Scan”

Most economists use only GDP and disregard GO when gauging economic outlook. However, Gross Output (GO) is the top line in national income accounting; GDP is the bottom line. Both metrics are essential to understanding where the economy is headed. According to Steve Forbes, GDP is the X-ray of the economy; GO is the CAT-scan.
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.”
Mark Skousen, who holds the new Doti-Spogli Endowed Chair of Free Enterprise at Chapman University, concludes, “GO gives a more complete picture of the economy; it is the missing piece of the macroeconomic puzzle.”
Recession or No Recession?
The sharp economic decline in the second quarter 2020 compelled many economists to predict marginal growth and substantial economic downturn over an extended period following the initial COVID pandemic breakout. However, the steep one-period drop in the second-quarter 2020 appears to have been merely an immediate and short-term reaction to the 2020 economic slowdown – caused primarily by government restrictions and business shutdowns in responses to the COVID-19 epidemic – not an indicator of long-term economic slowdown.
Another indication that the economic pullback in 2020 was only a temporary event is the relationship between the GO and GDP decline during that period. Earlier stages of production are generally more sensitive and more volatile in their response to economic disruptions. Therefore, during past recessions, GO commonly declined significantly more than GDP, which captures only final outputs in the economy.

For instance, GO declined more than 26% during the last quarter 2008. In the same period, GDP pulled back less than 8%. The 2020 economic slowdown broke from this pattern and saw GO decline at similar rates as the GDP. Over the last three quarters, GO has been recovering and expanding faster than GDP.

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law).

Therefore, our business-to-business (B2B) index is very useful for assessing the economy’s underlying health and the readiness to rebound after economic downturns.

Gross Output

The B2B Index measures all the business spending in the supply chain and new private capital investment. In the second-quarter 2022, nominal B2B activity rose 13.4% on an annualized basis to reach $34 trillion. This B2B growth in nominal terms lagged slightly behind consumer spending expansion, which increased 14.2% and reached $17.3 trillion in the second quarter. However, in real terms B2B expenditures grew 3.15%, more than triple the 0.9% real consumer spending growth.

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it is more responsive to the boom-bust economic cycle than consumer spending,” stated Skousen. “Business spending continues to expand at a faster pace than consumer spending, which is one good indicator for the longer-term economic outlook.”

While GDP includes only a small portion of investment spending, Gross Output accounts for significantly more of the business investment outlays, which tend to indicate economic direction over extended periods. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.”

The federal government will release the advance estimate for third-quarter 2022 GDP on October 27, 2022. The full release of Gross Output data and the third estimate of GDP are scheduled for December 22, 2022.

Important Note:  We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate. 

Report on Various Sectors of the Economy

After the general decline in the first two periods of 2020 and a robust recovery following that contraction, all but one sector and most subsectors of the economy expanded in Q2 2022.

Following a 43% annualized growth in the last-quarter 2021 and another expansion of 40% in the first-quarter 2022, the Mining sector delivered an annualized upsurge of 37.2% in nominal terms. While all three subsectors – Oil and Gas Extraction; Mining, except Oil and Gas; and Support Activities for Mining – expanded, the sector growth was driven primarily by the Oil and Gas Extraction segment, which benefited from high oil prices. The mining sector is small, and accounts for 2.1% share of the overall economy as measured by Gross Output. However, the sector represents one of the earliest stages of production. Therefore, we keep an eye on the expansion and contraction of the Mining segment, which can be an early indicator and a good predictor of which direction other sectors further down the supply chain might be headed in subsequent periods.

With a 1.4% share of the overall economy, the Agriculture sector is another small-share segment in the early stages of production that can be used as an early indication of future movements in the overall economy. After contracting 1.3% in the last period of 2021, the Agriculture sector expanded for the second consecutive period and delivered a 13.1% expansion in Q2 2022.

After reversing two periods of marginal growth with three quarters of double-digit growth, Manufacturing – the second largest segment of the economy with a 16% share of the economy – increased nearly 17% in Q2 2022.  Nondurable Goods increased 14.9% and Durable Goods Manufacturing expanded 18.7%.

Additionally, the Construction sector, which accounts for nearly 5% of the economy, followed up two periods of double-digit growth with an expansion of 11.7% in Q2 2022. The Retail and Wholesale trade sectors continued their above-average growth over the last few periods by expanding in the second period 2022 5.7% and 5.6% respectively.

Finance, Insurance, Real estate, Rental, and Leasing are the largest segment that accounts for nearly 18% of the economy. After expanding over the previous two periods, the segment contracted 2% in Q2 2022. While the Real Estate, Rental, and Leasing subsegment expanded at a healthy rate of 11.5%, it was unable to overcome the contraction of nearly 19% by the Finance and Insurance subsegment, which drove the overall segment slightly negative for the period.

While contracting nearly 6% in Q2 2020 amid the economic shutdown, Government has been expanding at record rates. Not only has it been expanding, but the expansion rates have accelerated over the last three periods, After growing 6.1% and 8.2% in Q4 2021 and Q1 2022, respectively, total government spending increased by more than 21% in the second-quarter 2022,

Over the past few periods, spending at the State and Local levels tended to outpace spending at the federal level by a two-to-one margin. However, in Q2 2022 spending at both levels expanded at similar rates. While Federal government expanded 21%, State and Local government spending expanded 21.4% in the second-quarter 2022.

Gross Output

Gross output (GO) and GDP are complementary statistics in national income accounting. 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 a financial 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 not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use. 

GO tends to be more sensitive to the business cycle, and more volatile, than GDP.

About GO and B2B Index

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, bigger than GDP itself. 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 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.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

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.”

For More Information

For a complete analysis of GO, go to https://www.grossoutput.com/gross-output/

Mark Skousen, “Recession Fears May Not Pass GO: GDP is Slumping, but There’s a Better Way to Gauge the Economy.” Wall Street Journal, August 11, 2022: Recession Fears May Not Pass GO – WSJ 

If you are not a WSJ subscriber, you can read a copy of the article on: https://www.grossoutput.com/2022/09/12/recession-fears-may-not-pass-go/

 

Emma Rothschild, “Where is Capital?” in Capitalism: A Journal of History and Economics 2:2 (Summer 2021), pp. 291-371.  https://muse.jhu.edu/article/798746   “Essentially an attempt to apply ideas about gross output to the economic history of the industrial revolution.”  

 

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

 

Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019:  https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa

 

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

 

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, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018:  https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/

Mark Skousen, “At Last, a Better Way to 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

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf

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 [email protected], or Ned Piplovic, Media Relations at [email protected].

# # #

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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 2022 second quarter is nearly $46 trillion. By including gross sales at the wholesale and retail level, the Adjusted GO (GO*) expands to more than $57 trillion in Q2 2022. Thus, the BEA omits more than $11 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, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

Filed Under: Articles, Featured Post, Main Tagged With: Economy, GO, Gross Output, Mark Skousen

Recession Fears May Not Pass GO

September 12, 2022 By Ned Piplovic Leave a Comment

GDP is slumping, but there’s a better way to gauge the economy.

By Mark Skousen

Originally appeared in the Wall Street Journal on Aug. 10, 2022 and on wsj.com

 

How can the U.S. be in a recession when the number of jobs is growing at a healthy clip? According to the National Bureau of Economic Research, two consecutive quarters of declining real gross domestic product is enough for a recession. The Bureau of Economic Analysis (BEA) reported just that—real GDP declined at an annual rate of 1.6% in the first quarter and 0.9% in the second.

But a host of statistics suggest that the economy is still growing, not the least of which is last week’s robust jobs report and unemployment rate. While the Conference Board’s leading economic indicator suggests a mild recession may be on the way, it reports: “The coincident economic index which rose in June suggests the economy grew through the second quarter.”

The BEA also produces a statistic called gross domestic income, which adds up wages, profits and other income. Theoretically it should align with GDP, but it no longer does. Real GDI rose 1.8% in the first quarter, and is expected to have risen slightly in the second quarter (the official number will be announced on Aug. 25). Economists have noted the unprecedented gap between GDP and GDI. The BEA uses different surveys to come up with GDI, but the growing gap can’t be explained by a statistical “discrepancy.”

In addition, the relatively new statistic gross output, or GO—which measures spending at all stages of production, including the supply chain—rose at an annual rate of 2% in real terms in the first quarter. Second-quarter GO won’t be released until Sept. 29.

Why is GO a better measure of the economy than GDP? Because GDP has a serious flaw—it leaves out the supply chain. It accounts for final output only, finished goods and services bought by consumers, business and government. Intermediate production—all the goods in process along the way—are ignored.

That means that GDP only measures about 44% of economic activity. According to the BEA, intermediate production amounted to $19.5 trillion in the past year, compared with $24.8 trillion GDP. For technical reasons, that former figure leaves out an additional $11 trillion of wholesale and retail trade.

For several years, I’ve championed GO as the “top line” in national income accounting and a better snapshot of the economy. Many economists consider it a better, more comprehensive measure than GDP. The biggest drawback is the BEA’s delays in releasing GO two months after the initial estimates of GDP.

For decades, publicly traded companies have released their earnings reports every quarter, reporting sales (top line) and earnings (bottom line) at the same time. The federal government should do the same. It’s time national income accounting caught up with the accounting profession.

Mr. Skousen holds the Doti-Spogli chair in free enterprise at Chapman University, is editor of Forecasts & Strategies and author of “The Structure of Production.”

Filed Under: Articles, Featured Post, Main Tagged With: Economy, GO, Gross Output, Mark Skousen

Are economists the slowest learners?

September 3, 2022 By Mark Skousen Leave a Comment

Dear friends of freedom,

Peter Drucker once said, “Economists are the slowest learners.”

I never believed that….until now.  See the announcement below from the American Economic Association.

I was very much looking forward to attending and maybe even speaking at the AEA meetings January 6-8, 2023, in New Orleans, a city I love, but was astonished to read of the draconian rules the AEA leadership have established–vaccines/boosters and N-95 masks!  Give me a break!

They wrote today:  “All registrants will be required to be vaccinated against COVID-19 and to have received at least one booster. High-quality masks (i.e., KN-95 or better) will be required in all indoor conference spaces. These requirements are planned for the well-being of all participants. Participants are also encouraged to test for COVID-19 before traveling to the meeting.”

Seriously?  This isn’t 2020 — it’s nearly 3 years later and I don’t know anybody except the AEA living in utter fear.  Everyone else is getting back to normal, and recognizing that everyone is going to be exposed to various viruses.  I got vaccinated, wore masks, etc., and still got Covid.  So have millions of others.  It’s time to move on.

By the way, my wife had a severe allergic reaction to the jab  — she will NEVER take another Covid-vaccine or booster. There are thousands of others who feel the same way.

Meanwhile, we can fly to New Orleans, we can teach and attend college classes, we can go to numerous socials and events without wearing masks or getting vaccinated — but no, the high and mighty AEA authoritarians are mandating we wear masks and get vaccinated–again!

I called the Hilton Riverside and asked if they have any such mask or vaccine mandates.  They said “none.”

I will be speaking at the New Orleans Investment Conference at the Hilton Riverside on October 12-15, and the conference organizers are not mandating masks or vaccines — even with thousands attending.  Are they stupid people?  I don’t think so.

I am also speaking at the World Knowledge Forum (the Asian version of Davos) on September 20-22 in Seoul, Korea, and they have no mask/vaccine mandate.

I will be attending the Mont Pelerin Society meetings in Oslo, Norway, and they don’t have any such mandates.

It’s time that the AEA leadership start treating us as grown-ups and let us allow us to decide for ourselves whether to wear a mask or get vaccinated.  Some people feel safer wearing masks and that’s okay.  But don’t force all of us to wear them, or to get vaccinated.

So, sadly I will NOT be coming to New Orleans in January, and I will encourage other economists to protest with me.

Best wishes, AEIOU,

Mark

Mark Skousen
Presidential Fellow and Doti-Spogli Endowed Chair of Free Enterprise, Chapman University
Newsletter:  www.markskousen.com
Free weekly e-letter:  https://www.markskousen.com/signups/skousen-investor-cafe/
Annual conference:  www.freedomfest.com

Filed Under: Articles, Featured Post, Main Tagged With: Economy, GO, Gross Output, Mark Skousen

Fourth Quarter Gross Output Confirms Stagflation for 2022, But No Recession

June 30, 2022 By Ned Piplovic Leave a Comment

Gross OutputWashington, DC (Wednesday, June 29, 2022): Today, the federal government released gross output (GO) – the measure of total spending in the economy – for the 1st quarter 2022. Real GO rose 2.0% (after inflation).

Surprisingly, GO was positive while GDP was negative (in real terms), signifying that the economic conditions in the US are not as bad as many predicted.  Whenever GO rises faster than GDP, it suggests that the economy is doing better.  

The increase in nominal and real GO does not suggest a robust recovery, however. The increase in GO marks the fourth quarter in decline, equal to the average tepid growth rate over the five years prior to the economic downturn in 2022.

In addition to returning to its “normal” range, the Gross Output growth rate was higher than the real GDP, which contracted 1.6% in the first period 2022. Furthermore, after trailing the GO growth rate over the past couple periods, the Adjusted Gross Output (GO*) expanded 3.9%, which is the prevailing historical trend.

in the previous fourth-quarter 2021 GO expanded at a lower rate than GDP, which generally indicate a negative GDP outlook for the following quarter’s GDP. Indeed, real GDP for the 1st quarter fell by 1.6% on an annualized basis. 

The GO growth rate for Q1 2022 indicates a positive GDP outlook for the second quarter, and we should expect a positive GDP growth when the Bureau of Economic Analysis (BEA) releases its second quarter 2022 advance GDP estimates on July 28.

One atypical factor in our model is the impact of pandemic-related issues, such as higher interest rates, price inflation, and continued supply-chain shortages. All these factors could skew the results.

However, business-to-business (B2B) spending continues to outpace consumer spending, which is a good indicator that the business sector has a high level of confidence that the economy will most likely deliver a decent recovery in place of the previously-projected severe recession. As indicated by the graph in the “Business – Not Consumers – Drives the Economy”, B2B spending is expanding at a faster rate than consumption, which is positive indicator for the future. 

Most economists use only GDP and disregard GO when gauging economic outlook. However, Gross Output (GO) is the top line in national income accounting; GDP is the bottom line. Both metrics are essential to understanding where the economy is headed.

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.”

Steve Forbes puts it another way: GDP is the X-ray of the economy; GO is the CAT-scan. 

In nominal terms, first-quarter 2022 GDP rose 6.4% and GO grew 12.0%. The Adjusted Gross Output (GO*) – which includes the gross wholesale and gross retail figures (included only as net figures in the GO reported by the BEA) advanced 13.9% in the first period 2022. The difference between net and gross figures amounts to almost $11 trillion, which is missing from the government’s official GO figure, but we include it in our Adjusted GO measure.

With the exception of fourth quarter 2021 when consumer spending outpaced business spending, consumer spending has trailed business spending expansion in five out of the last six periods, which includes the first quarter 2022. This is a positive early indication that, after contracting in the first quarter 2022, GDP should return to expanding, albeit at rates that are slightly lower than historical trends on the account of economic headwinds from higher interest rates, increased prices and persistent obstacles in the global supply chain.

 

Business – Not Consumers – Drives the Economy

Contrary to views of many academic economists and wide-spread media reports, consumer spending does not drive the economy, and does not represent two-thirds of the economy. Using GO as a better and a more accurate measure of total spending in the economy, the business sector (B2B spending) is almost twice the size of consumer spending. Consumer spending is the effect, not the cause, of prosperity (Say’s law).

Therefore, our business-to-business (B2B) index is very useful for assessing the economy’s underlying health and the readiness to rebound after economic downturns.

Gross Output

The B2B Index measures all the business spending in the supply chain and new private capital investment. In the first quarter 2022, B2B activity rose 19.85% on an annualized basis to nearly $39 trillion in nominal terms. This growth is significantly faster than consumer spending expansion, which increased 8.7% to $16.7 trillion in the first quarter. However, the discrepancy is really revealing in real terms. While real B2B activity expanded 11.6% to $26.6 trillion, real consumer spending contracted 1.2% from $13.53 in Q4 2021 to $13.49 trillion in Q1 2022.

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it is more responsive to the boom-bust economic cycle than consumer spending,” stated Skousen. “Business spending continues to expand at a faster pace than consumer spending, which is one good indicator for the longer-term economic outlook.”

While GDP includes only a small portion of investment spending, Gross Output accounts for significantly more of the business investment outlays, which tend to indicate economic direction over extended periods. As David Ranson, chief economist for the private forecasting firm HCWE & Co., states, “Movements in gross output serve as a leading indicator of movements in GDP.”

The federal government will release the advance estimate for second-quarter 2022 GDP on July 28, 2022. The full release of Gross Output data and the third estimate of GDP are scheduled for September 29, 2022.  

Important Note:  We are hopeful that in the near future, the BEA will release GO at the same time as the first estimate of GDP for the quarter, not the third estimate. 

 

Report on Various Sectors of the Economy

After the general decline in the first two periods of 2020 and a robust recovery following that contraction, most sectors of the economy continued to expand in the first period of 2022.

Following a rapid decline in the first half of 2020 the Mining sector followed a 43% annualized growth in Q4 2021 with another expansion of 40% in Q1 2022. The growth was distributed across all three subsectors – Oil and gas extraction; Mining, except oil and gas; and Support activities for mining – which expanded 36.9%, 50.5% and 44.9%, respectively. While the mining sector comprises only a 1.5% share of the overall economy as measured by Gross Output, the sector represents one of the earliest stages of production. Therefore, we watch the expansion and contraction of the Mining segment as early indicators of what other sectors further down the supply chain might do in subsequent periods.

Another small-share segment in the early stages of production – 1.3% of the overall economy – is the Agriculture sector. After contracting 1.3% in the last period of 2021, the Agriculture sector expanded 36.4% to begin 2022.

After reversing two periods of marginal growth with a 15.6% growth in Q3 2021 and a 17.2% expansion Q4 2021, manufacturing – the second largest segment of the economy with a 15.3% share – increased nearly 18% to start 2022.  Nondurable goods increased 21.9% and Durable goods manufacturing expanded 13.8%. Every manufacturing subsector contributed to the sector’s overall growth with the       Petroleum and coal products expanding the most at 89%.

The Retail and Wholesale trade sectors followed last-period 2021 expansions of 9.6% 14.5%, with even faster growth tares of 25.9% and 13.1%, respectively, in the first period 2022. Additionally, the Construction sector, which accounts for nearly 5% of the economy, followed up a 10% increase in the previous period with a 13.1% expansion in Q1 2022.

Accounting for nearly 20%, Finance, insurance, real estate, rental, and leasing is the largest segment of the economy. After increasing 6% in the previous period, the segment expanded 5% in Q1 2022.  While Insurance carriers and related activities grew at a healthy rate of 16.1%, a 27.3% decline in Securities, commodity contracts, and investments resulted in the minor contraction of Finance and insurance subsegment. However, the Real estate and rental and leasing subsegment, which is more than half of the segment’s transactions, followed a 9.1% expansion last period with a 9.2% expansion and managed to keep the overall segment in the positive.

Since contracting nearly 6% in Q2 2020 amid the economic shutdown, government spending has been expanding at record rates. In the first period 2022, overall government spending expanded 8.2% on an annualized basis. This is the second highest government spending expansion since at least 2005, exceeded only by the 11.8% expansion in the first quarter 2022.

Federal government spending expanded nearly 2% in the first period of 2022. While National defense spending declined 0.7%, increased spending on Nondefense spending – up 4.9% – and Government enterprises items – 1.6% higher – drove the overall expansion of government spending.

Despite spending at the federal level expanding less than 2%, government spending at state and local levels expanded nearly 11% and drove overall government spending to expand more than 8% in the first period of 2022.

Gross Output

Gross output (GO) and GDP are complementary statistics in national income accounting. 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 a financial 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 not quite the same as the “bottom line” (profit, or net income) of an accounting statement, but rather the “value added” or the value of final use. 

GO tends to be more sensitive to the business cycle, and more volatile, than GDP.

 

About GO and B2B Index

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, bigger than GDP itself. 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 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.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

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.”

 

For More Information

NEW!  Emma Rothschild, “Where is Capital?” in Capitalism: A Journal of History and Economics 2:2 (Summer 2021), pp. 291-371.  https://muse.jhu.edu/article/798746   “Essentially an attempt to apply ideas about gross output to the economic history of the industrial revolution.”  

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

Steve Forbes: What’s Ahead podcast. In this podcast, Steve Forbes discusses Gross Output with Mark Skousen on September 9, 2019:  https://www.forbes.com/sites/steveforbes/2019/09/09/were-using-the-wrong-measure-gdp-to-gauge-the-economys-real-health-mark-skousen/#35ff3d9a52fa

GO-Day podcast discussion panel hosted Mark Skousen that included Steve Forbes, Sean Flynn, Steve Hanke, and David Ranson, September 30, 2020: https://chapman.zoom.us/rec/share/KJ17YjuR_6zthmgOA5fNprv2e65F-jICOsf430bJvnu8qWzdPYPfTohPC48qRLe9.Q8rmnlXynnTN74Tv?startTime=1601488807000

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, “If GDP Lags, Watch the Economy Grow,” Wall Street Journal, April 24, 2018:  https://www.grossoutput.com/2018/04/26/away-go-economy-growing-faster-expected/

Mark Skousen, “At Last, a Better Way to 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

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economy Watch, July 24, 2017. HCWE & Co. http://www.hcwe.com/guest/EW-0717.pdf

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 [email protected], or Ned Piplovic, Media Relations at [email protected].

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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 2022 first quarter is $44.23 trillion. By including gross sales at the wholesale and retail level, the Adjusted GO (GO*) expands to more than $55 trillion in Q1 2022. Thus, the BEA omits more nearly $11 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, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

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