Professional Journal Publishes First Academic Article on Gross Output

“For forecasting, the new measure [Gross Output] may be more helpful than the GDP measure, because it provides information of goods in process.”  — David Colander (Middlebury College)

I am happy to announce that the first professional economics journal (Eastern Economic Journal) has published an article on Gross Output, the new macro statistic I’ve been advocating and now has been adopted by the federal government.

GO is an attempt to measure spending at all stages of production, the first statistic to be adopted since GDP was invented in the 1940s.  It is a way of measuring Hayek’s triangle, and I’ve found that the quarterly GO statistic a better, broader measure of the economy and a good predictor of final output (GDP).  In 2014, it has been rising faster than GDP, suggesting that the earlier stages of production are robust and predicting more growth ahead.

I consider the government publishing of a quarterly GO the greatest triumph in supply-side Austrian macroeconomics since Hayek won the Nobel prize 40 years ago.

The commentary is by the respected economist David Colander (Middlebury College), who, despite the headline, is largely positive about GO.  You can read his article here: http://www.palgrave-journals.com/eej/journal/v40/n4/full/eej201439a.html

And my response here: http://www.palgrave-journals.com/eej/journal/vaop/ncurrent/full/eej201465a.html

Austrian economists are now seeking to measure GO (or my own broader Gross Domestic Expenditures) in other countries, such as UK and Argentina.

Econologically yours, AEIOU,

Mark Skousen

US Economic Activity Jumps Sharply in Q2

For Immediate Release
Contact: Valerie Durham, vdurham@skousenpub.com

U. S. ECONOMIC ACTIVITY JUMPS SHARPLY IN 2ND QUARTER 2014

Washington, DC (Friday, November 14, 2014):  Gross Output, a broader measure of U. S. economic activity published by the Bureau of Economic Analysis, advanced to nearly $30.9 trillion in the second quarter of 2014, a 4.8% jump in real terms (annualized).  The GO data released by the BEA can be found at  http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15

Gross Output (GO) is a measure of sales or receipts of all industries throughout the production process, including business to business transactions. 

GO advanced slightly faster than GDP.  Gross Domestic Product (GDP), which measures the value of final goods and services only, rose 4.6% in real terms to $17,328.2 billion in the second quarter. 

“The GO data demonstrates that the economy recovered sharply from the slowdown in the first quarter,” stated Mark Skousen, editor of Forecasts & Strategies, who champions Gross Output as a more comprehensive measure of economic activity.   He first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990).  Now the BEA publishes GO on a quarterly basis in its “GDP by Industry” data.  [Read more…]

Missing Link in Economics Revealed!

by Mark Skousen
Presidential Fellow, Chapman University

For centuries economists have been searching for the missing link that would tie microeconomics (theory of the firm and individual behavior) with macroeconomics (theory of the economy as a whole).

I believe my four-stage model of the economy does just that.  Based on Austrian macroeconomics (known as Hayek’s triangles), I created a four-stage model of the macro economy in my book, The Structure of Production (NYU Press, 1990).  A few years later, John Taylor of Stanford University (famous for his Taylor Rule) independently produced a 4-stage micro model involving four stages in the production of Caribou Coffee.

A eureka moment!

I’ve incorporated both 4-stage micro and macro models in my textbook, Economic Logic (Capital Press, 2014), now in its 4th edition.  See especially chapter 14:  <http://www.amazon.com/Economic-Logic-Fourth-Edition-Skousen/dp/1621572226 It’s available in book print and Kindle.  If you want to buy it at a discount for only $34.95 plus S&H, call Eagle Publishing at 1-800-211-7661, and use code ECONL6.

SKOUSEN – TAYLOR LINK MACRO WITH MICRO

Figure 1.  Universal 4-stage Macro Model of the Economy

Source:  Mark Skousen, The Structure of Production (New York University Press, 1990); Economic Logic (Capital Press, 2014).

 

 

 

 

 

Figure 2.  4-stage micro model (production process of Caribou Coffee) 

Source:  John B. Taylor, Economics, 5th edition (Boston:  Houghton Mifflin, 2006)

U.S. Economy Doing Better Than Expected

U. S. ECONOMIC ACTIVITY HOLDS STEADY IN 1ST QUARTER 2014

Washington, DC —  Gross Output, a broader measure of  U. S. economic activity published by the Bureau of Economic Analysis, held steady at $30,210.6 billion in the first quarter of 2014.

“The GO data demonstrates that the economy is not as bad off as GDP figures initially suggested,” stated Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, who champions Gross Output as a more comprehensive measure of economic activity.   He introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990).  Now the BEA publishes GO on a quarterly basis in its “GDP by Industry” data.

The GO data was released by the BEA on Friday, July 25, 2014:  http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=q&5102=15 [Read more…]

Marx Madness is Back

“Capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine democratic societies.” — Thomas Piketty, “Capital in the 21st Century” (2014)

The Economist magazine rightly called French professor Thomas Piketty the new Marx, although a watered down Marx. His bestseller (rated #1 on Amazon and the New York Times) is a thick volume with the same title as KCapital in the Twenty-First Centuryarl Marx’s 1867 magnum opus, “Kapital.” The publisher, Harvard University Press, appropriately designed the book cover in red, the color of the socialist workers’ party.

Piketty cites Karl Marx more than any other economist, even more than Keynes. He barely mentions Adam Smith. Instead of the modern scientific name “economics,” he prefers the old term “political economy,” a favorite of radical professors. [Read more…]

Economist Makes Lead Story in the Wall Street Journal….Barron’s….and Forbes

I made the lead story in the Wednesday, April 23, 2014, edition of the Wall Street Journal.  The title:  “At Last, a Better Economic Measure.”  You can read it here:  http://on.wsj.com/PsdoLM

The editors of the WSJ don’t allow the author to see or approve the headline or subhead, but they nailed it perfect.  And I love the cartoon graphics!  It’s a perfect rendition of my four stage model of the economy.

Many readers captured the essence of my message.  As economic forecaster Jim Hagerbaumer of Florida wrote:  “Skousen is introducing a whole new species. This is one of the most important WSJ op-ed articles in years.”

I also wrote about Gross Output (GO) in the December 16, 2013, issue of Forbes.  Here’s the online version, with charts and response to critics:

My original article in Forbes Magazine (December 16, 2013):

Mark Skousen, Beyond GDP: Get Ready For A New Way To Measure The Economy, Forbes

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

Additional Commentary by Steve Forbes:
Steve Forbes, New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal, Forbes

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

Gross Output Includes B-to-B….GDP doesn’t [Read more…]

Steve Forbes Endorses My Gross Output Statistic

“Mark Skousen’s Gross Output statistic…will have a profound and manifestly positive impact on economic policy and politics.”  — Steve Forbes, Forbes magazine, April 14, 2014

The Bureau of Economic Analysis will start releasing Gross Output (GO) along with GDP every quarter starting on Friday, April 25.  I consider it a triumph in supply side “Austrian” economics.

I think Steve Forbes captures the importance of this new national statistic in his column in the April 14 edition of Forbes.

Most of the textbook writers are going to include GO in their next edition.  Sean Flynn, now the primary writer of the McConnell/Bruce textbook, is going to highlight it.

Here’s Steve’s commentary — New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal: by Steve Forbes  http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Here’s my original article in Forbes — Beyond GDP Get Ready for a New Way to Measure the Economy: by Mark Skousen  http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Here’s my op ed in the Wednesday, April 23 edition of the Wall Street JournalAt Last, A Better Economic Measure: by Mark Skousen http://online.wsj.com/article/SB10001424052702303532704579483870616640230.html

 

Chapman Students Are Surprised by the Answer to My Environmental Question

In January, my wife and I had the opportunity to teach at Chapman University, where I am a Presidential Fellow for 2014.  She taught a class in poetry, and I taught “Modern Political Economy:  Who is Winning the Battle of Ideas?”  I used my textbook, “The Making of Modern Economics,” now in its 2nd edition.

One of today’s controversies is about pollution and the environment.  We talked about a recent address by U. S. Secretary of State John Kerry, who warned students in Indonesia that “global warming” is “the greatest challenge of our generation,” more than disease outbreaks, poverty, terrorism and the proliferation of weapons of mass destruction.

Then he demonized anyone who disagrees with him, calling critics of global warming “shoddy scientists and extreme ideologues.” You could say the same about Al Gore.  Kerry added, “We should not allow a tiny minority of shoddy scientists and science and extreme ideologues to compete with scientific fact.”

Kerry is typical of the hysteria surrounding the issue of ecology and the environment. Students are being brainwashed into thinking the problem is getting worse and worse. Kerry and the extreme environmentalists blame any weather disaster, the cold snow in the Northeast or the drought in the West, to global warming.  You can’t argue with these fanatics.

I asked my students at Chapman University, “Has pollution declined or risen in the past 50 years in LA county?”  Over half thought pollution was worse.  The cold, hard fact is that pollution has been reduced sharply in LA county even as gasoline use has risen.  See this chart:

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&docid=pYBObTbuYbS9tM&tbnid=xwtv0ahLCtELQM:&ved=0CAUQjRw&url=http://www.noaanews.noaa.gov/stories2012/20120809_laairqualitystudy.html&ei=ht4EU5jyEKbb2QXRm4CoCg&bvm=bv.61535280,d.aWc&psig=AFQjCNGsuMz1HbLz7IT1IMCVqhIlch9HSA&ust=1392914426522327

The fact is that the average world temperature has been flat or declining for 17 straight years.  If you want to know the facts about global warming and pollution, read this column by Larry Bell in Forbes.com:  http://www.forbes.com/sites/larrybell/2013/08/21/the-new-york-times-global-warming-hysteria-ignores-17-years-of-flat-global-temperatures/

During the class, a journalist visited my class and gave this nice write up:  http://blogs.chapman.edu/happenings/2014/01/28/class-act-economics-comes-to-life-with-mark-skousen-teaching/

I will be returning to Chapman University on Wednesday, April 16, to give a public lecture as part of my Presidential Fellowship.

Students (each holding an American eagle silver dollar) join me in front of the Adam Smith statue at Chapman University.

A Personal Triumph 25 Years in the Making with Launch of New Macro Statistic

For the first time since World War II, the Federal government (Bureau of Economic Analysis) will begin publishing a new macro statistic Gross Output [GO] starting in spring 2014 at the same time it releases its quarterly GDP data.

Forbes.com article has just published my article on this new statistic “Beyond GDP“: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

A shortened version will appear in the Dec. 16 issue of Forbes magazine (circulation over 1 million).

I’ve been advocating this new national statistic since writing The Structure of Production (NYU Press) in 1990. Now it’s finally happening. Steve Forbes calls it a “real breakthrough.”

Steve Moore of the Wall Street Journal and Gene Epstein of Barron’s are looking into writing articles on GO.  So is The Economist.

Bill Nordhaus, professor at Yale University, writes, “Congratulations on the article and the work.  It has been a long slog to get the national accounts to introduce innovative measures, and Steve Landefeld [Director, BEA] has been a superstar in this respect…This will open up the potential for new insights into the behavior of the economy.”

GO goes a long way in providing the right balance in the production-consumption process that is missing in GDP data. As BEA Director Steve Landefeld and co-editors Dale Jorgenson and Bill Nordhaus state: “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.”

I think you’ll find the chart comparing GO and GDP of interest, how GO is consistently more volatile than GDP, and a better measure of the business cycle. (Click on the chart below to go directly to the article)

I’m excited — this is a personal triumph nearly 25 years in the making.

Most of the economics textbook writers are planning to include a section on GO in their next editions (McConnell, Parkin, Gwartney, Hubbard), and economic analysts are now starting to look at it.  In an email, Roger Leroy Miller, professor at University of Texas at Arlington, says that he has added a section on Gross Output for his 18th edition of Economics Today.  It is already part of my own Economic Logic textbook.

I hope you’ll check out the Forbes article, as well as Economic Logic and The Structure of Production for a more in-depth look at this important development.

Has Government Adopted My New Macro Model?

“How can I possibly put a new idea into your heads, if I do not first remove your delusions?” – Robert Heinlein

For several years now, I have been advocated the need for adding a new national aggregate statistic called Gross Domestic Expenditures (GDE) that measures total spending at all stages of production and not just the final stage (GDP).

I believe that GDE fills in a major piece of the macroeconomic puzzle.  It establishes the proper balance between production and consumption, between the “make” and the “use” economy, and one that is consistent with growth theory.

Most importantly, GDE and my 4-stage model of the economy are compatible with standard national income accounting and neo-classical macroeconomic analysis. You don’t have to rewrite the textbooks, just add it into the chapters.

Now for the good news.  I recently received a letter from Steven Landefeld, the director of the Bureau of Economic Analysis (BEA), the official government agency that releases GDP data every quarter.  He wrote me that starting next year, the BEA will begin publishing an expanded aggregate statistic that is similar to my own GDE, every quarter along with GDP. [Read more…]