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…]

Head to Head: “Public Vs. Private Spending: How to Get the Economy Growing Again”

Today’s Orange County Register published a point-counterpoint debate between Mark Skousen and Robert Kuttner on “Public vs. Private Spending:  How to Get the Economy Growing Again.”  See the attached file, that includes an ad to this year’s FreedomFest. 

Public vs. Private Spending: How to Get the Economy Growing Again


The Rise of the Commercial Society: The Business Leader as Hero

By Mark Skousen
Editor, Forecasts & Strategies

Keynote Address at Annual International Assembly for Collegiate Business Education (IACBE), April 18, 2013, Orlando, Florida

“It is business that creates wealth, not countries or governments.  It is businesses that decide how well or poorly off we are.”   —Shlomo Maital, MIT managerial professor

Tomorrow my wife Jo Ann and I celebrate our big 40th (ruby) anniversary. We were married on April 19, Patriot’s Day, in 1973 in Utah.

Last week we went to Hawaii to celebrate.  When we arrived at the Marriott Waikiki Beach Resort in Honolulu, we were given a small room with only a queen size bed and no view of the famous Waikiki Beach.  I asked the desk clerk if there was any chance we could have a room with a king bed.  He said nothing was available.

I suspect he knew that we used Priceline to get a discount on the room. [Read more…]

My First Book Review for Barrons – “Conscious Capitalism”

Here is my first book review on Barrons — on John Mackey’s new book, “Conscious Capitalism,” which I regard as revolutionary and encourage everyone to get a copy at either a Whole Foods store (always fun to visit) or on Amazon:


The Soul of the New Capitalism

A worthy successor to The Wealth of Nations

Reviewed by Mark Skousen

We tend to regard capitalism in these cynical times as the worst economic system, except for all the others. By contrast, in Conscious Capitalism, Whole Foods Market Co-CEO John Mackey and Bentley College marketing professor Raj Sisodia put forward what could be the most ambitious, indeed revolutionary, model for capitalism ever conceived. Had their application of higher consciousness been in the boardroom a generation ago, we might have avoided the suffocating regulations of Sarbanes-Oxley and Dodd-Frank, and the dire straits of companies like General Motors, Sears, Citibank, and even Enron.

Conscious capitalism, according to Mackey and Sisodia, is “a way of thinking about business that is more conscious of its higher purpose, its impacts on the world, and the relationships it has with its various constituencies and stakeholders.”

Conscious Capitalism: Liberating the Heroic Spirit of Business

by John Mackey and Raj Sisodia
Harvard Business Press
368 pages, $27

Although they call free enterprise the source of “unprecedented prosperity for humanity,” they challenge the two celebrity philosophers of capitalism, Ayn Rand and Milton Friedman. They reject the Randian notion that “selfishness” and “greed” are virtues, and deny the Friedman view that the only responsibility of capitalism is to maximize profits for its shareholders.

“Business is not about making as much money as possible,” the authors declare. “It’s about creating value for stakeholders.” Companies must develop sterling reputations to attract loyal customers, employees and suppliers, and generate community goodwill. If they do, superior returns can be achieved in earnings and stock price as a byproduct, not as a primary goal. [Read more…]

Report from AEA Meetings in San Diego: The FED = Inflation

I returned early this year from a productive trip to San Diego for the American Economic Association (AEA) meetings, where I met with several top economists, including Nobel Prize winners. One of the most popular sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.

As the graph indicates, there was virtually no inflation prior to 1913, when the Federal Reserve was created (other than wars, which caused temporary inflation) and we went off the classical gold standard. 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.

Despite the fact that the Fed engineered all of this inflation, caused 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! (You can bet that won’t be the case at our special panel on the 100th anniversary of the Fed at FreedomFest!)

Another telling sign was the fact that the sessions with super Keynesian Paul Krugman were standing room only, while monetarists including Nobel laureate Bob Lucas had a small turnout.

What does this situation bode for the future? If Krugman has his way, it means greater deficits, more inflation, and higher taxes.

Paul Krugman’s Endorses Say’s Law!

Paul Krugman endorses Say’s law! In a Sept 13 New York Times op-ed, “The iPhone Stimulus,” Paul Krugman blunders by confusing Keynes’ law (demand creates supply) with Say’s law (supply creates demand). He discusses how the production of the iPhone 5 will now bring a boost to gross domestic product (GDP) of something like half a percent. As classical economist Steve Kates wrote, “Krugman uses the production and
sale of a very much value adding item of technology to prove that Keynes was right when what he is really doing is proving that Keynes was wrong and that Say’s Law is right.” Krugman argues that when a private sector firm produces a value-adding good or service, it adds to economic growth. This is not Keynes, this is Say’s law and classical economics, which always has looked at economics from the supply side. Keynes’
“innovation,” a disaster of the highest order, was to argue that you could stimulate an economy from the demand side by simply buying things without having had value-adding production first.

Yours in liberty, AEIOU,

Mark Skousen

My Run In with the Irrepressible and Dangerous Paul Krugman in London

I’ve been in Poland and England on a very successful speaking tour — all SRO crowds.  In Poland, thanks for Jan Fijor, many of my books have been translated….In London I spoke at the Adam Smith Institute on “Austrian economics for Investors” and the Institute for Economic Affairs on “Hayek vs. Keynes:  Who’s On Top?”  Needless to say, in today’s crisis mode, Keynes and Keynesian economics are clearly on top.

Speaking of which……

This evening after my wife and I went to “Top Hat,” a fantastic new musical based on Irving Berlin’s film of the same name, we ran into Paul Krugman, the Nobel Prize economist and foremost advocate of “crude” Keynesian deficit spending, who is here in London on a book tour.  I asked him a series of questions: [Read more…]

How Keynes Changed His Investment Philosophy and Died Wealthy

by Investment U Research
Friday, April 27, 2012: Issue #1761

John Maynard Keynes: The Contrarian Investor 

“When the facts change, I change my mind. What do you do, sir?” - John Maynard Keynes

As longtime subscribers and readers of my books know, I’m no fan of John Maynard Keynes as an academic economist. His legacy is the welfare state, trillion-dollar unfunded liabilities and uncontrolled deficit spending. (See chapter 13, The Keynes Mutiny: Capitalism Faces Its Greatest Challenge of my book The Making of Modern Economics.)

But when it comes to Keynes the investor, it’s a different story, and the man deserves credit for being an outstanding stock picker during a period of war, uncertainty and depression… [Read more…]

Making of Modern Economics #2 in Ayn Rand Institute’s Top-Ten Must Read Books in Economics

Good news.  My book, The Making of Modern Economics, now in its second edition, won recognition from the Ayn Rand Institute, which published its first “top ten must-read books in economics,”  The Making of Modern Economics was ranked second, right behind Henry Hazlitt’s classic Economics in One Lesson. I’m not complaining, since Steve Mariotti, president of the Network for Teaching Entrepreneurship (NFTE), recently wrote that “Mark Skousen is the Henry Hazlitt of our time who can explain complex issues in a clear way.”

My book tells the bold story of economics, with free-market economist Adam Smith as the heroic figure who comes under attack by the Marxists, socialists and Keynesians, but triumphs in the end with the help of the Austrians, Chicagoans, and supply-siders. It recently won the Choice Book Award for Outstanding Academic Title, and is highly popular among students and intelligent laymen who love a good story with lots of anecdotes and pictures. As John Mackey, CEO of Whole Foods Market, says, “I’ve read Mark’s book three times. It’s fun to read on every page.”

It is available on Amazon, including an audio version, but you can get the book cheaper by calling Eagle Publishing at 1-800/211-7661. The price is only $49.95 for hardback (code ECONH3), $29.95 for paperback (ECONP3), plus $5 for shipping and handling ($10 if outside of the United States).

Free Market Textbooks Reign!

A Special Report from APEE Meetings in Las Vegas
by Mark Skousen

Mark Skousen, Peter Boettke (GMU), James Gwartney (FSU), and Tyler Cowen (GMU) at the APEE meetings at Harrah's in Las Vegas in front of their respective textbooks, April 2, 2012.

On April 2, 2012, I moderated a panel at the annual APEE meetings in Las Vegas.  APEE (Association of Private Enterprise Education) is the gathering place of free-market academic economists, and this year a record group of 500 showed up from colleges and institutions around the world.  (Go to www.apee.org for more information.) 

The panel’s theme was “Squaring the Mises Circle:  How to Integrate Austrian Economics into Mainstream Textbooks,” and we had a SRO crowd. 

It’s amazing how economics textbooks have changed in one generation.  When I was going to college, the principal textbook was Paul Samuelson’s Economics, which promoted the Keynesian themes of paradox of thrift, deficit spending, progressive taxation, and the welfare state. 

In 1991, I wrote a book called “Economics on Trial” (McGraw-Hill), which surveyed the top ten textbooks in economics at the time, and most were still Keynesian. 

Today Keynesian textbooks are still out there (Krugman, Baumol & Blinder), but there are a whole bunch of free-market textbooks, including ones by Roger Leroy Miller, Greg Mankiw, and the four highlighted at the APEE panel.  I spent a couple of days reviewing them in preparation for the panel, and was amazed how they all included new material from the great Austrian economists, especially the ideas of Friedrich Hayek.  [Read more…]