John Browne: 'GO' data expand picture
Keynesian, or “demand-side,” economists maintain that the pivotal measure of economic growth is the gross domestic product, which is the total goods and services produced by a nation.
“Supply-side” economists of the Austrian School favor production output as the key growth measure. On July 25, the Bureau of Economic Analysis (BEA) included “gross output” data for the first time in its quarterly publication. Largely unsung, this publication threatens to spark renewed and furious debate over the main target of Federal Reserve and government economic stimulation.
For centuries, in which undreamt economic wealth was generated, classical economists relied on Adam Smith's “Wealth of Nations,” published in 1776. Essentially, the Scotsman held that production was the source of prosperity.
In the early 19th century, the renowned French economist, Jean-Baptiste Say, stated in what became known as “Say's Law” that “supply creates its own demand.” He maintained that a fall in demand could not cause economic recession.
But, in 1936, John Maynard Keynes published his General Theory that dismissed Say, blaming the Great Depression on a lack of demand. He proposed the manipulation of interest rates, taxes and greatly increased government spending to stimulate aggregate demand. Although economists debate what ended the Depression, Keynes was awarded the accolade, some feel mistakenly.
Keynes' theory has dominated economic thought. As chair Janet Yellen's hero, his doctrine remains the mantra of Fed policy. However, Keynesian practice has seen the United States fall from being the richest country in history to being the world's largest debtor.
Despite the unprecedented stimulation of trillions in synthetic dollars, the economy splutters and unemployment remains worrisome. By following Keynesian demand policies, the Fed's attention is on boosting consumer confidence and spending with an anti-savings mentality.
Supply-side economists maintain that savings are essential to healthy business investment, technological advance and real wealth.
The BEA, a highly regarded bureau of the Department of Commerce, defines gross output as: “the market value of the goods and services produced, including commodity taxes. The components of GO include sales or receipts and other operating income, commodity taxes, plus inventory change.”
Gross domestic product is comprised of 68.5 percent consumption, 15.9 percent business expenditure, 18.6 percent government expenditures and -3 percent exports.
GO lends far more weight to business production as it is comprised of 38.4 percent consumption, 52.31 percent business expenditure, 10.55 percent government expenditures and -1.26 percent exports.
Although using GO can be criticized justifiably for double counting, it represents business production more fully than mere consumption and it is private business that ultimately adds profitable jobs — not government.
BEA's bold initiative to publish GO may offer the Fed an improved indicator to evaluate the economy more accurately and lead a return to production-led prosperity.
John Browne, a former member of Britain's Parliament, is a financial and economics columnist for Trib Total Media. Contact him at firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Starkey: Pederson had to go at Pitt
- Chryst returns home, named football coach at Wisconsin
- Steelers, young and old, thirst for opportunity to reach the postseason
- Pederson’s 2nd tenure as the athletic director at Pitt comes to abrupt end
- Penguins continue to thrive, despite spate of ailments
- Many Pitt fans endorse move to oust Pederson as athletic director
- QB Smith is chief concern for Steelers’ defense
- Pitt uses 2 2nd-half flurries to hold off Manhattan, 65-56
- With 3 more players possibly affected, Pens’ mumps fight escalates
- 50 years later, Vietnam vet gets his degree at Westminster
- High school roundup: Norwin wrestling edges rival Penn-Trafford