Investor CAFÉ

‘Gross Output’ Predicted Slowdown in Economy

“Gross Output, long advocated by Mark Skousen, will have a profound and manifestly positive impact on economic policy and politics.”

–Steve Forbes, Forbes magazine (April 14, 2014 issue)

The editors of the Wall Street Journal gave me the lead editorial in the April 23 edition: “At Last, a Better Economic Measure.” You can read it here. The editors don’t let the author see the headline but they captured the concept perfectly with their headline. The graphic cartoon was also perfect — check it out.

Basically, I contend that Gross Output (GO) is better than Gross Domestic Product (GDP) in measuring the economy. GO is an attempt to measure spending at all stages of production. It corrects the fallacy fostered by GDP that consumer spending drives the economy. Actually, business spending at all stages of production is larger than consumer spending when you use GO as the measure of economic activity (over 50%, compared to less than 40% for consumer spending).

GDP Leaves out B-to-B Transactions

After my Wall Street Journal article came out, I was at a dinner party and a venture capitalist who does deals mainly in China came up to me and said, “I read your article in the Journal and couldn’t believe that B-to-B [business-to-business transaction] is left out of GDP. Unbelievable.”

Read more about how gross output is a better predictor of the economy’s performance at Eagle Daily Investor.

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