The Structure of Production

The Structure of Production

The Structure of Production

The Structure of Production


In 2014, the U. S. government adopted a new quarterly statistic called gross output (GO), the most significance advance in national income accounting since gross domestic product (GDP) was developed in the 1940s. The announcement came as a triumph for Mark Skousen, who advocated GO nearly 25 years ago as an essential macroeconomic tool and a better way to measure the economy and the business cycle. Now it has become an official statistic issued quarterly by the Bureau of Economic Analysis at the U. S. Department of Commerce.

In this new revised edition of Structure of Production, Skousen shows why GO is a more accurate and comprehensive measure of the economy because it includes business-to-business transactions that move the supply chain along to final use. (GDP measures the value of finished goods and services only, and omits B-to-B activity.) GO is an attempt to measure spending at all stages of production. Using GO, Skousen demonstrates that the supply-side of the business spending is far more important than consumer spending, is more consistent with economic growth theory, and a better measure of the business cycle.


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. Steven Landefeld, and William D. Nordhaus, A New Architecture for the
U.S. National Accounts

Gross Output, long advocated by Mark Skousen, will have a profound and manifestly positive
impact on economic policy and politics.—Steve Forbes, “New, Revolutionary Way to Mea
sure the Economy Is Coming—Believe Me, This Is a Big Deal”

On April 25, 2014, the Bureau of Economic Analysis (BEA) at the U.S. Department of Commerce announced a new data series as part of the U.S. national income accounts, and the BEA began reporting “Gross Output by Industry.” It wouldn’t be long before other countries followed suit. For example, in late 2014, the United Kingdom began publishing annual “Total Output” statistics in their input-output tables.

It took nearly a quarter of a century for the federal government to recognize the critical importance of Gross Output (GO). Starting with my work in this book in 1990 and in Economics on Trial in 1991, I introduced the concept of GO as a macroeconomic tool, not to replace Gross Domestic Product (GDP), but to supplement it as a broader measure of total economic activity (see chapter 6, this volume). In these works, and later in my own textbook, Economic Logic (first published in 2008), I made the case that we needed a statistic that went beyond GDP, a new statistic that would measure spending throughout the entire production process, not just final output, and that the statistic would need to be updated regularly. GO is a move in that direction.

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