RE: [A-List] New Economy Bull, an expose

[<christian11@xxxxxxxxxxxxxx>]

Mark,

The reason you don't understand it is that it's nonsense.

1. In the effort to recover Say's Law, the writer somehow invents new income
and product numbers, and highlights the size of manufacturing. This is
supposed to prove that consumption is not such a big deal relative to sweaty
production, which is what creates wealth and profits (not unsweaty, ephemeral
"services" like plumbing repair or lawnmowing etc.).

Newsflash #1: the NIPA consumption number is from the product accounts; the
manufacturing number would be derived from the income accounts. Both accounts
work from the same final GDP number. So inflating the manufacturing number on
the income account implies that consumption increased on the product accounts
as well.

Newsflash #2:  The above is true b/c, far from being dead, Say's Law is
_assumed_ to be true for the purposes of the NIPA.

2. Keynes' basic point, which the writer has also totally missed, is that the
classical view of aggregate supply and demand is wrong. Only in a world where
real prices immediately reflect changes in relative prices, raw materials,
capital or technology, and all factors are always being used will the supply
curve be vertical--ie Say's law will apply. Since we don't live in that world,
Say's law doesn't apply.

3. Blaming Keynes is shooting the messenger. The world didn't work by
classical models before Keynes either. That it hasn't since is not his fault
either, though it is dysfunctional in a different way.

4. Since the manufacturing sector in the US is so robust, we can ignore all
those stories about manufacturing jobs moving abroad, and all that stuff about
nasty maquiladoras. Manufacturing is great in the US!

5. Bull, indeed.

Christian


> AI love this stuff, but want to understand the
> following, and don't:
>
> >The fact is, GDP can give us only a very
> partial insight
> >into the mechanisms at work. Consider the
> BEA's Input-
> >Output data. For 1998, when these were last
> compiled,
> >GDP stood at $8.8 trillion, and personal
> consumption was
> >$5.9 trillion.
> >
> >Manufacturing seemed to be fairly
> inconsequential at
> >$1.5 trillion in the GDP numbers and made a
> smaller
> >contribution than either finance ($1.7
> trillion) or
> >services ($2.1 trillion).
> >
> >If you look at what was actually being made
> and sweated
> >over within the economy...what provided the
> jobs, on the
> >one hand, and the opportunity of profits, on
> the
> >other...then the picture is quite different
> from the
> >less than perfect one you hear blathered by
> "experts" on
> >CNBC.
> >
> >In fact, the total gross output of the economy
> now comes
> >to $15.4 trillion in turnover. And
> manufacturing - at
> >$3.9 trillion - suddenly swells to being the
> largest
> >constituent of them all. 55% greater than
> finance, and
> >10% larger even than the much-vaunted service
> sector.
>
> Is there some distinction  between 'GDP' and
> 'total gross output' which
> allows the latter to be almost double the
> former, in the same US economy?
> What don't I get here?
>
> Mark
>
>
>