[A-List] New Economy Expose, Exposed

[<christian11@xxxxxxxxxxxxxx>]

I figured out where our friend Sean Corrigan got his numbers. The link is
posted below: see Table A. Basically, he's taken the input-output data and
treated it as current GDP, which means that he's counted all intermediate
goods consumed or destroyed in the making of final goods as part of GDP.

The problem with doing this is that you double, triple or quadruple count
everything in coming up with a gross output number. For example, if you begin
with the smelter who makes raw steel for car production, you'd have the
following count:

cost of iron ore $5000
cost (sale) to transporter $6000
cost (sale) to steelmaker $6500
cost (sale) to transporter $ 8000
cost (sale) to automaker $10000
cost (sale) to car buyer $15000

Whereas in GDP, you would record $15000, the contribution to the gross GDP
measure in the I-O tables would be $50,500, since all the intermediate sales
are counted as output/input by different industries. In other words, in the
I-O numbers, the $5000 cost of the iron ore is counted by two transporters,
the automaker, the steelmaker, and the car buyer. And so on up the line.

That manufacturing would consume more  intermediate goods than services is not
totally obvious, though it's not a surprise either. But it is clearly not
significant in the way our friend wishes it were--not least in resuscitating,
as if it were needed, Say's Law.

Christian


 http://www.bea.gov/bea/ARTICLES/2001/12december/1201io98.pdf