Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

310 Money, Bank Credit, and Economic CyclesIn short the Gross National Product is an aggregate figurerepresenting added values, and it excludes intermediategoods. The only reason national accounting theorists offer forusing this figure is that with this criterion they avoid the problemof “double counting.” Yet from the standpoint of macroeconomictheory, this argument rests on a narrow accountingconcept applicable to individual companies and is very dangerous,as it excludes from the computation the enormous volumeof entrepreneurial effort which each year is dedicated tothe production of intermediate capital goods, the bulk of economicactivity but not at all worth evaluating, according toGNP figures. To get an idea of the amounts involved, it sufficesto consider that the gross output (calculated according toour criterion) of an advanced country like the United States isequal to more than twice the country’s official GNP. 38Therefore traditional national income accounting figurestend to eliminate at a stroke the central role intermediate stagesplay in the process of production; specifically, these measuresignore the undeniable fact that the continuance of intermediate38 Skousen, in his book, The Structure of Production, pp. 191–92, proposesthe introduction of “gross national output,” a new measure in nationalincome accounting. With respect to the possible gross national output ofthe United States, Skousen concludes the following:First, Gross National Output (GNO) was nearly double[Gross National Product] (GNP), thus indicating the degree towhich GNP underestimates total spending in the economy.Second, consumption represents only 34 percent of totalnational output, far less than what GNP figures suggest (66percent). Third, business outlays, including intermediateinputs and gross private investment, is the largest sector ofthe economy, 56 percent larger than the consumer-goodsindustry. GNP figures suggest that the capital-goods industryrepresents a minuscule 14 percent of the economy.All of these figures refer to 1982 national income accounting data for theUnited States. As we will later see when we focus on business cycles,traditional gross national product figures have the glaring theoreticaldefect of hiding the important oscillations which take place in the intermediatestages of the production process throughout the cycle. Grossnational output, however, would reflect all of these fluctuations. Seealso the data for 1986, found at the end of footnote 20, chapter 6.