Wojtek noted:
>Value added is a useful concept in input/output analysis of the firm; it
>simply means the value of the output less the value of the input (or
>intermediate consumption); its usuefulness comes mainly in calculating such
>aggregates as the GDP. Excluding intermediate consumption and considering
>only the added value prevents multiple counting of the same value passing
>through different production/distribution stages.
The Hayekians reject the notion of value added in GNP accounts as highly misleading. For example, Mark Skousen who has tussled with Paul Samuelson recently has written:
" when one examines currrents for the Gross National Product, this fundamental characteristic [in modern economies only a minor part of the community's resources is devoted to the production of consumption goods while most of the energies and equipment are applied to the production of intermediate goods] is completely lost--in fact, it appears as just the opposite. If one looks at a breakdown of GNP, consumer spending always appears as by the far the largest section of the economy. For example, in 1987, total personal consumption expenditures in the US come to $3, 012 billion, while "gross private deomstic investment" totaled only $713 billion and government spending amounted to $925 billion. How does one explain this discrepancy, which shows consumer spending to be four times larger than capital expenditures? "What is happening is that the gross private investment figures in GNP is not really a gross number after all. It is actually a net measure and purposely excludes 'intermediate goods' that are purchased to be used as inputs in producing other goods and services. It is a strictly value added figure... "In short, the GNP data exclude the critical intermediate stages of production. Advocates of this traditional approach do so because, they say, they wish to studiously avoid double counting... "Further, the net method (GNP) greatly exaggerates the role of consumption in the economy, giving the deceptive impression tha tmost of the natinal output is in consumption goods rather than investment. Such thinking encourages economists and govt officials to for the misleading idea that consumer spending, being hte largest section of the economy, must be stimulated in order to get the economy out a slump." Mark Skousen, The Structure of Production, p. 190
Didn't think a Hayekian had anything but the perniciousness of underconsumptionism in mind, did you?
yours, rakesh