>And what's wrong with avoiding double counting? The final sales criterion
>makes plenty of sense to me. But I'm just a vulgar empiricist, as is well
>known.
Hi Doug, I wouldn't be here if you were anything else. The big fan of the gold standard Skousen does not hide his political agenda; he's concerned that by graphically demonstrating the overwhelming importance or size of final demand and the consumer good sector in the economy, economists and governemnts will take steps to revive first and foremost the consumer good sectors through the increase of mass purchasing power via downwardly redistributive methods in order to exit from a slump.
By underlining that the investment goods sectors is really the bulk of the economy, Skousen and Hayek want to change the emphasis in a slump to the revival of the capital goods sector.
Hayek believed that its revival and thus of the economy as a whole depended on the maintainence of low consumer good prices! The inability to understand this counter intuitive possibility distinguished the hoi polloi from the true economist, according to Hayek. So he wrote in one of Brad deLong's favorite books (Prices and Production):
"[while], of course, the relative magnitude of the demand for equipment of a particular industry will depend upon the demand for the product of that industry, it is certainly not true to say that the demand for capital goods in general is directly determined by the magnitude of the demand for consumer goods." p. 143 quoted in GR Steele "Hayek and Keynes on Capital" in Hayek, ed. Steve Frowen.
Quoting from Hayek's 1978 New Studies, Steele continues:
"According to H, a dependency of investment upon consumption can only apply to that investment in capital which replicates *existing* techniques; it cannot be relevant to 'investment which can increase productivity per head of worker by equipping a given labor force with *more* capital equipment'. H's explanation is that this latter kind of investment is 'encouraged by *low* product (consumer good) prices (which makes it necessary to save on labour costs) and discouraged by high ones.'"
The critic of neo Smithean Marxism Robert Brenner also worries that Keynesian pump priming will prevent the kinds of investments which make possible exit from a slump. That's why I suggested he may be a neo Austrian Marxist. But the preference of Marxists for Hayek over Keynes goes back to John Strachey in the 1930s, then still a member of the Party of Catastrophe.
yours, rakesh