Inicio > Economía, Economía marxista > «The Political Economy of U.S. Output and Employment 2001–2010»: Duncan Foley

«The Political Economy of U.S. Output and Employment 2001–2010»: Duncan Foley


Service industries such as Finance, Insurance, and Real Estate, Education and Health Services, and Professional and Business Services, for which value added is imputed from incomes, are included in Gross Domestic Product, distorting measures of recession and recovery. An alternative index, Narrow Measured Value Added, which excludes all services, has similar historic correlations with employment to GDP, and tracks employment in recent business cycles better. The U.S. economy as measured by NMVA has a lower long-term real rate of growth. Long-term macroeconomic policy requires attention to some version of the productive-unproductive labor distinction of the classical political economists.

Keywords: GDP, imputation, productive and unproductive labor, 2007-8 crisis

1 Outputless crashes and jobless recoveries

After the dramatic financial events in the Fall of 2008 I brushed off my rusty macroeconomic tools (mostly primitive Keynesian multipliertype analysis of the benighted 1960s) to try to estimate how big the downturn in the U.S. economy might be. I estimated a peak-to-trough decline in aggregate demand of 15–20% and, using the Okun’s Law rule of thumb that a 1% change in aggregate demand leads to a 1/2% change in employment, a decline in employment of 7–10%, leading to a peak unemployment rate of 11–14%.1

As it turned out, at least as measured by the most widely cited index of output, Real Gross Domestic Product (which I will refer to as GDP), I was way off in my aggregate demand projection, even given my own conservative margins of error, but quite well in the ballpark in my employment projection. This discrepancy, however, raised some rather fundamental questions in itself. How could the U.S. economy be producing real output, measured as value added, without employing more workers? What happened to the fairly stable and widelyaccepted statistical correlations behind Okun’s Law? These questions became all the more puzzling and relevant as time passed and GDP signaled a “recovery” that was not apparent in employment measures.The debacle (for Obama and the Democratic Congressional majority) of the 2010 election lent further poignancy to these questions.

My first paranoid suspicion was that the “recovery” was concentrated in the financial industry. The financial industry (Finance, Insurance, and Real Estate–FIRE) shares a peculiar feature with the Government (GOV), Education and Health Services (EHS), and Professional and Business Services (PBS) industries in the national income accounts. While in other industries such as Manufacturing (MFG) there are independent measures of the value added by the industry and the incomes generated by it (value added being measurable as the difference between sales revenue and costs of purchased inputs excluding new investment and labor), there is no independent measure of value added in the FIRE and similar industries mentioned above. The national accounts “impute” value added in these industries to make it equal to the incomes (wages and profits) generated.

I was also aware of the fact that the national income accounts impute as value added to FIRE the difference between interest received and interest paid, which, as a result of the aggressive post-crisis easing of monetary policy, was bound to increase significantly. One consequence of the imputation of value added in these industries is that the relation between employment and value added in them is weaker and more volatile than in industries where value added can be measured directly from market transactions. Since there is no direct relation of imputed value added to sales, the connection of aggregate demand to measured output in the industries subject to imputation is likely to be much less close as well.

The Political Economy of U.S. Output and Employment 2001–2010

  1. 14/01/2018 a las 02:22

    Estaba buscando esa informacion hace ciclo, te lo agradezco,
    estoy de acuerdo con tu punto de vista y pienso igual.
    Despues de buscar mucho por Internet encontre lo que buscaba.

    Genial!!! muchas muchas gracias

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