Marriage on the oneyear anniversary of the Supreme Court ruling, and america has drifted from the founders original ideas of liberty and justice. And those are just a few of the authors on booktv this weekend. For a complete television schedule, go to booktv. Org. Booktv, 48 hours of nonfiction books and authors, television for serious readers. [inaudible conversations] were going to get started. I have a lot of books to mention, so i want to make sure i get them right. Thanks for all being here, and thanks especially to the folks on our panel, mark, steve and george. Were really pleased that youre here. The last theres been a lot of talk about that over the last generation, maybe the last 40 years really highlights the challenges of measuring economic values. A lot of people take the view there hasnt been much progress, much growth in incomes, economic stagnation over that period of time. And i often try to put the lie to that assertion by asking people whether theyre low income, middle income, high income, raise your hand if you want to go back to 1975. And there usually arent a lot of takers. But one thing is undeniable over the last 10 or 15 years, we truly have been living through a period of economic stagnation. And im peter getler. I joined the Cato Institute a year ago as president. And over that time brink lindsay in particular has done a lot of work trying to explore the reasons for this growth slowdown. Hes published them as books, theyre ebooks. One is understanding the growth slowdown and another is reviving Economic Growth. For the first time in my life, weve had a tenyear period during which real gdp growth has not reached 3 in any single year. And at the time i joined cato 13 months ago, i was actually hopeful because during the periods of my lifetime where weve lived through time of economic stagnation or sharp economic contraction, its created a lot of pressure, tension and anxiety that often has been the impetus for positive change in, on the policy front. And i think over the last few months ive realized that i was correct in expecting that economic anxiety would create some turmoil and and stimulate some change. I was wrong because its not the kind of change that i had anticipated. [laughter] clearly. Really lucky to have three gentlemen here today that i dont think really need much of an introduction, but ill try to provide one. Between them i think theyve probably written more books than ive ever read. [laughter] but i think its a great opportunity for each of them to comment on, you know, their views on how were going to revive Economic Growth in the United States and thereby continue the course of progress and prosperity that our nation has enjoyed for such a long period of time. And they each have books that have been released recently that actually speak to this. I spoke with a donor to cato recently, and he has a son who will be starting college in the fall. And he told me that he was considering attending Cato University this summer so that his son could be inoculated against what he was likely to learn from the economics professors in college before he attended. When i was getting ready for college, i didnt need such inoculation. But in the senior year of my high school days, George Gilders book wealth and poverty was released, and during the summer between high school and college i read it. And it gave me no shortage of ammo to use against the marxist professors i encountered when i attended school, including in such classes as capitalism and its critics. I think things have changed. Some things havent changed. I think the philosophical makeup of the faculty at most universities is about the same as it was at that time, but i felt that in my classes we were able to engage in lively debate and disagree without fearing, as many students do today, that it can hurt their grades and their transcript and that disagreement is not permitted. So i actually thank you, george, for providing me so much ammo to use against fraternity brotherses, professors and others with whom i didnt agree who didnt agree with me and the case for enterprise and free markets. A lot of the ammo started at cato. Thanks so much for that. Thanks so much for that. Georges book is the scandal of money, and were delighted. I think one of the ideas that cato has promoted for a long time is the fact that our fiat money system and the power of the Federal Reserve is a great threat not only to our economic well being, but to our freedom. And thats one of the reasons that for 34 years cato has held a prominent annual monetary conference thats coordinated by our Vice President , jim dorn, and that we started under the direction of our center for monetary and financial alternatives to highlight, highlight these risks and to promote free Market Alternatives to our current system. So georges book is very important and timely. In addition to steves last book, i believe, was a similar topic, highlighting the threat that the lack of sound money poses to our country. So those are both tremendous contributions to the popular literature. I told steve earlier that for most of my life ive not been affiliated with either major party but that in late 1995 i registered republican so that in the 1996 connecticut primary i could cast my first primary vote for steve forbes for president. Steve replied that he wishes a lot more [laughter] registered and voted for him. But even in defeat he made great contributions to the debate and the case for freedom, enterprise, sound money and a flat tax. And hes still at work. His book that he wrote with elizabeth ames, reviving america how repealing obamacare, replacing the tax code and reforming the fed will restore hope and prosperity. And i think he does a fantastic job really prioritizing three key areas, particularly areas such as health care and money where many of the problems are actually created by government intervention, and for some reason the prescription that many people suggest is more government intervention. Finally, mark skousen who we all know as an economist, an economics professor and author, but many also know as the impresario of freedom fest which he accurately calls the Worlds Largest gathering of free minds which takes place in las vegas every summer. Were delighted to have mark here. I mentioned at the outset that while we can agree that theres been income and economic stagnation of late, the measurement problems reflected in our economic aggregates, i think, do fool us because there are many things that arent captured in gdp. And i, again, reject the assertion that americans really of any income level have experienced stagnation in their well being, in their lives in the last 40 years. Mark has proposed and he now has an updated version at least last year of his book, the structure of production, an alternative to Gross Domestic Product as a measure of our economy. And has proposed an turn called gross output. Im going to let mark explain it because one of the reasons, rationales he gives for it bng an improved and accepted version of the measure of the economys performance is that its now published quarterly by the government along with the gdp figs which is figures which is quite an achievement by mark. But as libertarians, we dont necessarily take Government Action as an endorsement. So im looking forward to his remarks explaining some of the work hes done in developing and promoting more effective measures of economic performance. And we will proceed with the speakers in the reverse order by which i introduced them. So, please join me in offering a warm welcome to cato for mark skousen. [applause] peter, your comments about slow Economic Growth and the fact that we havent experienced 3 growth in some time reminds me of this program that george w. Bush set up called the 4 growth plan. And when i i talked to the organizer of it, i said 4 growth plan, now, did he mean growth of the economy or growth of government . [laughter] so she didnt appreciate that comment. [laughter] but unfortunately, under george w. Bush the economy never did, using standard gdp statistics, never did grow more than never did grow 4 during the entire period of full employment. So its kind of unfortunate. What id like to talk today is what peter mentioned, gross output. I think its a very important statistic, and, in fact, my main thesis is that gross output or g. O. As we call it offers a better, more comprehensive picture of the economy, is a powerful Unifying Force between accounting, finance and economics, it links micro with macro, and it appeals to all the major schools of economics. In many ways, g. O. Is the missing piece of what the latest economist calls the prosperity puzzle which is their latest issue. And its interesting, they talk a lot in there about the problems with gdp which im sure will come up in this discussion. But in any case, my argument that this is a unifying approach, that its a more comprehensive picture of the economy, its a tall order. And so id like to get started. I actually see it as a paradigm shift in the way we treat macroeconomics. So we start off with basics, what is gdp, what is it supposed to measure. Annual spending is one way of looking at it in the economy. Consumers, government and business. C, plus, i plus g is the way they normally talk about it in classes, and theres a problem with gdp, theres a lot of problems with gdp. But the one i want to focus on in particular is according to gdp statistics, what drives the economy. Be and so what we find out that when you break down gdp and c plus i plus g, you see that it breaks into Consumer Spending as the biggest sector of the economy, Government Spending second and business spending a poor third. And what does that say in terms of policy implications, you see . Thats the issue. And, of course, because Consumer Spending represents such twothirds, basically, of gdp, you get the media constantly making, creating a myth. Its one of the most common myths in economics, and this is an example of it from the wall street journal. You get it from all the publications. Household spending generates more than twothirds of total economic output, says the wall street journal. So steady spending gains; that is, Consumer Spending gains should translate into Economic Growth. If only consumers would spend more, thats all it takes. And, of course, you have the new york times, Consumer Spending makes up more than 70 of the economy. And it usually drives growth during economic recoveries. And finally another one from the wall street journal, consumers are the engine of the u. S. Economy. Consumers. Not producers. Not entrepreneur. Consumers. Accounting for about 70 of the economy. So you can see the problem thats inherent with using gdp as a statistic is this are we coming to an accurate conclusion, is our question. So we have to ask ourselves the question, what is missing from gdp . Well, again, gdp is c plus i plus g, it was 18. 6 trillion economy, is that the economy . So we break it down into consumption, 67 , 12. 4 trillion. Investment, 3 trillion, and government 3. 2 trillion. So what is missing in gdp . This is the surprise factor the supply chain. Gdp does not measure the supply chain. It does not measure all the business spending, the b to b spending to bring the products to their final use. You see, gdp just measures the value of finished goods and services, your clothes, your shoes, the internet, all of everything that were enjoying right now. This cup of water. Thats all counted in gdp. But the spending by business to get you to the finished products is left out. And that is its achilles heel in many ways. And look at the size of that supply chain which ive been measuring, and now the government is measuring, the bea, bureau of Economic Analysis, 20. 3 trillion. Its more than Consumer Spending which is 12. 4. Its more than Government Spending. Its more than fixed see, the i part is fixed investment. Now, what is gross output . Well, it can be for those of you who are economists and youre familiar with the Irving Fishers equation of exchange, it measures total transactions. Its also a measure of high yaks hayeks triangles. And so this is taken from prices and production, this great book that Friedrich Hayek wrote in 1931 when he was lecturing at the London School of economics. And theres a picture of the triangle that he used. Now, it was purely theoretical. He has no breakdown, he has no statistics backing it. It was pure theory. And it has had a rough road of acceptance. But what im suggesting is that hayeks triangle is being measured today now by the government. And this is a fantastic breakthrough. And i am pleased that this program here today is taking place in the hayek auditorium. So appropriate considering the fact that the governments now measuring hayeks triangle. So we all know the background of Friedrich Hayek. I just thought i would post this up here. And particularly hes known more for his book the road to serfdom and the constitution of liberty, but he is also author of this macroeconomic work which formed the foundation of my own work in the structure production called prices and production published in 1931. I have a First Edition signed by Friedrich Hayek. Today ive come out or laissezfaire books has published his two essays on the Business Cycle called hayeks triangles, and they asked me to write the introduction. But heres a modernday version of hayeks triangle where it shows the four stages of production; resources, production, distribution and final output. So you can see gdp is in there, but then so are the stages, the supply chain prior to that where we have stages one, two and three. So this is a great way for students to capture what hayeks triangle and what i call the four universal fourstage model of the economy. Every good and service that you and i use has gone through the resource stage, the production stage, the distribution or wholesale and retail stage and then to final use which is represented number four by gdp. Well, the big news is in april 2014 the bureau of Economic Analysis which puts out gdp statistics has now started to measure gross output, a measure of hayeks triangle or total transactions under Irving Fisher depending on how you want to look at that. And we have Steve Landfeld whos the pioneer of the bea who says gross output is a powerful new set of tools of analysis, one that is closer to the way many businesses see themselves. And isnt that true . Business sees themselves as producing moving the product along the production process. And thats what gross output is measuring. So whats really interesting, a lot of people havent noticed this, but whenever the bea comes out with its quarterly are announcements release of gdp data which they did just recently, notice how they define, how they define gross gdp. They define it in terms of gross output first, and then they subtract out intermediate production. So gdp plus intermediate inputs equals gross output. Or another way, the way they define it, gdp is gross output minus intermediate input. So, basically, what theyre doing is getting you, the audience, the consumer of gdp statistics to get used to the idea of a what i call a topline of National Income accounting and a bottom line. The bea also, for those of us who are austrians who believe in disaggregating the economy and looking at industry by industry, sector by sector, im delighted that bea has also introduced gross output by industry which allows economists to disaggregate the economy based on stages of production. So based on this announcement, i was i wrote a lead editorial, commentary in april 2014 in the wall street journal. At last, a better economic measure. And they came out with a new third edition of my structure production. Basically, my book, the structure production, was, had virtually disappeared. Nobody was reading it. But suddenly when the government starts using the statistic, it has come out of obscurity and now is being used in, and being read. And we have copies here for you to purchase after the presentation. Well, what can we learn from the new g. O. Statistic . You may ask ourselves, well, so so what . So what that theres a new statistic . Well, first of all, you can see that gross output from this statistic is much more volatile. Its a much better indicator of the Business Cycle. You can see here that gross output, especially during the recession of 20082009, how it dropped precipitously. Gdp declined hardly at all. In nominal term, gdp declined 2 . Is that an accurate reflection of what happened during the Great Recession . Not at all. But you can see in terms of gross output, you can see what happened in the intermediate stages. There was a significant drop that is a better evidence of what is going on. So according to the new model, the new g. O. Model, everything is in reverse. Remember in gdp Consumer Spending was number one followed by government and business. Now suddennenly business spending suddenly business spending, when you include the supply chain, nearly 60 of the economy. Consumer spending is now down to 32 . Instead of twothirds, its only a third, and Government Spending is 8. 2 . So when you see these two molds next to each other, what do you see . Essentially, what you see is that business, the business sector is by far the most important sector in the economy. And policy that steve forbes is talking about in his book and what George Gilder is talking about in his book focus on the business sector, the supply chain, innovation, entrepreneurship, productivity. These are the facto