The Value of “Final Products” Counts Only Itself

George Reisman

American Journal of Economics and Sociology, 2004, vol. 63, issue 3, 609-625

Abstract: Abstract. The value of final products counts only itself and not the value of so‐called intermediate products. The prevailing, contrary belief entails a twofold violation of the laws of mathematics—namely, the impermissible discarding of essential terms of equations and then the addition of the remainders of equations that are mutually exclusive and therefore not properly subject to addition. It follows that in order to count the values of the so‐called intermediate products, one must go out and count them, because they are not counted in the value of the final product. Despite prevailing belief, counting the value of intermediate products does not represent “double counting.” The implications of these findings for macroeconomic theory are major and include a radically different approach to the respective roles of saving and consumption in spending and income formation, and recognition of the fact that today's concept of gross product is actually a concept of net product.

Date: 2004
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