Beyond Teenager Accounting: Why GO, GNP, EVA, and PPR Surpass Keynesian GDP

Four Austrian Alternatives to GDP That Are More Realistic and Mature

There is a metric that dominates headlines, guides economic policy, and determines the reputations of presidents and ministers: Gross Domestic Product. GDP. That magical figure supposedly capturing "the size of the economy" whose quarterly growth provokes either celebration or panic.

But there's a fundamental problem: GDP is an adolescent metric by design (or junk, depending on your perspective).

Not "adolescent" as a casual insult, but something specific: GDP reflects the mentality of the eternal teenager (see Keynes's biography for astonishing coincidences with this) who lives for immediate consumption, ignores capital accumulation (productive wealth), confuses spending with value creation, and measures "progress" by how much you devour today regardless of whether you're eating your seed capital.

Meanwhile, there are four alternative metrics that capture what truly matters in a mature production-oriented economy:

• Gross Output (GO) by Mark Skousen

• Gross National Product (GNP) by George Reisman

• Country-EVA by Nicolás Cachanosky

• Private Product Remaining (PPR) by Murray Rothbard

These are not slightly hippie-ish "beyond GDP" variations focused on "happiness" or "emotional sustainability" (several of those indicators are quite valuable, by the way, but this isn't that). These are the capitalist and adult alternatives, in economic terms, to Keynesian accounting.

I. The Original Sin of GDP: Consumerism as Virtue

Let's begin by dissecting what GDP actually measures and why this is problematic.

Standard GDP formula: GDP = C + I + G + (X - M)

Where:

• C = Private consumption

• I = Investment

• G = Government spending

• X = Exports

• M = Imports

Seems innocent, right? But observe the implicit priorities.

Consumption appears first and dominates. In developed economies, C represents 60-70% of GDP. When GDP grows, economists frequently celebrate because "consumption strengthened." When it falls, the lament is "consumers are withholding spending."

This prioritization reveals the underlying Keynesian ontology: the economy exists to consume. Consumption is the engine. Saving is a problematic "leakage" from the circular flow that must be compensated with government spending.

But this completely inverts the real economic causality. As Adam Smith observed (and Reisman recovers): production precedes consumption. You cannot consume what you haven't produced first—either you directly or someone else who trades with you.

More fundamentally: consumption destroys wealth. When I eat an apple, that apple ceases to exist. When I use gasoline, it becomes exhaust fumes. Consumption is, literally, the destruction of economic goods for immediate satisfaction.

And what creates wealth? Investment in capital—machinery, infrastructure, accumulated technical knowledge, research and development of valuable products and brands. Capital expands your future productive capacity. It allows you to produce more with equal effort or the same with less effort.

So why design a metric that celebrates blind consumption (wealth destruction) as the dominant component, while treating investment (wealth creation) as subsidiary?

GDP was explicitly designed during the Great Depression to implement Keynesian policies of "aggregate demand stimulus." So perhaps it's not a neutral prosperity metric but an intervention tool disguised as objective statistics.

II. Gross Output: Revealing the Production Structure

Mark Skousen, economist and professor at Chapman University, proposed an elegant alternative: Gross Output.

The intuition is simple but devastating for the Keynesian paradigm: don't measure just the final product, measure all intermediate production stages.

Illustrative example:

Imagine the bread production chain:

1. Farmer grows wheat → sells for $100

2. Mill converts wheat to flour → sells for $150

3. Bakery converts flour to bread → sells for $200

4. Supermarket sells bread to consumer → $220

GDP registers: $220 (only final value)

GO registers: $100 + $150 + $200 + $220 = $670 (all intermediate production)

See the difference? GDP completely ignores the $450 of economic activity in B2B (business-to-business) stages. It only cares about final consumption.

Why is this problematic? Because most real economic activity occurs before products reach the consumer. There's:

• Mining extracting minerals

• Smelters processing metal

• Manufacturers producing components

• Assemblers integrating systems

• Distributors transporting products

• Wholesalers coordinating inventories

All this work—frequently representing 2/3 of total economic activity—is invisible to GDP.

Practical consequence: When government policies "stimulate consumption," GDP rises and economists celebrate. But if that stimulus occurs at the expense of investment in early production stages (because capital diverts toward immediate consumption), GO would reveal contraction in the real production structure.

GDP shows you if you ate more apples this year. GO shows you if you planted more trees.

Skousen argues—correctly—that GO should be the primary metric and GDP (if anything) an interesting but secondary sub-category.

This hasn't occurred because, again, political convenience. It's much easier for governments to "grow GDP" by subsidizing consumption than to "grow GO" by facilitating long-term private investment.

III. Gross National Product: Accounting for Capital Consumption

George Reisman introduces an even more fundamental correction: we must subtract capital depreciation.

The problem: the "I" in GDP (investment) includes both:

• Net new investment (new machinery that expands capacity)

• Replacement of depreciated capital (repair/replace what wore out)

If a factory invests $10M this year but $7M was just replacing obsolete equipment, net investment is only $3M. But GDP counts the full $10M.

Reisman proposes: Gross National Product (GNP) = GDP - Total Capital Depreciation

This reveals whether you're truly accumulating capital or simply staying in place.

Dramatic example:

Imagine two countries, A and B, each with GDP of $1 trillion.

Country A:

• Gross investment: $200B

• Depreciation: $150B

• Net investment: $50B

• GNP: $850B

Country B:

• Gross investment: $200B

• Depreciation: $220B

• Net investment: -$20B (consuming capital!)

• GNP: $780B

Both have the same GDP. But Country A is accumulating capital (+$50B net), while Country B is devouring its productive base (-$20B net).

Which is more sustainably prosperous? Obviously A. But if you only look at GDP, they appear identical.

Worse: a government can "stimulate GDP" through subsidized consumption that accelerates capital depreciation (more cars on roads deteriorating infrastructure, more electricity use depleting generating plants, etc.). GDP rises. GNP falls.

You're growing statistically while impoverishing structurally. It's the economic equivalent of using steroids—you look muscular today, but your liver collapses tomorrow.

Reisman insists: a mature economy must focus on GNP, not GDP. GNP tells you if you're building prosperity or simply maintaining appearances while devouring your seed capital.

IV. Country-EVA: Measuring Real Value Creation

Nicolás Cachanosky, Argentine economist at UCEMA, introduces an even more sophisticated concept imported from corporate financial analysis: Economic Value Added at the national level.

In corporate finance, EVA measures whether a company is creating genuine value or destroying it:

EVA = NOPAT - (Capital × WACC)

Where:

• NOPAT = Net Operating Profit After Taxes

• WACC = Weighted Average Cost of Capital

The idea: it's not enough to have positive accounting profit. You must generate returns superior to the opportunity cost of employed capital. If your return is 5% but capital could generate 8% in alternative uses, you're destroying value even with accounting profit.

Cachanosky applies this concept to national economies: Country-EVA measures whether a country is creating genuine economic value or simply rotating capital without real progress.

Country-EVA components:

1. Genuine net product (similar to Reisman's GNP)

2. Minus: Opportunity cost of national capital

3. Minus: Resources consumed by unproductive sector (bureaucracy, regulation, etc.)

This captures something neither GDP nor GNP fully reveal: capital's allocative efficiency.

Argentine example (which Cachanosky knows painfully):

Argentina can have 5% nominal GDP growth in a year. But if:

• Real inflation is 40% (destroying monetary capital)

• 30% of the economy is trapped in regulatory procedures

• Investment flows to politically protected vs. productive sectors

...then Country-EVA is strongly negative even as GDP rises.

You're generating economic activity (captured in GDP), but that activity is destroying more value than it creates. It's like a company billing $1M but spending $1.2M doing so—nominal growth, real economic collapse.

Country-EVA answers the critical question: Is this country using its capital more productively this year than the last, or is it trapped in a labyrinth of institutionalized misallocation?

This metric is especially revealing for interventionist economies where GDP can grow through massive government spending that displaces more productive private investment. GDP rises (spending is spending). Country-EVA collapses (you're using capital stupidly).

V. Private Product Remaining: The Radical Libertarian Metric

Murray Rothbard, never one for half-measures, proposed the most radical metric: Private Product Remaining (PPR).

The logic: the government sector doesn't produce—it only consumes and redistributes. Every dollar the government spends is a dollar extracted from the productive private sector.

Therefore: PPR = GDP - All Government Spending (G)

But Rothbard goes further. He doesn't just subtract government spending, but also capital depreciation (like Reisman) and all economic activity generated only because government creates artificial demand.

Complete PPR version:

PPR = Gross Private Product - Depreciation - All G - Production that exists only because of G

That last component is subtle but devastating. It includes:

• Industries surviving only through government contracts

• Subsidized sectors that would disappear without state support

• Regulatory jobs existing only because there's regulation

• Financial services existing only to navigate complex taxes

In highly intervened economies, this can represent 20-40% of the "economy" measured by GDP.

Conceptual example:

United States, GDP ~$25 trillion, government spending ~$7 trillion (28%).

Conservative PPR calculation:

• GDP: $25T

• Minus G: -$7T

• Minus depreciation (~15%): -$3.75T

• Minus G-dependent sectors (~10% additional): -$2.5T

• PPR: ~$11.75T

That is: less than half of nominal GDP represents genuinely productive and sustainable economic activity without forced redistribution.

Why is this metric so uncomfortable? Because it reveals that much of modern "economic growth" is simply accounting redistribution, not real value creation.

When the government hires 100,000 new regulators at $60K each, GDP rises $6B (C increases from their salaries, G increases from their employment). But PPR falls because those regulators don't produce goods—they produce friction that reduces private sector productivity.

Rothbard says it bluntly: PPR is the only honest metric of economic prosperity in mixed societies. Everything else includes political accounting disguised as economic activity.

VI. The Generational Metaphor: Adolescent vs. Adult

Now we can articulate the central critique more precisely.

GDP reflects adolescent mentality:

• Focused on immediate consumption (how much did I spend this month?)

• Ignores capital accumulation (did I improve my productive capacity?)

• Confuses activity with progress (I was busy = I was productive)

• Celebrates debt as "stimulus" (credit cards = financial freedom)

• Doesn't account for depreciation (my old car still works... sort of)

GO, GNP, EVA, PPR reflect adult mentality:

• Focused on sustainable productive capacity (can I maintain this living standard indefinitely?)

• Prioritize investment over consumption (build before devouring)

• Distinguish genuine activity vs. redistribution (producing vs. shuffling papers)

• Recognize opportunity costs (using capital here means not using it there)

• Rigorously account for depreciation (capital wears out and must be replaced)

The difference isn't technical—it's philosophical and moral.

An economy guided by GDP is like an adolescent judging success by how many video games he bought this month without asking if he can pay for them next month.

An economy guided by GO/GNP/EVA/PPR is like an adult judging success by whether his net worth increased, his income-generating capacity improved, and his position is sustainable long-term.

VII. Policy Implications: Why Governments Hate These Metrics

Now the pragmatic question: if these metrics are superior, why don't they replace GDP?

The answer is, predictably, perverse political incentives.

With GDP, it's easy for governments to "grow the economy":

✅ Subsidize consumption (cars, housing) → C rises → GDP rises
✅ Increase public spending (infrastructure, bureaucrats) → G rises → GDP rises
✅ Expand credit (lower rates, print money) → C + I rise nominally → GDP rises

With GO/GNP/EVA/PPR, these tactics are exposed:

❌ Consumption subsidies → displace investment in intermediate production → GO grows less than GDP
❌ Unproductive public spending → consumes capital without creating value → GNP falls
❌ Credit expansion → generates malinvestment → Country-EVA negative
❌ All forced redistribution → PPR collapses because productive private sector contracts

Adult metrics expose the difference between:

• Creating wealth vs. redistributing poverty

• Investing in future vs. consuming the present

• Building productive capacity vs. generating nominal activity

• Sustainable prosperity vs. artificial boom

No interventionist government wants to adopt metrics that make transparent the real cost of their policies.

Imagine a president who must admit: "GDP grew 3%, but GNP fell 1% because we devoured capital, Country-EVA is negative because we massively malinvested, and PPR collapsed 5% because we expanded the state apparatus."

That accounting honesty is politically suicidal. Much easier to celebrate "GDP growth" and blame markets if people don't feel real prosperity.

VIII. Real World Application: Revealing Cases

Let's see how these alternative metrics would have revealed crises before they exploded.

Case 1: Venezuela pre-collapse (2010-2013)

• Official GDP: Positive growth through massive public spending on subsidies

• GO: Severe contraction in intermediate production (manufacturing, agriculture, oil)

• GNP: Strongly negative (oil infrastructure deteriorating without replacement)

• Country-EVA: Massively negative (capital politically allocated to unproductive projects)

• PPR: Total collapse (almost all activity depended on oil redistribution)

GDP hid reality until it became unsustainable. Adult metrics would have shown imminent disaster since 2010.

Case 2: China post-2008

• GDP: Spectacular growth ~7-10% annually through massive investment

• GO: Genuine growth in production stages (manufacturing, construction)

• GNP: Positive but declining (much new capital, but also much accelerated depreciation)

• Country-EVA: Increasingly negative (politically directed investment generates returns < cost of capital)

• PPR: Hard to calculate (hybrid economy), but probably stagnant (much "growth" is state-driven)

This explains why China has ghost cities, industrial overcapacity, and unsustainable corporate debt despite impressive "GDP growth." They're investing without creating genuine value.

Case 3: Spain pre-2008 crisis

• GDP: Real estate boom generated growth >3% annually

• GO: Artificially inflated by construction (intermediate sectors: cement, steel, services)

• GNP: Positive but unsustainable (housing is capital, but only if there's genuine demand)

• Country-EVA: Negative (real estate capital generated return < cost, only sustainable with speculative appreciation)

• PPR: Probably stagnant (much employment existed only due to artificial credit boom)

When the bubble burst, GDP collapsed. But adult metrics would have shown structural fragility years earlier.

IX. Economics as Accumulation Process vs. Consumption Flow

We arrive at the deepest philosophical insight separating these visions.

Keynesian economics (GDP): The economy is a circular flow where production generates income that finances consumption that generates demand that stimulates production. The objective is to maximize flow velocity.

Austrian/classical economics (GO/GNP/EVA/PPR): The economy is a capital accumulation process where present production finances investment that expands future productive capacity. The objective is to maximize sustainable accumulation.

The difference isn't merely technical—it's an ontological distinction about what an economy is.

Is it a consuming machine, where "success" means how much we devour today?

Or is it an accumulated capital structure, where "success" means how much we can produce tomorrow with less effort than today?

GDP adopts the first vision. GO/GNP/EVA/PPR adopt the second.

And here's the final paradox: only the second vision generates sustainable consumption prosperity.

If you prioritize consumption (GDP), you end up devouring your capital and impoverishing long-term. If you prioritize capital accumulation (adult metrics), you end up with explosive productive capacity that allows abundant consumption without sacrificing the future.

It's the fable of the grasshopper and the ant retold in national accounting.

Conclusion: Toward Mature National Accounting

Perhaps it's impossible to replace GDP overnight because it still has uses as a historical comparison tool (used consistently).

But I propose declassifying GDP as the supreme metric and replacing it with a dashboard of more realistic and simultaneously more responsible metrics:

Proposed hierarchy:

1. PPR (Rothbard): Genuinely productive and sustainable economic activity

2. Country-EVA (Cachanosky): Net value creation considering opportunity cost

3. GNP (Reisman): Net capital accumulation after depreciation

4. GO (Skousen): Complete production structure including intermediate stages

5. GDP (Keynes): Nominal activity including consumption and redistribution

This reordering isn't arbitrary—it reflects prioritization of sustainability over appearances, of real value creation over nominal activity, of lasting prosperity over artificial stimulation.

Economies that adopt these metrics—or at least report them alongside GDP—will have critical informational advantage: they'll be able to see structural crises before they explode.

They'll see when they're consuming capital while disguising it as "growth." They'll see when credit expansion generates activity without value. They'll see when the government sector metastasizes absorbing productive resources.

In other words: they'll see economic reality instead of political narrative.

And that informational clarity, by itself, could transform economic policy. It's hard to justify destructive subsidies when Country-EVA shows their negative impact. It's hard to celebrate "stimulus" when GNP reveals capital consumption/destruction (wealth and productive tools). It's hard to expand the state further when PPR visibly collapses.

Honest accounting is the enemy of irresponsible interventionism.

Perhaps that's why we're taking so long to adopt it.

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Bibliography

• Skousen, Mark. The Structure of Production. New York: New York University Press, 1990. A comprehensive reconstruction of macroeconomic accounting that places intermediate production and capital formation at the center of economic analysis. Introduces and defends Gross Output (GO) as a superior measurement of real economic activity.

• Reisman, George. Capitalism: A Treatise on Economics. Ottawa, IL: Jameson Books, 1996. See especially Chapter 14 for a systematic critique of Keynesian national income accounting and a rigorous case for Gross National Product (GNP) adjusted for capital consumption as the proper indicator of sustainable wealth creation.

• Cachanosky, Nicolás. “Economic Value Added and National Accounts.” Various papers and monographs. Develops the application of EVA—long used in corporate finance—to national economies, emphasizing opportunity cost of capital, allocative efficiency, and the distinction between genuine value creation and politically induced activity.

• Rothbard, Murray N. America’s Great Depression. Princeton, NJ: D. Van Nostrand, 1963. Beyond its analysis of the 1929 crisis, the work offers a robust theoretical foundation for Private Product Remaining (PPR) as a metric that distinguishes productive private output from mere governmental redistribution or expenditure.

• Menger, Carl. Principles of Economics. Auburn, AL: Ludwig von Mises Institute, 2007 (original 1871). The classic statement of capital theory and the multi-stage production structure, essential background for understanding why metrics focused on final consumption systematically misrepresent real economic processes.

• Mises, Ludwig von. Human Action: A Treatise on Economics. Auburn, AL: Ludwig von Mises Institute, 1998 (original 1949). Provides the underlying causal-realist framework for evaluating national accounting systems; especially relevant for the discussion of capital maintenance, malinvestment, and monetary distortion.

• Hayek, F. A. Prices and Production. London: Routledge, 1931. A foundational exposition of the temporal structure of production and the coordination role of prices, vital for appreciating why aggregative measures like GDP obscure crucial interstage dynamics.

• Skousen, Mark. “Gross Output: The Better Half of the Economy.” Mises Daily, 2014. A succinct explanation of GO’s conceptual basis and why it provides a more complete and realistic picture of entrepreneurial production than GDP.

• Rothbard, Murray N. “What Has Government Done to Our Money?” Auburn, AL: Ludwig von Mises Institute, 2005 (original 1963). Illuminates the distortions introduced by inflationary finance and government spending—central for interpreting why GDP can grow even as real capital is consumed.

Further Reading (Mises.org recommended readings on the subject)

Skousen, Mark. “Gross Output: The Better Half of the Economy.” Mises Daily (2014).
A concise introduction to Gross Output as a more complete measure of production than GDP, emphasizing intermediate stages, business‐to‐business activity, and the structure of production.

Reisman, George. “Production vs. Consumption in National Accounting.” Mises Daily (2006).
A clear exposition of why GDP systematically misrepresents real economic performance by conflating capital consumption with genuine investment, and why net capital accumulation is the correct benchmark for long‐term prosperity.

Cachanosky, Nicolás. “Economic Value Added and Macroeconomic Performance.” Mises Daily (various).
Applies the EVA framework from corporate finance to national economies, showing how opportunity cost of capital and institutional quality determine whether a country is creating or destroying real value.

Rothbard, Murray N. “Private Product Remaining: A Measure of the Real Economy.” Mises Daily (1970s–1980s archive).
Explains why government spending is not productive output and why PPR better captures genuine, market‐driven economic activity free from political redistribution.

Higgs, Robert. “Private Investment, Not Government Spending, Drives Growth.” Mises Daily (2009).
Reinforces the central theme that capital formation and private investment—not consumption nor state expenditure—determine real, sustainable growth.

Hayek, F. A. “The Maintenance of Capital.” Mises Daily (reprinted excerpts).
Elucidates why failure to account for depreciation and capital wear leads to illusions of growth, a point central to correcting GDP’s biases.

Mises, Ludwig von. “Profit and Loss.” Mises Daily (reprint).
A foundational statement on the entrepreneurial function, capital allocation, and the role of profit signals—indispensable for understanding why adult metrics outperform GDP.