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The time structure of production in the US, 2002–2009

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Abstract

The US time structure of production during the 2002 through 2009 business cycle is characterized empirically using industry-level input-output data. An industry’s total industry output requirement (TIOR) is proposed as a metric for “roundaboutness”. I find that the time structure of production lengthened following the Federal Reserve’s 2002 expansionary deviation from the Taylor rule and then contracted during the Great Recession. Value added growth in the most-roundabout of US industries accelerated relative to that of the least-roundabout industries. Heading into the Great Recession, value-added growth in the most-roundabout industries contracted early and turned negative in 2007 while value-added growth in the least-roundabout industries remained positive until 2009. The stylized facts of the time structure of production are consistent with Austrian Business Cycle Theory.

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Notes

  1. Young (2011) argues more thoroughly for the development of discriminating, quantitative hypotheses from ABCT. Young (2005) offers and tests such a hypothesis using quarterly job creation and destruction data for the US economy from 1972 through 1993.

  2. As Callahan and Horwitz (2010, p. 220) state: “If the central bank pursues a discretionary, rather than a rule-oriented, monetary policy, then the particular ideas of the chief central banker […] must be taken into account by participants in the markets affected by central bank policy.”

  3. As of this writing, the latest US Department of Labor report is for April of 2011 with the unemployment rate at 9.0 percent.

  4. http://www.bea.gov/industry/iotables/help_section.cfm#glossary

  5. Similar statements can be derived using an additive value-added assumption in place of (3), i.e., X i+1  = X i  + R.

  6. See Barnett and Block (2006) for a critique and, ultimately, an almost complete rejection of the use of Hayekian triangles.

  7. This will be true even if a larger or smaller number of firms allocate their time during the same “calendar time” interval. There are certainly analogs between the underlying intuition my using the TIOR and Skousen’s (1993, 2001, 2007) arguments in favor of aggregate gross output (GO) as a superior macroeconomic aggregate to GDP.

  8. http://www.bea.gov/industry/io_annual.htm

  9. For industries 561 (“Administrative and Support Services”), 42 (“Wholesale Trade”), 531 (“Real Estate”), 44 (“Retail Trade”), and 532 (“Rental and Leasing Services and Lessors of Intangible Assets”) from the LR subsample I substituted the related industries, respectively, 5613 (“Employment Services”), 425 (“Wholesale Trade Agents and Brokers”), 5312 (“Offices of Real Estate Agents and Brokers”), 443111, 4441, & 445110 (“Household Appliance Stores”, “Home Centers”, & “Supermarkets and Other Grocery Stores”), and 5321 (“Automotive Equipment Rental and Leasing”).

  10. Source: US Energy Information Administration (http://www.eia.doe.gov/steo/fsheets/index.cfm).

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  1. Department of Economics, West Virginia University, Morgantown, WV, 26506-6025, USA

    Andrew T. Young

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Correspondence to Andrew T. Young.

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I thank an anonymous referee for helpful comments.

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Young, A.T. The time structure of production in the US, 2002–2009. Rev Austrian Econ 25, 77–92 (2012). https://doi.org/10.1007/s11138-011-0158-0

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