Smithian Domestic Product and the U.S. economy

This study examines Adam Smith's concept of national product (referred to as Smithian Domestic Product, or SDP) which he articulated in The Wealth of Nations. In contrast to Gross Domestic Product (which measures the production of things that have value), Smith's measure is more plutological. It measures the production of things critical for the accumulation of wealth. Given the global interest in economic growth and improvements in living standards, SDP is potentially useful as a complement to the GDP measure. As a preliminary effort to assess that potential, SDP and GDP estimates for the U.S. economy were compared for the period from 1949 to 2002. For two major macroeconomic events in the past decade (the economic boom of the 1990s and the recent recession), SDP appears to perform better than the GDP measure.