Just after I wrote this article I was listening to a programme on civil engineering and how they cost mega projects together with their contractors. I was amazed that their modelling allowed them to produce projects whose end cost was within 98% of estimates. One point made was the drive to maximise controlled work places adjacent to the projects in order to pre-fabricate as much as they can. In this way to reduced the uncontrolled elements.

]]>Good Morning Aris.

Thank you for showing such interest. I am no mathematician so am unable to follow the maths. Could you please send me your comment as an attachment so I can show it to someone more able. I have tried to make a pdf of your valuable comments but could not.

I would like to refer you back to your turnover figure of 20 for the petroleum industry. In fact the formula in the aggregate provides a similar figure. If you examine the attached spreadsheet for the UK economy you will find confirmation of this. However before you do please be aware of the methodology employed by the system of SNA. It gives GDP by industry. That means turnovers are confined to the industry. Hence if we follow the turnovers for the petroleum industry we have to add up a number of columns relating to mining, processing, distributing and selling. Column 6&7 for the extraction, possibly column 9 for support facilities, column 19 which is the actual processing, some element of transport and definitely wholesaling. Together you get the figure of 20 where the processing element is 12.

Ideally I would like to only use the turnover for non-financial corporations as this would provide a composite figure and avoid this fragmentation. Unfortunately, no statistical bureau gives gross output based on legal entities, only by industry. Therefore it follows that the turnover formula can only apply to an industry. To circumvent this I also use retail turnover of around 9 as representative because it is the sum of manufacture, wholesale, a bit of agriculture and transport and it therefore provides a more responsive figure for the state of the market.

The spreadsheet has been prepared for my next article on the British economy. Funnily enough I was going to discuss this very issue of industry fragmentation using this spreadsheet, because the way the UK compiles its input-output tables lends itself to this explanation.

Again thank you for providing me with the two references. If you go on to my website and read my latest posting,

https://theplanningmotivedotcom.files.wordpress.com/2018/09/three-rates-of-profit-in-three-countries-pdf.pdf

you will find a critique of some of these authors.

I hope that I have restored your confidence in the formula. I consider it the Rosetta stone allowing us to interpret data in a much more precise and enlightening way.

]]>Comradely Aris

https://drive.google.com/open?id=1538eKcofJn8HRHa_weBjI6-pZqcdRiPm

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