Non Market Production
Nonmarket Production
Nonmarket production is something we could compare to household production. It is something that we cannot count as GPD because it does not involve a market transaction. An example would be things like repairing your car, getting the lawn mowed, painting the house or even picking up relatives from school. All of these things add nothing to GPD. Nonmarket production results in some oddities in national-income accounting and makes income comparisons across lengthy time periods less meaningful. So what does all this mean?? Nonmarket production causes an upward bias to the growth rate of real GPD.
In the article Education in Nonmarket Production, Robert T. Michael explores a framework in which these nonmarket production transactions may be analyzed. He goes to discuss that if human capital yields a flow of productive services through man-hours in the labor market then it may yield a flow of services through the time spent in other activities. His paper suggests a framework in which these nonmarket returns may be treated and his theory employs the concept of household production because viewed as a small multiproduct firm in which its member’s nonmarket time is combined with purchased market goods.
Nonmarket production is everywhere in today’s world. For example, my husband who was a car mechanic for many years worked on cars all day for a living. He was paid on how many cars came through the shop and how quickly he was able to fix these things. On the weekends he would do repairs to my car when needed with his own tools and his time. I did not pay to have my car repaired because my husband did it at my home so therefore there was no transaction against it. Examples like this happen everyday in households like mine. What I would pay the same shop my husband worked at to do I get done “free” because I married the mechanic.
References
James D. Gwartney, (2011). Economics, Private and Public Choice. 14th ed. USA: South-Western Cengage
Nonmarket production is something we could compare to household production. It is something that we cannot count as GPD because it does not involve a market transaction. An example would be things like repairing your car, getting the lawn mowed, painting the house or even picking up relatives from school. All of these things add nothing to GPD. Nonmarket production results in some oddities in national-income accounting and makes income comparisons across lengthy time periods less meaningful. So what does all this mean?? Nonmarket production causes an upward bias to the growth rate of real GPD.
In the article Education in Nonmarket Production, Robert T. Michael explores a framework in which these nonmarket production transactions may be analyzed. He goes to discuss that if human capital yields a flow of productive services through man-hours in the labor market then it may yield a flow of services through the time spent in other activities. His paper suggests a framework in which these nonmarket returns may be treated and his theory employs the concept of household production because viewed as a small multiproduct firm in which its member’s nonmarket time is combined with purchased market goods.
Nonmarket production is everywhere in today’s world. For example, my husband who was a car mechanic for many years worked on cars all day for a living. He was paid on how many cars came through the shop and how quickly he was able to fix these things. On the weekends he would do repairs to my car when needed with his own tools and his time. I did not pay to have my car repaired because my husband did it at my home so therefore there was no transaction against it. Examples like this happen everyday in households like mine. What I would pay the same shop my husband worked at to do I get done “free” because I married the mechanic.
References
James D. Gwartney, (2011). Economics, Private and Public Choice. 14th ed. USA: South-Western Cengage
References: James D. Gwartney, (2011). Economics, Private and Public Choice. 14th ed. USA: South-Western Cengage Learning. Robert T. Michael , (1973). Education in Nonmarket Production . Journal of Political Economy. 18 (2), pp.307