Another place where Reisman covers this is in Chapter 15 of "Capitalism". There he shows that the contemporary way of counting GNP makes it appear as if most of what goes on in economic life is consumption, whereas, in actual fact, most of what goes on is saving and investing.
He is referring to Dr. Reisman's treatise which you can link to here. Dr. Reisman explains how modern economists calculate national income and shows fundamentally how their method violates the law of identity by not counting productive expenditures as expenditures. As Per-Olof said, this leads to economists overemphasizing consumer expenditure as it relates to economic "growth" or GDP. I have read about this elsewhere, e.g., Jesus Huerta De Soto's book Money, Bank Credit, and Economic Cycles but nowhere is this explained as clearly and as in depth as in Reisman's book.
Thanks again to both Beth and Per-Olof. Their comments helped to further my understanding of the topic greatly.
I'd like to make a further fundamental point on the ideology of productionism vs. consumptionism. It would seem that this dichotomy is an instance of the more fundamental philosophic dichotomy of the primacy of existence vs. the primacy of consciousness. From ARI's website, I quote Ayn Rand:
The basic metaphysical issue that lies at the root of any system of philosophy [is] the primacy of existence or the primacy of consciousness.
The primacy of existence (of reality) is the axiom that existence exists, i.e., that the universe exists independent of consciousness (of any consciousness), that things are what they are, that they possess a specific nature, an identity. The epistemological corollary is the axiom that consciousness is the faculty of perceiving that which exists—and that man gains knowledge of reality by looking outward. The rejection of these axioms represents a reversal: the primacy of consciousness—the notion that the universe has no independent existence, that it is the product of a consciousness (either human or divine or both). The epistemological corollary is the notion that man gains knowledge of reality by looking inward (either at his own consciousness or at the revelations it receives from another, superior consciousness).
The source of this reversal is the inability or unwillingness fully to grasp the difference between one’s inner state and the outer world, i.e., between the perceiver and the perceived (thus blending consciousness and existence into one indeterminate package-deal). This crucial distinction is not given to man automatically; it has to be learned. It is implicit in any awareness, but it has to be grasped conceptually and held as an absolute.
Observe that the philosophical system based on the axiom of the primacy of existence (i.e., on recognizing the absolutism of reality) led to the recognition of man’s identity and rights. But the philosophical systems based on the primacy of consciousness (i.e., on the seemingly megalomaniacal notion that nature is whatever man wants it to be) lead to the view that man possesses no identity, that he is infinitely flexible, malleable, usable and disposable. Ask yourself why.
See, for example, this recent article on the resurgence of Keynesian economics. Quoting the article:
More than 70 years after the ideas of a British economist were used to justify a huge expansion in the government’s role in the economy, John Maynard Keynes is back.
Almost everyone today agrees that a big fiscal stimulus is just what the doctor ordered to lift the U.S. economy out of what is fast becoming the worst slump since the Great Depression. (The few remaining limited-government types are hunkered down at Washington’s Cato Institute.) The only questions for the Obama administration are the size of the package (anywhere from $500 billion to $1 trillion) and its composition (infrastructure, tax cuts, transfers to the states, “green” jobs).
That the idea of government spending substituting for private demand is still kicking around after all this time makes you wonder just what kind of a science economics is. Why don’t we know with some degree of certainty whether old-fashioned pump- priming works? Do we care? Or is this about government appearing to “do something” -- anything -- in a crisis?
The author of the article then cites the difficulty of conducting economics experiments as an inherent dilemma in ascertaining the validity of such policies. Do you need to do an experiment to know that cheating reality can not work. Doesn't all of our experience in reality tell us that? Quoting one of the "hunkered down", "limited government types":
There’s only one problem with the theory: a “glaring logical fallacy,” says Dan Mitchell, senior fellow at the Cato Institute, a libertarian think tank. “In the real world, government can’t inject money into the economy without first taking money out of the economy,” he says. “The theory only looks at one-half of the equation.”
So it is believed by virtually all that the government can create "fiscal stimulus" by spending money on public works thus increasing demand. Where does the government get this money and isn't this a zero sum game? Who knows - we do not have enough data from our experiments. The Fed is encouraged to create money or "inject liquidity" into the system. Where does this money come from and what effect will the creation of paper dollars have on prices in the long run? We don't know because we can not figure out how to do a "double blind" experiment. Of course, cheating reality can not work. So how can the whole world be taken in by this kind of thinking? Quoting Ayn Rand:
They want to cheat the axiom of existence and consciousness, they want their consciousness to be an instrument not of perceiving but of creating existence, and existence to be not the object but the subject of their consciousness—they want to be that God they created in their image and likeness, who creates a universe out of a void by means of an arbitrary whim. But reality is not to be cheated. What they achieve is the opposite of their desire. They want an omnipotent power over existence; instead, they lose the power of their consciousness. By refusing to know, they condemn themselves to the horror of a perpetual unknown.
Oh well, maybe this time they will make it "work".