Chapter 8 Gross Domestic Product

8.1    The central concept in a national accounting system is economic production. Production is the process whereby inputs of labour, materials (produced or natural), accumulated capital assets and knowledge are combined to provide outputs of goods and services. This definition of production includes:

• production of goods that are supplied to units other than their producers, including goods used as inputs to the production of other goods;
• production of goods that are retained for the producer's own use;
• provision of services of all kinds which add to the value of goods (such as transport and merchandising services);
• provision of services directly bought and sold in the market in their own right (such as the services of doctors, teachers and entertainers);
• provision of knowledge-capturing products (the provision, storage, communication and dissemination of information, advice and entertainment) which the consuming unit can access repeatedly; and
• illegal production, comprising the production of illegal goods and services (i.e. for which distribution or possession is banned by law), and production of legal goods and services by unauthorised producers (e.g. unlicensed medical practitioners).

8.2    Production is not only confined to goods and services that are of clear monetary value because they are bought and sold. Some produced goods and services do not enter the market but are made available free of charge by the producer (e.g. many goods and services produced by governments and non-profit organisations). They can also be for the direct use of the producer, either as final consumption or as inputs to the producer's own production or capital formation. Such non-market production can be regarded as including, in addition to the goods and services produced as the result of current work, the services which durable assets (such as cars, television sets and public parks) yield to their owners/users, and domestic services produced by households for use within the producing household. Such services are outside the market since they flow to their owners/users without any current exchange of money equivalent to the value of the services.