How the failure to adjust working capital contributes to the partial or indeterminate value of production

In our previous work (S.M. De Marco, 1991–2026), we have sharply criticized the practice of either omitting the contribution of fixed capital from production aggregates, thereby leading to partial analyses, or accounting for it using flawed methods, which invalidates subsequent analysis. In this paper, we wish to alert the reader that it is not only fixed capital that hinders an accurate representation of production aggregates (and exchange aggregates); circulating capital poses a similar obstacle, as its approximate aggregation casts a long shadow over macroeconomics. Once again, as was the case with fixed capital, the issue regarding circulating capital stems from a failure to integrate two realms: the corporate reality (evident in financial statements prepared according to the rules governing the determination of business quantities) and the economic reality (the domain of political economy). Political economy suffers from a flaw: it ignores the insights into the firm provided by business administration scholars. Yet, in both instances, the firm remains the same entity, but it's a «black box» for economic disciplines. In the following discussion, we will examine the specific values found in the financial statements of firms across all categories, legal forms, and sizes that are disregarded during the aggregation process required to derive macroeconomic figures. Consequently, the value of circulating capital is accepted as valid without accounting for its inventories, leading to an erroneous figure for the economic system's total production value.