Ok this is simple enough but has always puzzled me...
You have X bhp at the crank
You have X (less) bhp at wheel
If you shorten gearing, say -1 tooth front do you increase measured bhp at rear wheel.
From googling about I think you do, and if say I dyno 161bhp at wheel then shorten gearing 5% I make 5% more power at wheel ? (ie - 169). I'm thinking this because by reducing the gearing you lessen the power loss between the crank and wheel as less work involved for engine. Maybe this works to the point where the rear wheel bhp would almost match crank bhp though at that point you wouldn't be traveling very fast at all.
edit: feel free to point out the flaws in my thinking lol, im really not very bright :)
edit again: ok reading about it some more it seems to only effect torque, which makes sense, lower gearing more torque.. power remains at a constant.
edit again again: looks like both remain constant.. quote
'Horsepower is a function of Torque and RPMs that the engine puts out.
Hp(T,R)=R*T/5250 where R=rpms and T=ft-lbs
Gearing does not change the ammount of torque that your engine produces or the rpms that it produces it at, therefore the power is also unchanged. The effect that changing the gearing has is to use the same availble power but with a modified linear relationship between the speed of your engine and the speed of your tire. The more revolutions the tire does for each revolution of the engine, the slower the engine can accelerate the tire between fixed speeds (within the powerband for example) because it can only do a certian ammount of work/time. if that same work/time is applied to a lower ratio of tire revolutions to engine revolutions, the tire will accelerate to a faster speed. Stunters change their sprockets for this advantage, more acceleration within gears with the downside of shorter gears.'