| Subject: | [socialcredit] The Nascent Reductio | | Date: | Wednesday, May 4, 2005 07:15:39 (-0700) | | From: | William B. Ryan <w_b_ryan @.....com>
|
Consider a simple two-stage three-sector model, with
supplier, retailer and consumer sectors. The
retailer sector makes both A and B payments,
CONSIDERED AS FLOWS, with B flowing to the supplier
stage of production. The supplier sector makes only
A payments. So we categorize the totality of A
payments into A1--those by the retailer sector, and
A2--those by the supplier sector. A1+A2 is the
income of the public. A1+B is price at the point of
retail.
Under what conditions will A1+A2 = A1+B?
-
--- Jim <jschroeder@shaw.ca> wrote:
> Again, no, but that's the reductio ad absurdum to
> the
> argument.
>
> The model of circular flow ("All 'capitalized'
> costs > if you trace them back, had to originate as
> income.")
> assumes that A+B equals sales of goods and
> securities
> to the public, whose income to purchase goods and
> securities derives entirely from salaries, wages
> and
> corporate dividends. The theorem demonstrates that
> is a mathematical impossibility if there is labour
> displacement, etc.; that in such cases a portion of
>
> A+B must derive from some source or sources
> extraneous to A, which Douglas postulated is from
> "favourable" balance in trade, bank credit
> expansion,
> etc.
>
>
> It's no "reductio ad absurdum" to state that B costs
> (capitalized costs) were once income (A costs). The
> value of any raw material, or capital, is the income
> that went into transforming it. The rock sitting in
> my driveway has no value, but if I polish it, and
> charge $10 wages to that polishing process, then the
> price of the rock has to be at least $10 for me to
> earn a profit. The value of the rock comes from my
> transformation of it, which is represented by A. A
> becomes B once it is "capitalized" or carried
> forward in price. In my example, if the polished
> rock is used for a piece of jewellry, then the
> labour going into the process of making the jewellry
> from the polished rock is A, and the polished rock
> itself becomes B. Both A+B form the price of the
> rock.
>
> If my income $10 was "saved up" as purchasing power,
> then there would be no discrepancy, because my A
> would be equivalent to the jewellers B, but if my A
> makes its way back to the bank before the price of
> the polished rock shows up in the jewellery, then
> there is a discrepancy by the amount B.
>
> There's no way the gap between A+B can be bridged by
> increasing A based on what I said above. A is also
> CREATING costs, so any increase in A increases price
> by the ratio of labour costs to price. I can bring
> income closer to unity (equilibrium) between prices
> and income by increasing income (A) relative to
> capital costs (B), but I can never bring unity. And
> increasing A also increases price as the income
> shows up in cost, and hence, price.
>
> When income hits a price, it begins to flow back to
> the bank. If that price is cancelled, as in a
> consumer price, then there is no problem. However;
> if that price is carried forward as in a capitalized
> cost, and the income disappears by cancellation of
> the bank loan that created it, then there is a
> corresponding discrepancy.
>
> We've had this discussion before. It appears to me
> that you've fallen for the fallacy that income is
> flowing backwards with respect to time. I'll go
> back and dig up the example you gave me in this
> regard, and I've seen it before. The point is that
> people who produce capital don't wait until the
> consumer good is sold until they receive their
> income. If they did, there would be no
> disequilibrium. The fact is that they are paid in
> advance of the cost showing up in a consumer good.
>
> This causes inflation of currency at the time, and
> is absorbed by the the producers/distributors of
> consumer goods. This extra money is then reinvested
> back in industry. It's not saved up as purchasing
> power, it's used to create capital. This capital
> then goes to create price values for which there is
> no equivalent purchasing power.
>
> If you want, we can call this investment in capital
> "labour displacement". B is the financial
> representation of this displacement. However; even
> if B were not to increase, depreciation alone would
> grind the economy to a halt if it were not for
> intervening factors. And socialists try to increase
> A relative to B, but this never brings the economy
> to equilibrium, and it shows up as inflation as the
> A costs show up in production.
>
> The fact is that all bank loans are inflation of
> currency, and real cost would be decreasing if not
> for this fact.
>
> Take care,
>
> Jim
>
>
>
> ----- Original Message -----
> From: "William B. Ryan" <w_b_ryan@yahoo.com>
> To: <socialcredit@elistas.com>;
> <ownership@cog.kent.edu>;
> <austrianschoolofeconomics@yahoogroups.com>
> Sent: Sunday, May 01, 2005 10:12 AM
> Subject: [socialcredit] Replying to Jim Schroeder:
> Re: Social Credit from First Principles
>
>
> > "B costs had to have been A costs at one time. I
> > cannot find the exact quote, but Douglas believed
> in
> > the labour theory of value. All 'capitalized'
> costs
> > if you trace them back, had to originate as
> income."
> > --------------------------
> > ---------------------------
> >
> > Again, no, but that's the reductio ad absurdum to
> the
> > argument.
> >
> > The model of circular flow ("All 'capitalized'
> costs
> > if you trace them back, had to originate as
> income.")
> > assumes that A+B equals sales of goods and
> securities
> > to the public, whose income to purchase goods and
> > securities derives entirely from salaries, wages
> and
> > corporate dividends. The theorem demonstrates
> that
> > is a mathematical impossibility if there is labor
> > displacement, etc.; that in such cases a portion
> of
> > A+B must derive from some source or sources
> > extraneous to A, which Douglas postulated is from
> > "favorable" balance in trade, bank credit
> expansion,
> > etc.
> >
> > That is to say, the consumers who are involved in
> the
> > production process, through their labor and
> > ownership, are divorced from sovereignty over the
> > totality of their own production. Something else
> is
> > involved than personal decisions to consume, save
> or
> > invest, reflected through sales. Therefore, the
> > theory of the market is flawed.
> >
> > The Social Credit reforms would rationalize that
> > "something else" to the benefit of consumers at
> the
> > point of retail, establishing their economic
> > sovereignty for the first time in history.
> >
> > As to Douglas believing in the labor theory of
> value,
> > you will not find anything supporting that
> contention
> > in the writings of Douglas. Indeed, you will find
>
> > the contrary.
> >
> > There is the displacement of labor. But also the
> > cultural heritage, inherited from the past,
> entitling
> > everyone to a share of productive capacity,
> whether
> > employed, or not. And taking that share does not
> > take anything away from anybody, since it derives
> > from the unearned increment of association, owned
> > equally by all.
> >
> > It is dividend paid on capital account.
> > -
> >
> >
> >
> >
> > --- Jim <jschroeder@shaw.ca> wrote:
> >
> > > The more I think about it, the more I think we
> are
> > > arguing the same thing in different language,
> and if
> > > you humour me I'll explain.
> > >
> > > You state, " For example, a B payment places a
> > > financial asset into the hands of the seller in
> the
> > > structure of production, while at the same time
>
=== message truncated ===
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The Nascent Reduct
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