| Subject: | [socialcredit] Re: the theorem: SAY'S LAW | | Date: | Monday, January 17, 2005 10:37:43 (-0800) | | From: | William B. Ryan <w_b_ryan @.....com>
|
| In reply to: | Message 480 (written by Timothy Carpenter) |
> The conventional assumption - Say's Law - is that
the
> costs of production of what is being produced
> automatically equal the salaries, wages and
dividends
> being paid to final consumers.
"From the extract, below, I do not see the above
assumption/presumption of Say's Law being so."
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---------------------------
Tim, the standard shorthand paraphrase is "supply
creates its own demand."
Do you disagree with the standard paraphrase? I
mean, do you disagree that's what Say is saying in
the cited excerpt?
http://www.geocities.com/socredus/say.txt
-
"Money is the means for transactions, being a
temporary conversion of productive wealth. Wealth
grows with increased production, not increased money
ALONE."
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---------------------------
I would be tempted to say that nobody in the world
believes in something as ridiculous as that, except
I've seen the "magic theory of money" expressed
frequently on the GJM list. I would put it in the
category of perpetual motion machines; I've seen one
of those promoted also by the founder of the list:
the motionless electromagnetic generator. Its
financial equivalents are "zero interest loans,"
"zero taxation" and "debt-free money."
Money and credit are merely tools among many other
tools, physical and contractual, that contribute to
the process of production.
It is within the broad category of society's
"ultrastructure," in contrast to its infrastructure
and superstructure.
Another way of putting it is that it is included in
society's *social infrastructure.*
-
"If anything, it [Say's Law] does not disagree with
A+B at all IMHO."
-------------------------
---------------------------
The difference is that Say's Law says that supply and
demand equate automatically; A+B says that it does
not, and demonstrates a mechanism as to why it does
not: Labor Displacement. It certainly would equate
in a pure barter system, but the modern world cannot
function in a pure barter system. You might note
that Say is imposing a barter model upon the economy
of 1821 in his reply to the "adventurers in the
different channels of industry." It was an
inappropriate model even for 1821. That's what the
"adventurers" were telling him and he wouldn't
listen.
This is how Douglas put it in the Interim Report:
http://www.geocities.com/socredus/interim_report.txt
From the Preamble:
"...Effective demand originated in the barter system,
that is to say, individuals parted with a surplus of
real wealth in their possession to obtain in exchange
real wealth of a different variety for which they had
a need...In the modern world, however, the
preponderating feature in effective demand which is
universally employed to carry on the world's business
is what is technically called a 'credit instrument,'
of which there are several forms. For the purposes of
this preamble it is only necessary to consider the
cheque...
"While it is clear that under a barter system there
is always sufficient effective demand although it may
be inequitably distributed, under a money or cheque
system both inequitable and ineffective demand are
certain unless production and demand are consciously
and systematically related."
-
"What is missing explicitly from Say's Law is that
additional money is needed to fill the gap, as
opposed to more money 'creating' wealth on its own."
-------------------------
---------------------------
Of course, Say denied there was a "gap," taking what
we now call the "neutral money" position, his public
conveyance metaphor. It's not that money creates
wealth "on its own," but that money is one of the
tools that helps us create wealth.
-
"You say much money exists as accounting..."
-------------------------
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It is an element of the accounting system.
-
"Does it need to exist as coin/silver/hard currency?"
-------------------------
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No. The creditary view is that precious metal
coinage were creditary instruments printed on coins
that carried along with them some intrinsic value, as
collateral. In those days copper was a precious and
very useful metal commonly used in production.
(Innes has demonstrated that coins of the same
denomination varied greatly in terms of their
intrinsic metal content, so he concludes the
intrinsic metal content was secondary to their
primary function.)
http://www.geocities.com/new_economics/innes/ In
that way, metal coinage differed from alternative
monetary forms, like tallies, which were commonly
used in trade since Man emerged from the last ice
age. The record is skewed because most ancient
tallies were on wood or leather, which did not
survive, unlike metal coins which could survive for
millennia. The collateral backing money is no longer
needed in modern societies with credible institutions
to adjudicate contracts, including the implicit
contract against the issuer, as well as against the
immediately preceding holder in due course. For that
reason, tallies in their modern forms have supplanted
intrinsic metal coinage.
-
I think we need to go several more rounds with Say
before moving on.
Thanks for your continuing participation in the
discussion.
-
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