From: Jim <jschroeder@shaw.ca>
Reply-To: socialcredit@elistas.com
To:
socialcredit@elistas.com
Subject: [socialcredit] A+B as I C
Date: Wed, 20
Sep 2006 16:25:08 -0600
I wanted to give a brief synopsis of A+B as I see it.
Martin mentions that the "cost" of capital production appears in consumer
prices twice, because it shows up in the cost of consumer goods now, as the money
that is distributed for the capital production is absorbed by businesses
operating on the laws of supply and demand, and it appears again when the
consumer goods the capital goods produce pass the cost of the capital goods onto
the consumer in order to recoup the money they invested in the production of the
capital goods.
Douglas said, "Where any payment in money appears twice or more in series
production) then the ultimate price of the product is increased by the amount of
that payment
multiplied by the number of times of its appearance)
without any
equivalent increase of purchasing power." (The Monopoly of Credit)
This can also happen from re-investment of savings, as the money that was
debited to the cost of goods for one production cycle is re-invested and shows up
in the cost of goods of another.
Bill likes to point to the fact that labour displacement, or the use of
technology to increase the productivity of labour, causes B to rise relative to
A, and this means that the gap between income and prices is ever increasing. The
result of this is that ever increasing capital production, or ever increasing
exports over imports, is necessary to bridge the gap.
I think alot of opponents to the A+B theorem do not like the way Douglas
approached the problem, and I must say that I don't think that the firm Douglas
used in his examples are a "statistical firm", nor do I think he started with a
macro-economy. Douglas was an engineer and a scientist, so like a scientist, he
took an observation, derived a hypothesis, and tested it. Economists derive a
theoretical model first, and then test it (more of an Aristotilean approach).
Douglas noticed that in the firm he was working the expenditures on wages,
salaries and dividends during any period of time were always less than the total
costs for the company in the same time period. He then checked to see if this
was true for all firms, and found that only in cases where the firm was going out
of business was it
not true, so he concluded that if it was true for all firms not going out of
business, it must be true for the economy as a whole. In other words, he worked
from the firm to the macro, all the while using a scientific approach to the
problem.
The criticism of Douglas is that the B payments to other firms are income for
other firms, and this is where the error in their thinking occurs. It can only
be income if it is distributed as an A payment, so even if one firm's B payment
goes to another firm, only the portion that the firm distributes in wages,
salaries, and dividends is income, which of course comprise it's A payments.
There is money which is "hung up" in the productive system because it is going to
cancel costs from previous accounting cycles. I believe the confusion results
from the belief that money "circulates" as opposed to "cycles", and has two
"directions".
I will end my thoughts here, because they are long enough for now.
Any comments?
Take care,
Jim
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