----- Original Message -----
Sent: Thursday, September 21, 2006
10:25 AM
Subject: [socialcredit] A+B as I
C
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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