Re: profit, etc.

["Gunnar Tomasson" <tomasson@xxxxxxxx>]

Bill:

You write:

The rate-of-flow of the costs of production is A + B.  The
rate-of-flow of purchasing power to final consumers enabling final
consumption is A, which includes salaries, wages and dividends broadly
defined.  A represents payments into account balances held by
consumers.  B represents payments into account balances held by firms.
In an expanding economy, A + B is greater than A yet the statistical
firm books a profit.

Question:

If "the rate-of-flow of purchasing power to final consumers" is A, "which
includes salaries, wages and dividends broadly defined", then A would seem
to be "the rate-of-flow" of production costs incurred during any given
period.

Where, then, does B enter the picture - except as payment by Firm X
(Microsoft Software Department) to Firm Y (Microsoft Hardware Department)
whereby some of Firm Y's work in process is transferred (sold) to Firm X?

Gunnar


----- Original Message -----
From: "William B. Ryan" <william_b_ryan@xxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Cc: <tomasson@xxxxxxxx>
Sent: Monday, September 25, 2000 9:18 PM
Subject: Re: profit, etc.


> -----original message-----
>   13 June 2000
>   Gunnar Tomasson
>   tomasson@xxxxxxxx
>   Re: profit, etc.
>
>   Bill:
>
>   The reference note reads in part as
>   follows:
>
>   "In the condition of *expansion*,
>   however, B > A2, so that the
>   instantaneously measured costs of
>   production are > than factor payments,"
>   where "B represents the composite of
>   disbursements by firms in the aggregate
>   into account balances held by firms" and
>   A2 is part of "A, bifurcated into A1 and
>   A2, [which] is the composite of
>   disbursements by firms into account
>   balances held by consumers in their role
>   as consumers, enabling final
>   consumption."
>
>   Also:
>
>   "In *stasis* the following condition
>   applies: B = A2, therefore, in this
>   special case only, the costs of
>   production = factor payments, A1 + A2."
>   -----//
>
>   Why should "disbursements" from one
>   firm (or Microsoft software
>   department) to another firm (or
>   Microsoft hardware department) be
>   treated as "costs of production" for all
>   firms (Microsoft)?
>
>   Gunnar
>
> -------------------///
>
> [reply]
>
> This is a variation of the ubiquitous *Net to Zero* fallacy.  Since
> payment is made from one firm to another firm, or from one department
> to another department within the same firm, it would seem that the
> transactions must "net to zero" in terms of costs that are passed on
> to consumers.  After all, everyone's disbursements are someone else's
> income.  It's just common sense.
>
> What this way of thinking ignores is the *directionality* of
> production, from lower to higher stages in series production, the
> highest being the point of sale into final consumption.
>
> The rate-of-flow of the costs of production is A + B.  The
> rate-of-flow of purchasing power to final consumers enabling final
> consumption is A, which includes salaries, wages and dividends broadly
> defined.  A represents payments into account balances held by
> consumers.  B represents payments into account balances held by firms.
> In an expanding economy, A + B is greater than A yet the statistical
> firm books a profit.  In *steady-state*, the rate-of-increase to A
> equals the rate-of-increase to A + B, that is to say, the slopes of
> their respective curves, when plotted on the same chart, are equal.
> See the attached flux-reflux.jpg  Let T1 be the costs of production;
> T2 represent sales in reflux; and T3 then is accounting expense,
> delayed from T1 through the conventions of double-entry accounting.
> T2 minus T3 at TX is the rate of instantaneously measured accumulation
> to entrepreneurial profit.
>
> Within the structure of production every B payment is a payment made
> to a lower stage of production, creating a cost passed up the
> structure to the point of final consumption.
>
> The pool of funds into which B payments are deposited does not
> constitute effective demand against final production.
>
> Nor does it need to, assuming steady-state.
>
> william_b_ryan@xxxxxxxxxxx
>
>
>
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