Re: Fundamentals

[John Vertegaal <vertegaa@xxxxxxxxx>]

The lack of a rejoinder by JML has left my argument hanging
in mid-air, so maybe it's worthwhile to substantiate it a bit
by putting some meat on its bones.

>"John M. Legge" <jlegge@xxxxxxxxxxxxxx> wrote:

>>Dixit and Pindyck, in their "Investment Under Uncertainty"
>>were able to demonstrate a method for determining the
>>fundamental value of a revenue stream modelled as a
>>geometric random walk.  This is nonstationary and therefore
>>nonergodic.

>IMHO, Dixit and Pindyck, and by implication JML and anyone
>else putting their _faith_ in microeconomic determinants
>are pushing on strings.

What I mean to say is that the "fundamental value of a
revenue stream" is not due to any particular capital in
question, but instead to the inversion of myriad capitals
economy-wide through the demand function at the retail level.
And that these capitals, after having been the cause of this
"fundamental value of a revenue stream", critically depend on
how the first capital proceeds with this revenue for their
own realization as (re)productive capitals.
  Although new credit can of course accomplish that same
function, such activity is a step above being "fundamental"
and forces the economy into an quest for unrelenting growth;
quite unnecessary for any but the financial sector, as simple
depreciation allowances can account for and produce all the
growth we need naturally.

Because costs are disbursed before revenue can be realized
and this realization is complex, [i.e. profit income depends
on the direct spending of realized profit income, allowing
through further direct spending a whole new group to realize
their revenue etc., (in ever decreasing significance, but in
an overlapping mode with later rounds)] _no_ determinate
economic platform exists at any time from which the next step
(up) can be taken.

The argumentation of D and P is no more substantive than post
hoc, ergo proctor hoc.


>The interest rate, so called "determined" by the CB, may
>very well be disequilibriating, throwing all relevant
>determin[istic] equations out of the window.  The quest for
>microeconomic fundamentals _is_ nonsens[ical].

The only "link" between the rate(s) of interest and the
rate(s) of profit, is that as costs they are imposed by those
so empowered, on the economy for resolution; without the
knowledge that the ability to resolve in the aggregate, and
in real terms, lies singularly with the beneficiaries of rent
and profit income.
  As such _any_ "rates" are theoretically resolvable, putting
the economy in an unencumbered reproductive mode; and have
nothing to do with the rate of economic growth, regardless of
how it's measured.  Thus it is satiation, and not unlimited
wants and desires, that determines economic health or the
lack of it.  Demand determines supply.
  The baton of the "maestro" not only is a wand without
magic, in the hand of an ignoramus it is a scimitar apt to
inflict suffering.

John V