Re: Monetary production versus monetary exchange economies

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Tue, 04 Dec 2001 11:47:18 -0500, Gunnar Tómasson
<gunnar.tomasson@xxxxxxxxxxx> wrote:

[Quoth I]:
>> What additional premises are you starting with so that you can
>> add this concept and arrive at this conclusion?  Not only does
>> it not seem self-evident to me, it does not seem to me that
>> the premise can bear directly on the conclusion ... income is
>> about how receipts are allocated.  They are all allocated to
>> people, on one or another grounds.

>In entrepreneurial market economies, "receipts are allocated" in
>the market for factor services - IF labor is the 'sole factor of
>production', THEN all such 'receipts' or 'income' must accrue to
>suppliers of labor services.

Then it is the premise of this fictitious "market for
factor services" that is required for the conclusion.  In
a monetary exchange economy, such as the non-fictitious
industrial economies that most of those on this list inhabit,
the producer or producing organisation first enters into
obligations in order to produce with the equipment and
other infrastructure that the producer or producing
organisation already owns.  Then the production can take
place.  Then the product can be vended.  At that time or
later, payment is made.  Sometime along the way, depending
on the terms of the various obligations, payments are made
to meet the obligations entered into in order to produce.

In a monetary production economy, it would be impossible
to ensure that all obligations entered into on aggregate
will equal all payments received on aggregate, let alone
have that happen as a normal outcome of the system without
intervention.  Decisions will have been made that events
will show were incorrect, but at least some of the
obligations entered into must be honoured, or the producing
organisation will lose its right to trade.

A single coherent "market for factor services" is a
fiction required to dispense with consideration of
synchronisation or lack thereof in the various market
transactions and transactions governed by different
institutions required for production to take place in a
monetary production economy.  The benefit of the fiction
is that it permits us to pretend that a monetary production
economy is instead a monetary exchange economy.  The cost
of the fiction is that ordinary outcomes in which the actual
system does not mobilise all the resources available are
turned into an disequilibrium in a single fictitious market,
when they may well be perfectly ordinary equilibria given
the anticipations of the actors acting in a variety of
incompletely synchronised and coordinated markets and other
institutions.

In any event, it is now much more clear why you promote such
gross misreadings of the General Theory.  You enter into it
sharing important premises with the Washington Consensus, which
are in fact premises that the General Theory disputes, and
on importing those premises, the result is far closer to the
Washington Consensus and far further from logical coherence
than the General Theory itself is.

--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah