Re: Monetary production versus monetary exchange economies

["Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx>]

Besides money (as an IOU), there are other significant social methods
in which output is distributed to every man. It seems to me that
the existence of these other methods means a corresponding portion
of money is part of output. However, this output probably consists
of happy memories rather than material goods.

Harry Veeder

----------
>From: Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>
>To: <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: Monetary production versus monetary exchange economies
>Date: Fri, Dec 7, 2001, 1:46 AM
>

>Brief comments on two points.
>
>> 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.
>
>Comment:
>
>It is a fiction of long standing in analytical economics - in Wealth of
>Nations, the fiction is reflected, inter alia, in the following passage in
>Book II, Ch. 1:
>
>"Money, therefore, the great wheel of circulation, the great instrument of
>commerce, like all other instruments of trade, though it makes a part and
>very valuable part of the capital, makes no part of the revenue of the
>society to which it belongs; and though the metal pieces of which it is
>composed, in the course of their annual circulation, DISTRIBUTE TO EVERY MAN
>THE REVENUE WHICH PROPERLY BELONGS TO HIM, they make themselves no part of
>that revenue."
>
>In the long-forgotten world of classical analytical economics, "the revenue
>which properly belongs to [A, B, and C]," is the claim to share in final
>output in exchange for which A, B, and C supply factor services to the
>production process, with MONEY being neither more nor less than IOUs
>received by A, B, and C from entrepreneurs as token of their rightful claim
>to shares in final output commensurate with their supply of factor inputs
>thereto.
>
>That is, shares in final output which properly belong to them.
>
>> 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.
>
>Comment:
>
>I am not sure I understand your point.
>
>If you are referring to my reference to the cæteris paribus notion that an
>increase/decrease in the supply of money will be associated with a
>decrease/increase in the rate of interest, then the explicit thrust of my
>argument was that this veritable cornerstone of The Washington Consensus is
>part and parcel of Post Keynesian Monetary Theory 101.
>
>Gunnar
>
>----- Original Message -----
>From: "Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>
>To: <pkt@xxxxxxxxxxxxxxxx>
>Sent: Wednesday, December 05, 2001 11:33 PM
>Subject: Re: Monetary production versus monetary exchange economies
>
>
>> 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
>>
>>
>