Re: Stiglitz on Soros--question for Leigh

["Leigh Harkness" <Leigh@xxxxxxxxxxxxxxxxxxxx>]

Vicenc Melendez wrote:

> Then, those firms that can increase their prices because they have a
> position (nobody can produce their goods or services and they are
> necessary for many)
> to do that would take more than they put in the pool. If we could
> aggregate the whole production in terms of labour, you would say that it
> is not good to change the monetary expression of this labour.
>
> Also, those firms that, through technical progress, can reduce their
> production costs and do not reduce their prices accordingly, are also
> taking more than they put in the pool.

1.    You appear to be questioning is whether higher prices can deplete the
pool.

The answer is no.

First, to earn entitlements to the economic pool, one must first sell
products to the economy.

Whoever bought those products with inflated prices gave up entitlements to
other products of an equilavent value.

Those who sold the products at the inflated prices now how entitlements to
the products that the buyer was prepared to forego.  So those who earned the
higher prices have become richer at the expense of the purchaser of their
product because they were able to charge higher prices.  But that has not
created a shortage of goods in the pool.


2.    You also ask whether technical progress can deplete the pool.

No.  The technical progress reduces the producers costs so that they can
keep more of the entitlements for themselves and pay less entitlements to
labour. It may redistribute entitlements but it does not create a shortage
of goods in the pool.

Regards

Leigh