Re: Savings fallacy redux (was Re: Method)

["Dr. Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>]

John Vertegaal <vertegaa@xxxxxxxxx> wrote,
on Tue, 03 Sep 2002 07:22:31 -0700 (PDT):

> As resources enter the economy a corresponding debt is created;
> and this debt, embodied in output, is passed on until it reaches
> the retail level, where bit by bit it can be resolved; thereby,
> through final demand, determining the "true" value of the supplied
> economic asset over time.


Why "true" value?  In the sense of "the one true faith"?  That is,
why is this superior to the normal terminology for this amount,
which is the market value of goods and services for final demand.


>   This is very different from a resolution of income, disbursed to
> economic agents during a particular period, through expenditures of
> either kind.  Or: Y1=C1+I1 and its various consequent derivations
> such as you showed.


The resolution of value added and income *disbursement* may be
quite distinctive things.  However, the value added at each
stage in the process that you describe is the same as the
earned income at each stage.  Which means the earned income
generated by passing through the stages would be identical
to the final "true" value (barring indirect taxes along the
way).

Further, the final "true" value represents a payment.
Where did those payments come from?  Each business in
those stages of production only produced in expectation
of being able to sell at a level that would at least recoup
expenses, and hopefully provide a surplus as well. It
certainly is not the existence of the resource that drives
it into the productive process that you described ... it is
the expectation of return at the end of the current stage
that draws it into the current stage.  So what are you
proposing to replace effective demand as a focus for
business expectations?

So far much of what you say would serve as a critique of the
sad parody of Keynes model that shows up in macroeconomic
textbooks, but I still don't see the purchase that it has
on the GT itself.