PKT message, Re: The Compensated Price

Dan, your reply indicates to me that you don't have the foggiest idea what Social Credit is all about, in particular the A + B Theorem. I'm not saying this to be insulting or patronizing. You have often expressed a general sympathy for the idea, as I have found through research in several years of usenet archives. It simply brings home to me the extreme difficulty in expressing the concept, even to one who is sympathetic. If we can't get the idea across to sympathizers, how in the world can we expect to get it across to skeptics? I've experimented with a number of approaches and haven't hit the right formula yet. I've never converted anyone, though I'm still trying.

There are all sorts of problems in this world that need to be resolved. Social Credit goes beyond the "money" problem. It is a question of priority, as Douglas said. It is difficult to address other problems of a social nature until the money problem is resolved. Then we can move on.

The A + B Theorem is profound but tough to grasp, that's for sure. I'm coming to the realization that it cannot be understood without a thorough grounding in fundamentals, and that especially includes the fundamentals of orthodox theory, even though we may not agree with them, for our theory stands in counterpoise to orthodox theory. Our task is made all the more difficult because most "credentialed" economists are not especially well read in economics. They don't have to be. Most of them are employed as statisticians and information gatherers. So there's not a common ground for discussion even among economists.

I've inserted some comments below.

Bill
----------

From: "Dan Parker" <dan.parker@xxxxxxxxxxxxxxx>
Subject: RE: The Compensated Price
Sent: 10/16/2002 12:12:37 PM

--------------------------------------------------------------------------------

> -----Original Message-----
> From: william_b_ryan@xxxxxxxxxx [mailto:william_b_ryan@xxxxxxxxxx]

>
>
> Dan, it isn't just a matter of approximating purchasing power
> with costs. We are talking about effective demand, the
> spending from income that offsets the costs of production.

Good point William, but I would suggest the free market approach
where if demand falls, production falls, hence the costs of the
production fall.
----------

[Ryan] There is a difference between real demand and financial demand. There is a difference between costs and purchasing power being paid to consumers during the course of production. Financial demand at the point of retail is a limiting function of the purchasing being power being paid to consumers because of the limiting capacity to consume in the real sense. We can sleep in only one bed at a time, so for most of us there's no need or desire to purchase more than one bed. The A + B Theorem asserts that the costs and purchasing power being paid to consumers diverge over time, with purchasing power falling in respect to costs through the displacement of labor. Costs in the financial sense correspond to productive potential in the real sense. Social Credit asserts that consumer purchasing power should be augmented with dividends, so that if consumers so choose, they can fully call upon that increasing potential.

Should consumers not choose to fully call upon that potential - and that should be their right, they should have the right to choose leisure - that potential shouldn't be scrapped and wasted, as continually happens now. We are surrounded by the carcasses of failed projects. Nor should it be used to produce things that consumers don't want (for export or war or whatever) so they can get the money to get the things they do want. Retail discounts will make up the difference, in the financial sense, so that the potential is allowed to increase without limit. As it does, the ratio of inputs actually being utilized - labor and natural resources - is decreasing to outputs--that which is actually being produced and consumed.

It is the path to sustainability.
----------

However, I don't think demand will ever fall,
although it would be nice if 'growth' happened in less materialistic
directions in some cases (both for the environment and for the
person).

I don't think Japan is a good example in that consumer
psychology is hampered by fear of a future shortage of
money (scarcity mentality) and the exponential driver in
the current system, and Japans capturing of much of it,
drove prices so out of whack, that they still aren't sensible
in many cases.

It seems to me you are saying here that people have
more money than they want to spend, and that lowering
prices will solve this. However, this would give them
more money yet than they would need to spend. I am
sure I am misreading you here.
----------

[Ryan] It isn't that consumers have more money than they want to spend, but that they see no need to purchase all the things that their money can purchase. A fraction of their money can purchase all that they want. We are not talking about specific consumers but the community as a whole. The difference between what they are receiving and what they are spending is presumably a reflection of the community's increasing wealth. The trouble is, the totality (actually, more than the totality) of the money they are receiving is being charged against the fraction of productive capacity they are consuming, which means that the remaining fraction is continually going out of business, since they cannot recover their costs of production. It explains why, with technological progress, there is an ever increasing variety of things being made available for purchase and enjoyment, which is good, but the paradox of poverty amidst plenty never goes away.

The Gesellist solution is to require them to spend, and if they will not spend, take it from them and give it to people who will spend. The trouble with Gesellism - in all its variants including Keynesianism - is that even if they spend all they receive, there still is the other matter revealed by A + B: the money the community is receiving is falling in respect to the costs of production.

So really two factors are interellated: first, that income is falling in respect to the costs of production, and second, that the spending from income is falling with the decreasing "propensity to consume."

It is this second factor that is addressed by retail discounts.
----------

My main issue was with compensated price was the
government fixing prices as a percentage of profits,
and how this would be hard to enforce.
----------

[Ryan] The compensated price is an accounting adjustment at the point of retail, which allows goods that cost X to be sold profitably for X - Y.
----------

However, I think a fundamental change in economics
will follow the line of continual adjustment with
experiments or prototypes providing feedback for
further changes.
----------

[Ryan] This might actually not be far from the truth. Despite our intellectualizing, change will come ultimately from practical necessity. I am reminded that Douglas said it is the bankers who will implement Social Credit. They are in the position to most competently accomplish it, in any case. Attached is a recent article from the Financial Times regarding the situation in Japan.
----------

Social credit provides some good
understanding, as does binary economics etc, It's
great to have experts in each area, but my preference
is to educate about how the current system works,
and speak of the various proposals offered as
solutions. I really like some of the fundamental
concepts of Social Credit, such as decentralization,
and freedom of the individual.

rgds

Dan Parker