PKT message, Fwd: Re: [gang8] Binary nonsense

>From: "William B. Ryan"

>Reply-To: william_b_ryan@xxxxxxxxx

>To: "Keith Wilde"

>CC: ChrisofDulwich@xxxxxxx, geoffrey.gardiner@xxxxxxxxxxxxxxx

>Subject: Re: [gang8] Binary nonsense

>Date: Thu, 14 Nov 2002 07:38:39 -0800

>The compounding error is not apparent at the level of the firm; each firm is either making a profit or making a loss. The individual entrepreneur has no comprehension [see note 1] of the falling divergence in the slope of the aggregate sales curve in respect of the aggregate costs curve for the economy as a whole.

>The economists assume that accounting works like their marginal analysis. They therefore take the numbers reported to them by the entrepreneurs and group them into two columns in the national accounts, assuming that the tabulations of the two columns will equal. The two cannot equal but they ascribe the discrepancy entirely to statistical discrepancy. They therefore add the totality of discrepancy to the lesser of the two columns, making them equal [see note 2].

>--

>[Note 1] The entrepreneurs do have a crude comprehension when they get together and talk. It is they who Say was referring to by his characterization: the "adventurers in the different channels of industry..." who "pronounce money to be scarce; the grand object of their desire is, a consumption brisk enough to quicken sales and keep up prices." It was against them that Say, speaking for the economists, countered with his proto-marginalist "law." http://www.geocities.com/william_b_ryan.geo/say.html

>[Note 2] Rather than merely adding it to one column in their single entry tabulations, they should add it as real purchasing power at the point of consumption.

>P.S. Since I know you are literate in the French language, having written technical papers in French on economics, will you supply your personal translation of this famous passage? Translations are paraphrases so at best they cannot fail to reflect the bias and prejudice of the translator. I've collected several each with different nuances. It would be helpful to me to have your translation.

>--

>On Wed, 13 Nov 2002 21:46:53

> Keith Wilde wrote:

> >

> >This was your best yet, as I recall them. Or maybe the passage of time and

> >perusal of texts is beginning to penetrate. In any event, I feel like I am

> >beginning to understand. The contrast between bookkeeping and marginal

> >analysis is the real eye-opener for me. I wish I had been more interested

> >in accounting at an earlier age.

> >

> >At 11:22 PM 11/12/2002 -0800, you wrote:

> >>Chris,

> >>

> >>What brought this on? I have been highly critical recently of so-called

> >Binary Economics, is that it? I suppose that bothers you. Or is it that

> >you think I support Binary Economics? Whatever.

> >>

> >>By A, B, C I guess you mean the A + B Theorem. It's simply the analytical

> >refutation of Say's Law. That's all it is. As such it's in the same

> >category of logical argument as Say's Law with additional predicates. It

> >is a model just like Say's Law; a simplification. It helps us to think

> >about things. There's nothing magical about it nor do I remember saying

> >that there is.

> >>

> >>Intimately connected with the theorem is the realization that double entry

> >accounting is not precise mathematics but is in the nature of a Rule of

> >Thumb, analogous much like the Rule of 72 is to the mathematical precision

> >of logarithms.

> >>

> >>In precise mathematics, profit is the positive differential in slope

> >between the sales curve and the curve of the costs of production. Double

> >entry accounting gives us an approximately correct measurement of this only

> >in the unnatural condition of stasis or growth that is steady state, where

> >the ratio of inputs to outputs is remaining constant through time.

> >Everything is increasing but everything is increasing proportionally to

> >everything else.

> >>

> >>Because it is a Rule of Thumb, the errors inherent to the double entry

> >method will compound exponentially so long as there is continuous

> >parametric shift, that is to say, so long as the ratio of inputs is falling

> >in respect to outputs - what is called the displacement of labor and all of

> >that. But it applies to the ratio of all inputs to outputs, not merely labor.

> >>

> >>The great advantage of double entry accounting is that it is easily taught

> >and learned by entrepreneurs, administrators and managers. It's not easily

> >replaced.

> >>

> >>The most practical solution, rather than attempting the task of finding an

> >alternative to double entry accounting, is to apply rationally determined

> >compensation or accounting adjustment at the level of the macro economy.

> >There are many ways this could be theoretically accomplished that are in

> >principle fairly simple. Retail discounts and consumers' dividends will

> >work quite nicely.

> >>

> >>But you don't care to hear anything that I would be inclined to say on the

> >matter, so why should I ramble on?

> >>

> >>In any case, I think I am tiring of this subject of economics.

> >>

> >>I am permanently withdrawing from all public discussion.

> >>

> >>Good luck to you.

> >>

> >>Bill

> >>--

> >>

> >>On Tue, 12 Nov 2002 08:44:39

> >> ChrisOfDulwich wrote:

> >>>.

> >>>

> >>>Dear Kevin'n'all:

> >>>I confess I have very little patience with all this magical formulae

> >>>purporting to show the eternal truth of economics.

> >>>

> >>>That good man Bill Ryan rather blotted his copybook with the Gang by urging

> >>>one such formula in supremacy to anything else : as I remember it involved

> >>>juggling the letters A,B and C as if, like Douglas Adams' all-encompassing

> >>>answer "42", that then became the ultimate solution to life, the universe

> >and

> >>>everything.

> >>>

> >>>When it comes, the truth about economics will be nothing like that. People

> >>>are far too complicated and inconsistent to obey eternal mathematical

> >rules.

> >>>

> >>>Chris

> >>

> >Keith Wilde

> >Ottawa

> >kwilde@xxxxxxxxxxxx

> >613 990-8125

> >