PKT message, Keynes - Creditary Economist?

John Stuart Mill's confident assertion in his Principles that "Demand for commodities is not demand for labour" is curiously at odds with the Keynesian rationale for Aggregate Demand Management - for how could two brilliant minds draw such radically conflicting conclusions from the facts of the matter?

The answer to that question, it seems to me, resides in the distinction between Cooperative and Command-based Production Systems which I posted to Gang8 earlier today as follows:

An Economic System is a man-made set-up whose essential features are designed to serve specific desired ends.

The Creditary Principle reflects the 'logic' of all Cooperative (as distinct from Command-based) Production Systems.

That is to say:

In the context of such Production Systems, Money = IOUs which (a) Entrepreneurs hand over to Owner/Suppliers of Factor Inputs at one end of the production line, and (b) Owner/Suppliers of Factor Inputs hand over to Entrepreneurs in exchange for Output at the production line's other end.

For, while Mill's is indisputably valid for a Cooperative Production System, it has no bearing whatsoever on any kind of Command-based Production System - including real-world economies with which Keynes was concerned, in which 'commands' are issued by and on behalf of Finance Capital.

In Ch. 16 of the General Theory, Keynes stated his 'preference' for what Gang8 would term the Creditary View of Finance Capital as follows:

"It is much preferable to speak of capital as having a yield over the course of its life in excess of its original cost, than as being productive. For the only reason why an asset offers a prospect of yielding during its life services having an aggregate value greater than its initial supply price is because it is scarce; and it is kept scarce because of the competition of the rate of interest on money. If capital becomes less scarce [as under a monetary regime reflecting Creditary Principles - insert], the excess yield will diminish, without its having become less productive - at least in the physical sense.

"I sympathise, therefore, with the pre-classical [read: before John Stuart Mill, Edgeworth, and Marshall - insert] doctrine that everything is produced by labour, aided by what used to be called art and is now called technique, by natural resources which are free or cost a rent according to their scarcity or abundance, and by the results of past labour, embodied in assets, which also command a price according to their scarcity of abundance. It is preferable to regard labour, including, of course, the personal services of the entrepreneur and his assistants, as the sole factor of production, operating in a given environment of technique, natural resources, capital equipment and effective demand. This partly explains why we have been able to take the unit of labour as the sole physical unit which we require in our economic system, apart from units of money and of time." (The General Theory, Ch. 16, ii)

In addressing related issues on Gang8 yesterday, I commented as follows:

Keynes never gave a clear statement on why "capital [can] have a yield over the course of its life in excess of its original cost" - my own concept of Final Demand Inflation provides the missing explanation.

And, given that explanation, the proposition that "the only reason why an asset offers a prospect of [profit] is because it is scarce" is revealed to be only part of the answer and contingent on Final Demand Inflation.

Gunnar