Re: Keynes - Creditary Economist?

["Gary Santos" <evs@xxxxxxxxxxx>]

<<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.>>
----------------------------
If I understand this concept correctly, the concept then supports that the
idea that the population in an economy has to continually grow. And,
corollarily, we have the implication that the problem of poverty is reduced
to one of wealth distribution and charity.

It would also appear that the growth engine could also be one of the growing
needs of a static population driven by technology. But, wouldn't this mean
that output has to increase either by hours worked or by means of
technology? And, if this is true, isn't this a dead end? As the population
ages, consumption decreases, is this not anxiomatic?

I am continually convinced that today's economics is bankrupt of ideas and
those that make more sense have no chance of going mainstream. Keynes'
theories was a good try. But, it seems to me that if I continue to spend all
the income I earn (and, it will be worse, if I borrow since debt's cost does
not go back to real spending) a status quo is all I can hope for, at best.
And, especially since wealth continues to be driven towards the financial
sector to be put in bonds and the like and since the purchasing power of
savings continues to be eroded, real demand has to decline over the long
term.

I think I read somewhere that aggregate net income due to interest is now
greater than the aggregate net income due to manufacturing.




----- Original Message -----
From: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Cc: "Gang8" <gang8@xxxxxxxxxxxxxxx>
Sent: Friday, January 24, 2003 3:48 AM
Subject: 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