A Third Way?

[John Vertegaal <vertegaa@xxxxxxxxx>]

     In light of the various discussions going on recently regarding the
efficacy of deductive versus inductive reasoning, their epistemologies
and limitations; and in contrast to kindred pk theories seemingly riddled
with internal contradictions, I'd like to introduce a rewrite of my own
alternative approach's point of departure, to show were I'm coming from.
  Using deductive logic it pinpoints the conflict between an 'ideal' and
real-world economy, seems to demolish the case for even bridled
capitalism, yet explicitly embraces free enterprise (as a fourth axiom?)
at the end.  Could this be the long sought-after "third way" in embryonic
form?

The correlations from the three fundamental axioms below are significant
but somewhat arbitrary; in that many more could be thought of to fit in
between, not to mention to come after, the ones shown.  And any comments
about its comprehensiveness as far as it goes, would be much appreciated.
Even though not explicitly mentioned in this extremely short outline, it
is already quite clear that the non-neutrality of money and uncertainty
stem from the freedom to spend directly and being able to refrain from
doing that; and thus suggesting institutionally imposed ameliorations,
whenever the system as a whole can be shown to suffer as a result of the
axiomatically set freedom of individuals.

The system under consideration, though open, is bounded.  This reflects
what was alluded to above, namely that there is a difference between the
'ideal' and real-world economies, and that it becomes possible to move
the uncertainty factor to a level outside the economy proper.
  Neither claiming my three axioms to be the "most fundamental" possible,
nor seeing any particular advantage in being more fundamental than the
below; I believe that axiomatically setting the "What", "Why", and "Who"
The Economy is for, renders a good enough base.  I also hope to show that
both logic and rigour not only are possible, but also quite powerful, at
least in heterodox macro (though I would agree with Frederic that the two
together are not compatible in heterodox micro).  And if in anyone's
learned opinion I have failed, either in logic, potential rigour, or
relevance, I would very much like to know that too.

     So here goes...

  1. It is a man-made structure with boundaries that are open to Nature.

  2. Its sole purpose is to provide _additional_ benefits to the natural
     human condition in perpetuity.

  3. Every individual, longing to be useful and gain experience, is
     entitled to participate and receive its benefits, but retains the
     freedom to spurn them.

  4. Because of 1, man can step outside it and look _objectively_ upon
     its totality.

  5. Because of 2: it is, as a whole, a perpetual means to an end and
     never an end (nor allowing ends to exist) in itself.

  6. Because of 1, and 5: it takes natural resources from outside the
     economy, transforms them inside the economic sphere and then
     dissipates them again into exogeneity, for consumption.

  7. Because of 1, and 6: Consumption, and the decision making process
     to do so (or not), are 'extra-economic' or exogenous activities.

  8. Because of 5, 6, and 7: the value of an "end" (also known as use-
     value or utility) is economy exogenous; it thus has zero 'economic
     value', and is valued strictly in terms of preference. (e.g. both
     a contemplative walk on the beach and shopping for a new personal
     computer have analogous values)

  9. Because of 4, and 8: the value of all economic factors implicated
     with the final dissipation of an end product, necessarily resolved
     to zero.

 10. Because of 3, 6, and 9: an accounting system with units of account
     (money) is imperative to keep track of the accrual of collective
     costs (and benefits) during the transformation of natural resources
     into items for consumption; while upon a successful dissipation, the
     self-cancellation of costs and benefits validates an account renewal
     to allow for reproduction.  Net experience gained equals net growth.

 11. Because of 2, 9, and 10: the entire charged cost/fee structure of
     output, including depreciation allowances on existing means of
     production, profits, taxes, etc., constitute founded claims to
     currently available standard of living; to either be realized by
     those accounted for as beneficiaries, proxied to others less
     satiated, or wasted.  There are no other logical attributives like
     'productive capital' or 'dead labour'.

 12. Because of 3, 10, and 11: the potential scope of production, at any
     level of development, is limited only to the availability of free
     natural resources, already existing sustenance, and man's inherent
     eagerness to use his skills.

 13. Because of 12: newly made available credit for additional means of
     production, redistributes already existing and accounted for final
     output; it thereby alters the value of the unit of account, and has
     no causative attributes to the to be created means of production.
     Wherefore the repossession of means of production/inventory by
     creditors having pulled the plug, because set time limits on
     repayments were not met, is legalized theft.
       [This preliminary conclusion is further reinforced (beyond this
     outline) when it becomes clear not only that the creditor/rentier
     group as a whole is solely responsible to resolve the "interest"
     part of the cost structure (no one else can!); but that far from
     starting the economy back on a clean slate, the power to repossess
     puts it ever deeper in the quagmire of irredeemable debt.]

 14. Because of 3, 11, 12 and 13: "wasting" claims to final output, by
     turning disbursed benefits (personal income) into 'value' changes
     of 'accounted for productive assets', robs the system's reproduction
     potential while inducing unemployment.  However investment (meaning:
     employing unused human resources, so that they can consume the final
     output spurned by the satiated) remains valid at least until (world-
     wide) full employment has been reached.

 15. Because of 14 and (the apparent empirical benefits of) free
     enterprise, the non-direct spending of personal income ought to
     remain universally valid in order to be able to weed out the least
     popular businesses.

 16. Because of 14, and 15: a dilemma has been exposed.  In the real-
     world economy we have outstanding claims to final output, that are
     orders of magnitude greater than such output is available at the
     current price level; harmless, as long as it isn't acted upon and
     the illusion of wealth is maintained.  But not only is this inherent
     instability a calamity waiting to happen; while these claims were
     built up, millions of entrepreneurs and their employees bit the dust
     in bankruptcy, being subjected to untold misery.
     In an 'ideal' economy, no net saving/'investing' would occur, no
     businesses could fail, full employment would always be a matter of
     course, and as techniques improved we'd all be able to work less
     hours for the same living standard or better.  On the other hand
     however, we all would be buying stuff we really didn't need, and
     human nature as it is, become less efficient and more lazy as time
     went on.  Maybe the 'ideal' economy isn't so "ideal" after all.
     Notwithstanding our, at this stage very fuzzy, understanding of what
     the economy is all about, a solution seems obvious enough already:
     tax indirect [and non-] spending to the tune of a healthy economy.
     Or, as some 175 years ago someone wrote:

 ..  "[It is the duty of] the government to be the protector of those who
     are unable to defend themselves against the excesses of the
     powerful; in the interest of an impartial but enduring stability for
     all, and to countervail the often passionately fought for, but just
     temporal advantage to the few... Only [this authority], transcendent
     of prospective productivity gains being a sufficient condition to
     motivate individuals [on the micro scale], is able to correlate
     [these tendencies] with the augmentation of living standard and
     happiness for all; which ought to be the goal and disposition of
     society."   Sismondi, N.P. I:52,53 (2e ed. 1827)  [my translation]

John V