Re: Growth vs Prosperity

[John Vertegaal <vertegaa@xxxxxxxxx>]

Geoff Edwards wrote:

>I am troubled by your claim that growth in living standards is 'the
>indisputable goal of all economic endeavour'. This is a large claim.
>Growth (meaning an increase in per capita consumption of goods and
>services) appeared as an objective of public policy only after 1950 and
>then as a stake in the Cold War rivalry between the USA and USSR.
>I would have thought that there are several legitimate alternative goals
>of economical activity: such as prosperity for all, eradication of
>poverty, easing of pain and suffering, construction of civic amenities,
>establishment of the conditions for future economic activity or even
>simply employment.

I realize it's a large claim.  That's why the previous/first time I wrote
that line in a post, I added a ? behind "indisputable".  Since nobody
objected then, the ? was now intentionally omitted; but of course I still
welcome the opportunity to discuss it, as the answer in part depends on
one's assumptions.
  First off, there is a big difference between my "growth in living
standard" and your "Growth" as defined above.  Indeed except for the last
two, which cannot be ends in itself; all _your_ "legitimate alternative
goals", could be defined as subsets of _my_ "growth in living standard"
goal.  So please bear with me, if it looks I'm going a bit far afield.
  Second, "a growth in living standard is the indisputable goal of all
economic endeavour" also means: that there cannot be legitimate economic
"ends" to economic endeavour; like accumulating wealth for wealth sake,
money as a means to keep score, or whatever motives/expressions are used
by the powerful few to satisfy their greed.  But this is a paradigmatic
issue, so you are free to reject the argument by rejecting my paradigm.

The problem is that no accepted economic paradigm can pinpoint, that such
greedy behaviour diminishes potential living standard in the real world.
  You may find it obvious that Keynes's GT does, in conjunction with his
notion of effective demand; but his 'solution' lacks the generality of
his claim.  Marxism may come close in a different sense, but its axioms
are unacceptable to most; and in a democracy a majority is needed to
change the institutional set-up, so that greedy excesses are at least
minimized.
  Since I'm not questioning their moral integrity, and given the absence
of a Keynesian outcry equating the monstrous gain in 'funds' over the
last three decades, with the obscene loss in "living standard" by the
disadvantaged over that same time period; the only conclusion I can come
to, is that an essential piece of diagnostic equipment is missing from
the Keynesian toolbox.  And this in essence also means that they would
have nothing to contribute, as to the why and how of a possibly impending
collapse yet to occur. Post Keynesians please interject if felt slighted.

And so the challenge is to construct a paradigm wherein entrepreneurial
motive is transmuted, directly or indirectly, into a "growth in living
standard" in its broadest possible form; which I believe to have done by
isolating the economy, as a self-resolving entity, from anything that
could be considered as measurable in living standard 'units' only.  For
further preliminary details, see my post "A Third Way?" of a few weeks
ago.

Since the criterion has now shifted from formation/accumulation to that
of resolution, the scope of the macro matrix can be as wide as you want
it to be; all restrictions are gone.  You want to remunerate housewives?
no problem.  Sure, taxes will need to be raised.  But once it is realized
that in our vertically integrated economy all taxes are paid by retailers
as embodied costs in retail output; and retailers, neither knowing nor
caring about the composition of their costs, only want a return so that
they can stay in business; the rate of taxation is immaterial, and the
economy will thrive as long as economy-wide capital is being resolved,
through retail output taken off the market. (with housewives by the way
probably being the most likely direct spenders of any economic group)

This principle holds for anything else you want the government to concern
itself with, because of the private sector being unwilling or unable to
engage in 'unprofitable', but deemed beneficial, activities.
And given the fact that all your concerns mentioned above are government
related, perhaps my approach warrants a closer examination; for is the
GT potentially able to integrate governmental economic activity, within
a single macro matrix?

And finally, it is quite conceivable within my paradigm for the economy
to shrink, while the perceived standard of living is rising; pointing to
an even greater divergence between conventionally measured "Growth" and
mine, than is obvious at first sight.  When the economy has allowed us
to choose voluntary unemployment, because more leisure is now preferred
above more material possessions and the related stresses involved, its
ultimate goal in my sense has not altered.  But probably more important
is that my approach, not needing any new loans for the preservation of
'the money supply' as old ones are repaid, can cope with such economic
shrinkage without at the same time inducing involuntary unemployment.
  Care to try to deduce from the GT, that the only economic sector in
dire need of a general growth for its own survival is the financial one?


>Also, the claim that an increased rate of economic activity is the goal
>of economic activity has a somewhat tautological flavour to it and
>overlooks the alternative conception that economic activity is a tool
>to allow mankind to achieve the goals that it sets for itself.

It may seem tautological to you, because you have been made to understand
that the consumption of economic output is an economic activity; which,
in my paradigm, it is not.  Thus I'm not claiming what you indicate I am.
  The concept of having put a boundary around the economy allows me to
agree with most, if not all, of your objectives/conclusions, without
having fallen into a tautology trap.  But in inter-paradigmatic debate,
these sorts of misunderstandings are to be expected.  Thanks for giving
me the opportunity to explain myself again and hopefully better, as you
are unlikely to be the only one who misunderstood what I have been
writing for quite some time now.


>This alternative conception steers economics itself as a discipline away
>from being a study of an autonomous market powering growth for the sake
>of it, into a study of how society can organise economic activity to
>achieve its goals.

See above.


>Another problem if one equates growth with the goal of economic
>endeavour is that this can be sustained only until a limit of the
>capacity of the earth's resources to fuel growth is reached.

I don't, in your sense of "growth"; see above.


>There is good scientific evidence that we have already passed that point
>- and China and India have yet to claim their full share as they
>industrialise. For example, there is good evidence that the peak of oil
>production is only 10 years away.

Economic restructuring according to sustainable opportunities for all is
an imperative component of my "growth in living standard".  If there are
not enough natural resources available for all, at the current rate that
some are being satisfied at right now, the latter will have to cut back
on the consumption of those resources and find satisfaction elsewhere.
  That is unless they prefer to be engaged in perpetual 'anti-terrorist'
battles against the have-noughts.


>My view is that another chapter needs to be added to Keynes' GT to
>accommodate the new insights we have today about the magnitude of
>human's footprint on the earth's resources, for demand / consumption
>cannot be fed indefinitely and an economy that relies on continually
>increasing consumption is unstable and unsustainable.

I seriously doubt that those (my!) goals can be accomplished by adding
a chapter to the GT.  You would have to decide whether (a) the points of
contention with the GT that I brought up above are dismissable, and as
such outweigh the noted similarities between your supplemental ideas and
my (original) approach; (b) your goals do logically follow from Keynes's
deterministic ideas on capital, investment, money and the like; and (c)
given Keynes's emphasis on effective demand, whether he even agrees with
himself.  Otherwise you will find yourself fruitlessly defending Keynes,
before your own last chapter even enters the debate.

And, for what it's worth: if I were to consider using the GT as a vantage
point for an alternate general theory, because its prestigiousness would
make it worthwhile to retain as much of it as possible, rather than to
start from scratch; Keynes's blind-spot, the result of considering the
value of money as a storable (determinate) in-between station, would not
be a deterrent, in spite of it having been the subject of the bulk of the
foregone.  Instead, my decision would be hinging on how much of Keynes's
terminology remains appropriate within an intrinsically dynamic setting.
(e.g.) I could live with his definition of "the marginal efficiency of
capital", as long as it would not contradict the value of capital being
indeterminate at any particular time; but to make up my mind I would have
to reread the GT, something I'm not exactly looking forward to.

John V