Re: Growth vs Prosperity

[John Vertegaal <vertegaa@xxxxxxxxx>]

Bill Ryan wrote:

>It is well and fine to be "blunt," John, but
>please answer the question:  To remunerate
>housewives, why do taxes have to be raised?

>Otherwise, we will think being "blunt" is just
>your way to avoid answering the question.

I thought I had answered it already, but perhaps there is more to your
question than is apparent to me, or I could have some blind-spot too.
  So let's see if we can get the logistics of the system straight.

1.   Government levies taxes (economy-wide) in order to allow a certain
     portion of society, engaged in activities there is no market for,
     to benefit from the final output of society as a whole.
2.   This imposition can have no bearing on the fact, derived from three
     basic axioms, that the sum total of such activities as measured in
     the unit of account self-resolves.
3.   Government sets the value of the unit of account by deciding the
     proportion of market vs non-market activities; and runs a set of
     books based on those values.
4.   The market sector follows suit, running its own set of books based
     on those same values; and passes its costs on to the retail sector
     for resolution.
5.   Government now decides to alter the current proportion by increasing
     non-market activities, i.e. it is altering the value of the unit of
     account; while at the same time seeking to recoup its expenditures.
6.   Government cheques start to show up for redemption in final output,
     and without a prior outlay of costs and the increased velocity of
     clearing the market, retailers are bound to raise prices; matching
     the inflation initiated by the government.
7.   As raised taxes slowly make their way to the retail level, windfall
     profits subside and a new dynamic equilibrium potential on a higher
     price level is reestablished.

Any other conceivable flow of circumstances requires the additional
assumption, that some other form of financial asset, redeemable for
living standard enhancement in addition to the above all encompassing
distribution, can validly exist side by side with the unit of account.
In other words, the integrity of the system is not upset by tinkering
with its means of resolution, that inherently allows it to function
perfectly already.

While I realize the popularity of deficit spending on this list, and also
can see the need for it to deal with short term fluctuations; it is no
solution for structural problems, or an issue like deciding to remunerate
housework, unless one is willing to surrender the integrity of a dynamic
equilibrium.  For even if the system can be shown able to handle interest
payments more or less problem free, there is no outlet in terms of living
standard enhancement for the funds of matured bonds.
  This introduction of irresolvable economic "ends" that cannot exist
according to its systematic axioms, now having made the system unstable
in its terms and logically incoherent, in essence is the reason for
choosing taxation as the far superior resolution.

Although the current situation is ample proof that a system way out of
whack can remain functioning, and for all intents and purposes appear to
be stable; this is the result of the _expectation_ to be able to redeem
one's funds for final output in terms of the current price level, and has
no basis in fact.  So an economist looking logically at the situation has
a number of options.  Abandon logic as unfit and embrace some ideology.
Find another set of axioms altogether, and build up a theory from those.
Or, treat those expectations as a given and unlikely to change.
  The latter means taking the stance that what isn't known cannot hurt,
and if the crash does come, 'simply' start afresh; because ultimately,
it is only a problem of accounts. (Mosler's position)  One problem with
this position is that even though the vast majority of fund holders or
savers will find their activities nullified by others living on credit
turning it meritorious again, and the entire "net saving" culprit is thus
attributable to a relatively few large account holders; all savers will
suffer a wipe-out in the event of a crash.

Another option would be to start educating the public about the true
value of its nest eggs; unveil the full impact of net saving on both past
and current employment conditions; and show that in real terms, nest egg
accumulation in aggregate not only is unnecessary but also impossible.
  All the while realizing however, that this very disclosure could well
precipitate a crash.  But even if it is better for the general public to
remain in the dark, economists using logic can perceive what is going on
below the surface and why.  And thus be able to decide whether it is in
the public interest to influence policy decisions, that will allow a
closing of the gap between the inflation of financial assets and that of
the price level, possibly bringing it back to some historical average
over time; or, it is all just a big yawn.  i.e. Mosler is right: keep the
advantages flowing to the few, keep taxes to a minimum and deficit spend
instead, it's all for the best; just appease the unfortunate, regardless
of their station in life, with some minimum wage job, while the going is
likely to go on forever.

  So Bill, if you detect a flaw in my logic or something essential is
still missing, let me know.  But don't try to put it in terms of some A
+ B ideological theorem, without making it logical by laying out all your
assumptions first.

John V



--------- Original Message ---------

DATE: Thu, 29 May 2003 17:32:29
From: John Vertegaal <vertegaa@xxxxxxxxx>
To: william_b_ryan@xxxxxxxxx
Cc: POST KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>

>
>Bill Ryan asks in reponse the below:
>
>> -->You want to remunerate housewives? no problem.
>> Sure, taxes will need to be raised.<--
>
>> Why?
>
>Re. the first sentence: It was the most far-reaching example I could
>think of to broaden the economy in an integrated way, on short notice.
>
>Re. its entirety:  The means of remuneration (i.e. its logical value)
>follows from (previously stated) basic axioms; and therefore rules out
>transitional tinkering with those means.
>
>I am familiar with your SC paradigm Bill.  And though there is a bit of
>logic to it; unless this can be shown to follow from a set of (equally
>valid) stated axioms, I hold that its adherents are just money cranks.
>Sorry to be so blunt.
>
>John V
>
>