Re: (2 of 3) Without "The Optimum Policy" (TOP), Capitalism is Corrupted, and Democracy Fails.

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Good day Wes:

I have not gone through the exchanges between you and Gang8 during the past
few days - so please bear with me if my comments have already been
addressed.

But, re the following:

> In my Sun 8 Jun 2003 post (1 of 3), Figure 7, "Life Cycle Of A
> Productive Asset," is the centerpiece of the three charts on Fig7-9d
> because it identifies the commonality between capital assets and
> human assets, and more important, Figure 7 shows the feedback of
> "value added" to support that part of the population still in
> development.  Those WHIPs who reduce that feedback below an
> adequate level are practicing genocide, slowly.  Figure 7 also shows
> the necessity of a reliable "store of value" (feed-forward) to enable
> the present workforce to provide for their own retirement.  Notice
> that "productive capital assets" are not allowed to sit in retirement
> for 18 years, and counting, as this retired engineer (a productive
> human asset?) has been privileged to do at the expense of the
> young folks who now pay a 15% S. S. Payroll Tax on all earned
> income between zero and $76,000/year, and a zero% S. S. Payroll Tax
> on all income, earned and not earned, above $76,000/year.  A
> technically valid micro model of a national economy, such as
> Figure 7, which was widely accepted by the public, would be a great
> help to members of Congress when they reform Social Security.  All
> programs funded by tax revenues are "pay as you go" programs.

Comment:

I have a BIG problem with the concept of "A Productive Asset".

And, as indicated below, so did both Schumpeter and Keynes.

First.  Here is Schumpeter on related issues:

"Böhm-Bawerk was indeed the first who expressly said that the whole value of
the product must in principle be divided between labor and land, if the
process of production is to proceed with ideal perfection."

The "ideal perfection" bit is Schumpeter's own hangup expression - the point
at issue has NOTHING to do with "ideal" this that or the other.

Instead, it has to do with LOGIC - as in, A and B who supply Factor Services
a and b to the Production Process, will accept nothing less than Claim to
the "value" which a and b are deemed to contribute to the "value" of the
Final Output.

Second.  Here is Keynes on same:

"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_."

Here is my own take on the point at issue.

IF, as economists do, we assume that the suppliers of Factor Inputs a and b
will receive from Entrepreneurs neither more nor less than the "value" of a
and b as finally determined in the market for Final Output into which a and
b have been transformed through the Production Process, THEN the fact that a
and b may be relabeled "A Productive Asset" insofar as the Production
Process is concerned does NOT change the fact that, as Böhm-Bawerk put it,
"the whole value of the product must in principle be divided between [a and
b]."

Gunnar





----- Original Message -----
From: "Wesley S. Burt" <wesburt@xxxxxxxx>
To: <TOP@xxxxxxxxxx>
Cc: <Wesburt@xxxxxxxx>; <debt@xxxxxxxxxxxxxxxx>; <cm@xxxxxxxxxxxxx>;
<pkt@xxxxxxxxxxxxxxxx>; <simpol@xxxxxxxxxxxxxxx>;
<TheNewForum@xxxxxxxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>;
<cyber-soc@xxxxxxxxxx>
Sent: Sunday, June 15, 2003 8:38 PM
Subject: (2 of 3) Without "The Optimum Policy" (TOP), Capitalism is
Corrupted, and Democracy Fails.


> To: The Wealthy Healthy Intelligent and Powerful folks (WHIPs)
> on my copy list who could make this subject newsworthy.
>
> Good day folks,
>
> In my most recent email, 06-14-03, "Was The Second Tithe Enough
> To Keep The Levites Honest?," I removed three attached files.  Those
> three graphic files contained five charts which are more instruction
> material than could be effectively presented in one email.  Perhaps
> the five charts would have been more effectively handled as a three
> part series, so:
>
> Fig. 4-3, National Macro Model      (2 of 3) this post you are reading.
> Figs. 7-9D, National Micro Model  (1 of 3) my post of Sun, 8 Jun 2003.
> Fig. 8_1, US Defect of Omission   (3 of 3)  forthcoming.
>
> In my Sun 8 Jun 2003 post (1 of 3), Figure 7, "Life Cycle Of A
> Productive Asset," is the centerpiece of the three charts on Fig7-9d
> because it identifies the commonality between capital assets and
> human assets, and more important, Figure 7 shows the feedback of
> "value added" to support that part of the population still in
> development.  Those WHIPs who reduce that feedback below an
> adequate level are practicing genocide, slowly.  Figure 7 also shows
> the necessity of a reliable "store of value" (feed-forward) to enable
> the present workforce to provide for their own retirement.  Notice
> that "productive capital assets" are not allowed to sit in retirement
> for 18 years, and counting, as this retired engineer (a productive
> human asset?) has been privileged to do at the expense of the
> young folks who now pay a 15% S. S. Payroll Tax on all earned
> income between zero and $76,000/year, and a zero% S. S. Payroll Tax
> on all income, earned and not earned, above $76,000/year.  A
> technically valid micro model of a national economy, such as
> Figure 7, which was widely accepted by the public, would be a great
> help to members of Congress when they reform Social Security.  All
> programs funded by tax revenues are "pay as you go" programs.
>
> Figures 8 and 9 on Fig7-9d were drawn, rather inappropriately, to
> represent capital assets with significant internal fixed expenses
> (no-load losses) and large variable expenses (fuel costs), and are
> more familiar to electric power engineers than to liberal arts
> graduates and lawyers with a degree in communication technology.
> The more appropriate presentation of human assets, for this
> discussion will be shown Fig. 8_1, US Defect of Omission (3 of 3)
> forthcoming.  Enough said about (1 of 3).
>
> The centerpiece of this post (2 of 3) is Fig. 4-3, National Macro Model,
> because it helps the reader visualize every aspect of a corporation.
> A corporation not only concentrates wealth, as every protester claims,
> it is also the universal financial structure of every human enterprise,
> from a subsistence family farm up to the global economy.  As the
> instructors at GE's Advanced Engineering Program used to say in the
> 1950s, "If you've seen one system, you've seen them all."  The smallest
> enterprise will exhibit each of the three flow paths shown, to some
> degree.  At the macro level of a national economy, the business to
> business transactions will be about 150% of the GDP (value added
> by the US workforce), the GDP flow path will be 100%, and the
> Speculative Transactions flow path (not drawn to the same scale as
> the 250% of GDP "Real Economy") will be an order of magnitude,
> or more, larger than the GDP flow .  At any level of the model, the
> capital plant at 90 degrees is the "Node" of the enterprise.
>
> Any one not familiar with the term "Node," used when describing
> fluid, electrical, or money networks, might want to consult an
> exchange of emails on the subject of "Nodes," a year or so ago,
> between William B. Ryan and John C. "The Banking Systems
> Engineer" Turmel.  In Fig4-3, the fact that the capital plant is the
> "node" of an enterprise, means that the flow of money (M1)
> through the workforce, which defines GDP or Value Added by
> the enterprise, may divide and pass through each or all of the
> four paths shown on the world market at 360/0 degrees on Fig4-3.
> As an example, a corporation in a primary industry would have
> most of its flow of M1 from its customers (and counterflow of
> goods or services) circulating through the Business to Business
> loop, some flow through the "Tax Gap" in the world market,
> and an uncertain flow of M1 in the speculative loop.
>
> To the contrary, firms like "Bronson Capital Markets research,"
> which provided data for Fig10d, would have most of its M1 flowing
> through the speculative loop.  In other words, the macro model
> does not change as we move from a family farm to a national
> economy, but the number of "Nodes" becomes large.  When we
> move the model from a national economy to a global economy, the
> imports and exports vanish and the mean value of the income
> distribution "Bell Curve" moves from $31,910/year, for the US, to
> about $4,000/year, for the global economy.  That change will be
> more vividly shown on Fig8.1 in part (3 of 3).
>
> Danial Yegin's June 14 issue of "Commanding Heights" on PBS put
> "global trade" in real goods and services at $8 Trillion/year and
> "speculative transactions" in currencies and debt instruments of
> the private and public sectors at $288 Trillion/year.  So "global trade"
> is rapidly approaching the US GDP of $10,000 Billion/year which flows
> through Fig4-3 as twenty-six biweekly payrolls of $384.6 Billion in M1.
> In addition, we assume that the Business To Business transactions
> of $15,000 Billion/year flows as twenty-six biweekly billing periods of
> $576.9 Billion in M1.  Together, these two flows of M1 amount to $961.5
> Billion out of a present M1 of $1,200 Billion, as defined by the Federal
> Reserve System, and nearly constant since 1994.  Now comes the
> tricky part.  Since all three segments of the capital plant provide
> employment, earned income, interest and dividends to the workforce
> at 270 degrees on Fig4-3, the question left unanswered from previous
> posts is: "How much of GDP (M1) flows through the speculative loop?"
>
> My best guess is, just enough to pay the earned income, interest,
> dividends, and profits received by that part of the workforce that
> works in the speculative loop.  The "speculative transactions" in
> currencies and debt instruments of the private and public sectors,
> which flow at the rate of $288 Trillion/year, are primarily book
> entries of titles to wealth already produced and owned by WHIPs
> who make their living in the speculative loop.
>
> Speaking of timely information, the July 14 issue of
> THE ECONOMIST, Page 13, published tables for the tax rates
> (% of GDP) and personal income ($GDP/capita/year) for thirteen
> nations.  I have not seen that set of data published anywhere
> since I plotted Fig1 in 1994, and then I had to use two sources.
> Watching global economic development is like waiting for the
> hundred monkeys to type Lincoln's Gettysburg Address.  But I
> digress, the proportions (150% and 100%) of the real economy in
> Fig 4-3 are based on Wassily Leontief's 1966 book INPUT- OUTPUT
> ECONOMICS, and help to explain why capital investment rates of
> 15% or 16% of GDP were typical for the US and UK in 1995 while
> Europe and Japan were investing 25% of GDP in their capital plants.
> In 1995 Europe and Japan were closer to the "Optimum Policy" than
> the US or the UK were.  The 2001 issue of the World Bank ATLAS
> puts the capital investment rate of the US and UK at 20% and 18%
> of GDP, respectively.  So the US is dragged, kicking and screaming,
> toward a closer compliance with the law, which GE observed to stay
> at the top of FORTUNE's 500 Industrials, and Westinghouse neglected
> to drop out of the 500.  And neither management, nor the governments
> of the winners and losers of World War II, will put the Law in the
> public domain.  It is still not newsworthy.  Enough said about (2 of 3).
>
> On to (3 of 3).
>
> Kind regards,
>
> Wes Burt
>
>
>
>
>
>