Re: demand management

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

***In an economy with diminishing returns and no
change in the degree of monopoly (as N varied),
higher employment rates would inevitably mean lower
real wages.  In the absence of diminishing returns
this was not the case.***
----

This is absolutely correct certainly within the
context of the Great Depression.  There was
tremendous capacity that had been previously
employed.  Re-employing that capacity could not fail
to have increasing returns up the level of its
previous employment and perhaps beyond.  That would
continue to be the case so long as there is
improvement in process.
--

***Unless there is a profitable market for mass
produced goods and services, entrepreneurs will not
expand production and invest in productive
facilities. So it is necessary to make sure that
workers can afford the products of industry.***
-----

The question then becomes how best to make sure that
workers can afford the products of industry.  In
principle the simplest and quickest method is to
gradually but assertively apply an increasing credit
subsidy to consumers, effectively increasing their
wages, and a credit subsidy at the point of retail,
effectively lowering prices.  The goal is to equate
retail sales to supply costs up to the point of
maximum utilization of productive capacity, or to the
point of satiation, whichever comes first.
--

***But if there are not profits in the system, the
entrepreneur will not hire labor to produce goods and
services.***
-----

This is quite true.  The competitive market system
allows the de-centralization of decision-making, with
individual entrepreneurs subservient to the real
demand of consumers.  The only possible alternative
that has any semblance of efficiency is some
variation of centrally directed bureaucracy calling
the shots, with penal enforcement.  It is no wonder
such systems evolve into police states.  The
competitive market becomes possible through the
institution of banking, which transforms the
individualized credit of individual producers into
fungible purchasing power, enabling consumers to shop
at something other than the company store.

That institution, in its most general sense what we
call finance, is not the natural attribute of the
market, but is a human construct that allows the
market to exist when it is working correctly.




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