Prof. Gunning and Central Planning

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

<**>"Reductio ad absurdum," in the context in which
you use it, simply means that if we define A and B as
distinct numerical values and additive, A cannot
equal A + B. Our definition of A does not enable us
to benefit by exploring the characteristics of B
because the definition is not distinct.<**>
--------------------

Here, Professor Gunning is interpreting A + B to be
trivially a fallacy of this type:

A = all the cows
B = some of the cows
Therefore,
All of the cows + some of the cows > all the cows.

That is to say, it is merely the error of double
counting which demonstrates that Major Douglas was an
ignoramus and crank who couldn't even add.
--

But the definitions are distinct, it's just that
Professor Gunning can't see them (since it is
argument by reductio which is missing from the
praxeologist's tool bag):  The *flow* of payments made
by firms into account balances held by consumers, as
opposed to the net flow of payments made by firms
into account balances held by firms.  A + B are the
accounted for costs of production that flow to the
point of retail.  This last sentence is a statement
from accounting, not pure economics.  Its validity or
invalidity stands or falls within that context -
meaning the context of accounting.  It also uses the
concept of "flow" which puts it in the context of
Newton's calculus.
--

Double entry accounting may be used to record
transactions in barter, money and credit, where
monetary transactions are taken to be indirect barter
transactions through a fungible commodity or fungible
quasi-commodity "medium of exchange."

The "Austrians" have no comprehension of creditary
transactions, nor do they have an understanding of
double entry accounting.

It is our contention that the system of mass
production free enterprise is impossible without the
method of double entry or something better that can
be used by ordinary businessmen, and it couldn't
exist without credit, which is part and parcel of the
same thing (meaning accounting).  It is marvelous
technology.

The development of double entry in the twelfth
century was therefore a necessary precursor to the
Industrial Revolution, as was Newton's invention of
the fluxional calculus that enabled the design and
construction of the machines of mass production.
>From the twelfth century on most transactions became
to be conducted in market derived creditary
instruments, such a bills of exchange and tallies
rather than the king's "money."  The problem of final
settlement in a growing economy was solved with the
development of fractional reserve banking in the
seventeenth century, which allowed reserves in the
king's money to become a smaller and smaller
percentage of transactions.  Now, in the twenty-first
century, the king's money has become dispensed with
entirely (except in systems of central planning where
they are an instrument of that planning).  It is
however not a perfect system without flaws.  It is
those flaws which social credit attempts to address.
--

Double entry accounting was rejected at the beginning
of Soviet reign for ideological reasons, since it was
the method for calculating profit.  It was for this
as much as anything else that made the demise of the
Soviet state inevitable.

They had to revert to a complex system of single
entry tabulations.  But because double entry
facilitates accountability, it permits
decentralization in management.  The bureaucratic
alternative is to mandate rules from above against
which the performance of managers may be judged.  It
is the only way to achieve accountability without the
tool of double entry accounting.  That meant the
economy had to be organized along the lines of a
police department that delivers its services "in
kind" rather than "selling" them.  It is no wonder
such systems devolve into police states.

It also mandated continuous espionage.  Central
planning requires coefficients to be fed into their
input-output tables.  To emulate the performance of
the Western economies those coefficients could only
be acquired by observing the market economies in the
West.

They got all the Sears catalogues they could get.  In
the early days at the beginning of their revolution,
Sears catalogs had everything that could equip a
small economy.  Automobiles, airplanes, tractors,
pre-fabricated houses and sheds, hand tools, machine
ship tools, clothes - practically everything but
food, which the Soviets at that time already had in
abundance (but also in accordance to the "Austrian"
notion that there is necessarily a "trade-off"
between consumption and capital production, they had
to kill the Kulaks to divert labor from the farms to
the new factories).  From the Sears catalog they had
relative price information they could plug into their
tables.

Over the years the Sears catalog degraded.  Fewer and
fewer things were listed.  Whole categories of items
were dropped.  Finally, in the late 1980s the catalog
itself was dropped and was no longer available to the
Soviets.

Not entirely tongue-in-cheek, we may say that with
the demise of the Sears catalog the Soviet system had
to collapse because they could no longer get the
information needed for their coefficients.
--

"Boyes' explanation of the sudden collapse of
Communist Power may be summarised thus.  The collapse
was not sudden; its seeds lay within Communism from
the start.  For the Communist State, The Plan is
important, but the Plan cannot work.  The market
responds to and is served by the myriad free
decisions and arbitrary choices of countless
individuals.  It is true that the general trends and
effects of these choices, given a sufficient mass can
be plotted by actuarial sciences, but they cannot be
planned for in advance and no central plan can
replicate them.  In effect the Plan creates shortages
of everything...

"Communism has criminalized the whole of society, but
particularly the party and the police.  The black
market may provide the things people need to live,
and therefore be tolerated, but ultimately the
creation of an economy outside the control of the
Party results in a loss of authority.  By the 1980's
the Party had lost control, but still bore
responsibility in mass perception...

"Yet Boyes' book only supplies the contemporary
evidence for the truth of what we already knew.  Over
2000 years ago, Aristotle in his criticism of Plato's
Republic, made the point:

"**There is further drawback to common ownership; the
greater the number of owners, the less respect for
the property...they exercise care over public
property only in so far as they are personally
affected.  Other reasons apart, the thought that
someone else is looking after it tends to make them
careless of it. (The Politics : Bk.II, Chap.3.)**

"A point amply borne out by the case of the
collective farms and their equipment.  C.H. Douglas,
however, has provided a more recent critique, and it
is the more germane as it is directed at 'The Plan'.
Douglas' defence of genuine market economics against
those who favour a planned economy is best understood
from his vivid illustration of the golden sovereign.
When a man entered a shop and requested an item from
the shelf, proffering a sovereign as effective
demand, he immediately set in motion an order for the
item to be replaced on the shelf.  On receipt of that
order (or in anticipation of it), carters carted,
factory workers set machines in motion, ships sailed,
farmers sowed and reaped, miners mined and quarrymen
quarried.  The only weakness in the system was that
not enough people had sovereigns with which to
command, and for that Social Credit proposed a
remedy.  No centralised Marxist or Fabian plan can
provide for all the free actions necessary to replace
the item on the shelf.  As Douglas argued in *Social
Credit*, plans are static - Platonic Abstractions -
whilst Society is dynamic.  By the time the minutiae
of 'The Plan' have been gathered, society has moved
on to new situations; a fact which defeated Labour's
National Plan in 1969.  The Plan is an ideal form so
that, even in Platonic terms, actuality can never be
identical to it.

"The entire argument of Boye's book may indeed be
summarised by a quotation from Douglas' monograph,
*The Big Idea*:

"**The idea so skilfully inculcated that confiscation
of property will assist in the distribution of wealth
is, of course, completely without foundation.
Socialism is a restriction system and it has two well
defined fundamental principles - centralisation of
power and espionage...It has no chance whatever of
success, but it has a real chance of setting back the
clock of human happiness by hundreds of years.**"
--




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