The Purpose of an Economy

georgephillip

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If there's a single purpose for any economy and your choices were limited to the following three, which would you select?

Social credit - Wikipedia, the free encyclopedia

"1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action.

2. The second alternative has a certain similarity to the first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment.

3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services.[12]

"Douglas believed that it was the third policy alternative upon which an economic system should be based, but confusion of thought has allowed the industrial system to be governed by the first two objectives."

Douglas is CH Douglas and he authored a popular economic theory called Social Credit during the decades between the two World Wars

"Social credit is an interdisciplinary distributive philosophy developed by C. H. Douglas (1879–1952), a British engineer, who wrote a book by that name in 1924.

"It encompasses the fields of economics, political science, history, accounting, and physics.

"Its policies are designed, according to Douglas, to disperse economic and political power to individuals.

"Douglas wrote, 'Systems were made for men, and not men for systems, and the interest of man which is self-development, is above all systems, whether theological, political or economic.'"

Social credit - Wikipedia, the free encyclopedia
 
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georgephillip

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Perhaps the most intriguing facet of Douglas's Social Credit theory is the additional factor of production he identifies "as the knowledge, technique and processes that have been handed down to us incrementally from the origins of civilization."

"Douglas disagreed with classical economists who recognised only three factors of production: land, labour and capital. While Douglas did not deny the role of these factors in production, he saw the 'cultural inheritance of society' as the primary factor..."

Social credit - Wikipedia, the free encyclopedia

I believe Douglas argues our collective cultural inheritance, including Mathematics and Language, is the property of all of us.
 
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georgephillip

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"According to Douglas, the true purpose of production is consumption, and production must serve the genuine, freely expressed interests of consumers.

"In order to accomplish this objective, he believed that each citizen should have a beneficial, not direct, inheritance in the communal capital conferred by complete access to consumer goods assured by the National Dividend and Compensated Price.[6]

"Douglas thought that consumers, fully provided with adequate purchasing power, will establish the policy of production through exercise of their monetary vote.[6]

"In this view, the term economic democracy does not mean worker control of industry, but democratic control of credit.[6]

"Removing the policy of production from banking institutions, government, and industry, Social Credit envisages an 'aristocracy of producers, serving and accredited by a democracy of consumers.'"

Social credit - Wikipedia, the free encyclopedia
 

expat_panama

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"Douglas disagreed with classical economists who recognised only three factors of production: land, labour and capital. While Douglas did not deny the role of these factors in production, he saw the 'cultural inheritance of society' as the primary factor..."
That's been a pop Marixist attitude, that even though all economic activity requires both labor and capital that somehow people who supply labor are somehow good while those that supply capital aren't. OK so everyone's entitled to a preference. Nevertheless when this prejudice was historically translated into public policy the results were disastrous.
 
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georgephillip

georgephillip

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"Douglas disagreed with classical economists who recognised only three factors of production: land, labour and capital. While Douglas did not deny the role of these factors in production, he saw the 'cultural inheritance of society' as the primary factor..."
That's been a pop Marixist attitude, that even though all economic activity requires both labor and capital that somehow people who supply labor are somehow good while those that supply capital aren't. OK so everyone's entitled to a preference. Nevertheless when this prejudice was historically translated into public policy the results were disastrous.
Can you spot any obvious, glaring errors in this analysis by Douglas?

"It was while he was reorganising the work at Farnborough, during World War I, that Douglas noticed that the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries and dividends.

"This seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power.

"Troubled by the seeming disconnect between the way money flowed and the objectives of industry ('delivery of goods and services', in his view), Douglas set out to apply engineering methods to the economic system.

"Douglas collected data from over a hundred large British businesses and found that in nearly every case, except that of companies heading for bankruptcy, the sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: consumers did not have enough income to buy back what they had made.

"He published his observations and conclusions in an article in the English Review, where he suggested: 'That we are living under a system of accountancy which renders the delivery of the nation's goods and services to itself a technical impossibility.'[5]

"He later formalized this observation in his A+B theorem.

"Douglas proposed to eliminate this gap between total prices and total incomes by augmenting consumers' purchasing power through a National Dividend and a Compensated Price Mechanism."

Social credit - Wikipedia, the free encyclopedia

Douglas seems to define economic democracy differently from most Socialists by substituting democratic control of credit for the worker control of industry.
 

expat_panama

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...sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: consumers did not have enough income to buy back what they had made... ...Douglas proposed to eliminate this gap between total prices and total incomes by augmenting consumers' purchasing power through a National Dividend and a Compensated Price Mechanism....
What makes this a confused muddle is the lack of clarity as to which payments are positive (incomes) and which are negative (payouts). It sounds like Douglas considers profit as something that's 'bad'. I mean, let's say I set up a company to make a really neat product where I pay workers $1,000/month to make stuff I can sell for $2,000/month. What Douglas seems to want is that I got to always pay my hired help more in wages then I can get in product sales.

If that's what he's saying then for me that qualifies as what I'd call an "obvious glaring error". If that's not what he's saying then I'm still waiting for a better explanation. You can understand why none of us are willing to spend all day guessing.
 
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georgephillip

georgephillip

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...sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: consumers did not have enough income to buy back what they had made... ...Douglas proposed to eliminate this gap between total prices and total incomes by augmenting consumers' purchasing power through a National Dividend and a Compensated Price Mechanism....
What makes this a confused muddle is the lack of clarity as to which payments are positive (incomes) and which are negative (payouts). It sounds like Douglas considers profit as something that's 'bad'. I mean, let's say I set up a company to make a really neat product where I pay workers $1,000/month to make stuff I can sell for $2,000/month. What Douglas seems to want is that I got to always pay my hired help more in wages then I can get in product sales.

If that's what he's saying then for me that qualifies as what I'd call an "obvious glaring error". If that's not what he's saying then I'm still waiting for a better explanation. You can understand why none of us are willing to spend all day guessing.
I hope you understand why I believe most of you will have better guesses on this subject than I have. I didn't mean to imply I understood Douglas's reasoning; I was hoping for some help from those more educated than I am about these concepts.

It's my interpretation that Douglas isn't asking you to pay your workers more than your total revenues. He is pointing out how "the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries, and dividends (and) this seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power."

Social credit - Wikipedia, the free encyclopedia
 

expat_panama

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"the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries, and dividends (and) this seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power."
--and that's what I meant by a 'confused muddle' --not knowing which is income and what's outlay.

We seem to run into leftist muddle brains a lot these days who love smoke'n'mirrors to hide the fact that there's no basis for their goofy left wing ideologies. In this case Douglas presents "goods produced" as some kind of 'cost', and wages, salaries, and dividends are something that's being 'distributed' by someone (unnamed) to someone else (undefined).

Speaking about confused muddles, you said "I didn't mean to imply I understood Douglas's reasoning" but then you proceeded to tell say "Douglas isn't asking you to pay your workers more than your total revenues". If we want to get somewhere we need say which things we understand things and ask about what we don't understand. For example, I understand Social Credit Theory is a sloppy mess, and I'm asking you to spell out just what it is that we know and what we are asking.

Unless of course we're not trying to figure anything out in which case we're already fine...
 
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georgephillip

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"the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries, and dividends (and) this seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power."
--and that's what I meant by a 'confused muddle' --not knowing which is income and what's outlay.

We seem to run into leftist muddle brains a lot these days who love smoke'n'mirrors to hide the fact that there's no basis for their goofy left wing ideologies. In this case Douglas presents "goods produced" as some kind of 'cost', and wages, salaries, and dividends are something that's being 'distributed' by someone (unnamed) to someone else (undefined).

Speaking about confused muddles, you said "I didn't mean to imply I understood Douglas's reasoning" but then you proceeded to tell say "Douglas isn't asking you to pay your workers more than your total revenues". If we want to get somewhere we need say which things we understand things and ask about what we don't understand. For example, I understand Social Credit Theory is a sloppy mess, and I'm asking you to spell out just what it is that we know and what we are asking.

Unless of course we're not trying to figure anything out in which case we're already fine...
You don't see any "costs" involved in producing "goods"?
The distribution of wages, salaries, and dividends depends on the interaction of the three classic factors of production, land, labor, and capital.
Douglas adds a fourth factor, the cultural inheritance of mankind, as an (unnamed) influence on how wealth is distributed.


"Douglas disagreed with classical economists who recognised only three factors of production: land, labour and capital.

"While Douglas did not deny the role of these factors in production, he saw the 'cultural inheritance of society' as the primary factor. He defined cultural inheritance as the knowledge, technique and processes that have been handed down to us incrementally from the origins of civilization.

"Consequently, mankind does not have to keep 'reinventing the wheel'. 'We are merely the administrators of that cultural inheritance, and to that extent the cultural inheritance is the property of all of us, without exception.'

Are you confused or fine with that?

Social credit - Wikipedia, the free encyclopedia
 

editec

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...sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: consumers did not have enough income to buy back what they had made... ...Douglas proposed to eliminate this gap between total prices and total incomes by augmenting consumers' purchasing power through a National Dividend and a Compensated Price Mechanism....
What makes this a confused muddle is the lack of clarity as to which payments are positive (incomes) and which are negative (payouts). It sounds like Douglas considers profit as something that's 'bad'. I mean, let's say I set up a company to make a really neat product where I pay workers $1,000/month to make stuff I can sell for $2,000/month. What Douglas seems to want is that I got to always pay my hired help more in wages then I can get in product sales.

If that's what he's saying then for me that qualifies as what I'd call an "obvious glaring error". If that's not what he's saying then I'm still waiting for a better explanation. You can understand why none of us are willing to spend all day guessing.
I hope you understand why I believe most of you will have better guesses on this subject than I have. I didn't mean to imply I understood Douglas's reasoning; I was hoping for some help from those more educated than I am about these concepts.

It's my interpretation that Douglas isn't asking you to pay your workers more than your total revenues. He is pointing out how "the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries, and dividends (and) this seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power."

Social credit - Wikipedia, the free encyclopedia
George I THINK I understand his problem, and the answer of how the economy keeps going despite the fact that the aggregate cost of goods (to be) sold exceeds the aggregate salaries and incomes is this

DEBT.

Remember we live (and have live since industrialization) in a NEW MONEY PRODUCED BY DEBT ISSUANCE ECONOMY.


You know how I keep going on about those "MASTERS"?


Those are the guys with their hands on the tiller that produced that new mone that bridges the gap between REAL WEALTH and the money we need to claim our share of it.

That is also why they basically own the world, now.

I doubt there's more than 100,000 of them in the entire world.
 

expat_panama

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...spell out just what it is that we know and what we are asking. Unless of course we're not trying to figure anything out in which case we're already fine...
You don't see any ...
Still not seeing any balances and system boundaries yet that could describe an econ model. Maybe if there are any lurkers here with talents in econ ed they can help ease us though the communication impasse.
 

CrusaderFrank

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Apple takes in more than the total costs of goods and services produced each week...so what? Is that Bad?

You see now why Marxist economies are the world poorest
 

expat_panama

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...the aggregate cost of goods (to be) sold exceeds the aggregate salaries and incomes...
What needs to be defined before that statement can make sense is:
  • Whether the goods' cost dollar value is the before profit cost to the company or is it the company's final goods' sales price.
  • Whether 'salaries and incomes' includes a given company's (or an aggregate sector of companies') total payments for employee compensation, or are we talking about the total incomes of the entire population within the system boundary (including suppliers, owners and management).
Please let me know if you'd had any thoughts in that direction.
 
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georgephillip

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...the aggregate cost of goods (to be) sold exceeds the aggregate salaries and incomes...
What needs to be defined before that statement can make sense is:
  • Whether the goods' cost dollar value is the before profit cost to the company or is it the company's final goods' sales price.
  • Whether 'salaries and incomes' includes a given company's (or an aggregate sector of companies') total payments for employee compensation, or are we talking about the total incomes of the entire population within the system boundary (including suppliers, owners and management).
Please let me know if you'd had any thoughts in that direction.
I will.
Would you tell me your choice for the purpose of an economy from Douglas's three options?


"1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action.
2. The second alternative has a certain similarity to the first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment.
3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services."

Social credit - Wikipedia, the free encyclopedia
 
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georgephillip

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What makes this a confused muddle is the lack of clarity as to which payments are positive (incomes) and which are negative (payouts). It sounds like Douglas considers profit as something that's 'bad'. I mean, let's say I set up a company to make a really neat product where I pay workers $1,000/month to make stuff I can sell for $2,000/month. What Douglas seems to want is that I got to always pay my hired help more in wages then I can get in product sales.

If that's what he's saying then for me that qualifies as what I'd call an "obvious glaring error". If that's not what he's saying then I'm still waiting for a better explanation. You can understand why none of us are willing to spend all day guessing.
I hope you understand why I believe most of you will have better guesses on this subject than I have. I didn't mean to imply I understood Douglas's reasoning; I was hoping for some help from those more educated than I am about these concepts.

It's my interpretation that Douglas isn't asking you to pay your workers more than your total revenues. He is pointing out how "the weekly total costs of goods produced was greater than the sums paid out to individuals for wages, salaries, and dividends (and) this seemed to contradict the theory put forth by classic Ricardian economics, that all costs are distributed simultaneously as purchasing power."

Social credit - Wikipedia, the free encyclopedia
George I THINK I understand his problem, and the answer of how the economy keeps going despite the fact that the aggregate cost of goods (to be) sold exceeds the aggregate salaries and incomes is this

DEBT.

Remember we live (and have live since industrialization) in a NEW MONEY PRODUCED BY DEBT ISSUANCE ECONOMY.


You know how I keep going on about those "MASTERS"?


Those are the guys with their hands on the tiller that produced that new mone that bridges the gap between REAL WEALTH and the money we need to claim our share of it.

That is also why they basically own the world, now.

I doubt there's more than 100,000 of them in the entire world.
Douglas seems pretty clear on how his system required democratic control of credit, ed.

"According to Douglas, the true purpose of production is consumption, and production must serve the genuine, freely expressed interests of consumers.

"In order to accomplish this objective, he believed that each citizen should have a beneficial, not direct, inheritance in the communal capital conferred by complete access to consumer goods assured by the National Dividend and Compensated Price.[6]

"Douglas thought that consumers, fully provided with adequate purchasing power, will establish the policy of production through exercise of their monetary vote.[6]

"In this view, the term economic democracy does not mean worker control of industry, but democratic control of credit.[6] Removing the policy of production from banking institutions, government, and industry, Social Credit envisages an 'aristocracy of producers, serving and accredited by a democracy of consume.'"

Social credit - Wikipedia, the free encyclopedia

If you had to choose between his three purposes of an economy, which would it be?

"1. The first of these is that it is a disguised Government, of which the primary, though admittedly not the only, object is to impose upon the world a system of thought and action.

"2. The second alternative has a certain similarity to the first, but is simpler. It assumes that the primary objective of the industrial system is the provision of employment.

"3. And the third, which is essentially simpler still, in fact, so simple that it appears entirely unintelligible to the majority, is that the object of the industrial system is merely to provide goods and services."

Social credit - Wikipedia, the free encyclopedia
 
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georgephillip

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Apple takes in more than the total costs of goods and services produced each week...so what? Is that Bad?

You see now why Marxist economies are the world poorest
Would you agree a majority of US living standards have been declining lately?

"Douglas collected data from over a hundred large British businesses (during WWI) and found that in nearly every case, except that of companies heading for bankruptcy, the sums paid out in salaries, wages and dividends were always less than the total costs of goods and services produced each week: consumers did not have enough income to buy back what they had made.

"He published his observations and conclusions in an article in the English Review, where he suggested: 'That we are living under a system of accountancy which renders the delivery of the nation's goods and services to itself a technical impossibility.'"

Social credit - Wikipedia, the free encyclopedia
 

expat_panama

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...the aggregate cost of goods (to be) sold exceeds the aggregate salaries and incomes...
What needs to be defined before that statement can make sense is:
  • Whether the goods' cost dollar value is the before profit cost to the company or is it the company's final goods' sales price.
  • Whether 'salaries and incomes' includes a given company's (or an aggregate sector of companies') total payments for employee compensation, or are we talking about the total incomes of the entire population within the system boundary (including suppliers, owners and management).
Please let me know if you'd had any thoughts in that direction.
I will. Would you tell me your choice for the purpose of an economy from Douglas...
His three candidates struck me as childlike options for use in figuring out goals for a concept as intangible as 'the economy'. Like, here we are picking a purpose for something with so many possible definitions (from here):
  • The system or range of economic activity in a country, region, or community (Effects of inflation were felt at every level of the economy).
  • A specific type of economic system (an industrial economy; a planned economy).
  • The complex of human activities concerned with the production, distribution, and consumption of goods and services.
  • The management of the resources, finances, income, and expenditure of a community, business enterprise, etc.
  • The management of the resources of a community, country, etc., esp. with a view to its productivity.
  • Financial system, financial state (Africa's most industrialized economy).
  • Organization of money and resources (the country's economy; household economy).
Each individual definition from this partial list could point to a distinct set of possible proposes. Sure, I got my guesses as to what y'all may be thinking, but that game's been getting pretty tedious.

That's why I was asking Editec what his thoughts might be...
 
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georgephillip

georgephillip

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My choice:

"4. (Economics)
a. the complex of human activities concerned with the production, distribution, and consumption of goods and services
b. a particular type or branch of such production, distribution, and consumption a socialist economy an agricultural economy
5. (Economics) the management of the resources, finances, income, and expenditure of a community, business enterprise, etc."

economy - definition of economy by the Free Online Dictionary, Thesaurus and Encyclopedia.

I suppose it could be important to keep in mind that Douglas formulated his theories during wartime when much of the economy he studied was centrally controlled in ways it isn't today.
 

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