The Purpose of an Economy

[eagle1462010]

Marx got the solution to capitalism all wrong, IMHO.
He saw its fatal flaws as clearly as anyone who ever wrote about it.
You're certainly entitled to reject him and his purpose; however, do you think he was correct when he says "money plays the largest part in determining the course of history?"

It makes as much sense to ask what the purpose of an economy is as to ask what the purpose of a Giraffe is.

Does it make sense to you to ask if the purpose of an economy is to provide jobs or provide goods and services?

They are one in the same................

The whole thread is about a man who basically is preaching communism................

It's disguised as something else.......He ditches currency, but then states you will be issued TICKETS for your work to purchase goods and services........

How is that not currency..............It's just another word for it...........

He rejects Barter economics...............Currency was issued because Barter Economics are only going to work at the most local level.........But basically we BARTER our services and our products with the exchange of currency.............

The problem being when there is no REAL VALUE associated with the currency and it becomes FIAT currency instead of EQUITABLE CURRENCY...............

example........I do electrical work at a Refinery..........If it was complete BARTER for my services they'd have to pay me in gas.........Of course then I'd have to trade the gas for food, wood, electricity, and etc...............So instead I receive cash to buy those things, as I can't see having to go around and trade my gas for everything I need................

Which is the purpose of the currency to begin with.

 

[georgephillip]

It makes as much sense to ask what the purpose of an economy is as to ask what the purpose of a Giraffe is.

Does it make sense to you to ask if the purpose of an economy is to provide jobs or provide goods and services?

They are one in the same................
According to Douglas, they are not.
He argues that if the purpose of an economy is to deliver the maximum amount of goods and services with the least amount of labor, then unemployment becomes necessary for a large segment of the workforce.

"Douglas proposed that unemployment is a logical consequence of machines replacing labour in the productive process, and any attempt to reverse this process through policies designed to attain full employment directly sabotages our cultural inheritance.

"Douglas also believed that the people displaced from the industrial system through the process of mechanization should still have the ability to consume the fruits of the system, because he suggested that we are all inheritors of the cultural inheritance, and his proposal for a national dividend is directly related to this belief."

Social credit - Wikipedia, the free encyclopedia

 

[bripat9643]

Marx got the solution to capitalism all wrong, IMHO.
He saw its fatal flaws as clearly as anyone who ever wrote about it.
You're certainly entitled to reject him and his purpose; however, do you think he was correct when he says "money plays the largest part in determining the course of history?"

It makes as much sense to ask what the purpose of an economy is as to ask what the purpose of a Giraffe is.

Does it make sense to you to ask if the purpose of an economy is to provide jobs or provide goods and services?

No. Like I said, asking what the purpose of Giraffe is makes as much sense as asking what the purpose of an economy is. An economy simply is. The idea that it's some kind of club or institution created for a purpose is idiotic. Anytime you have two or more people exchanging goods and services, you have an economy.

 

[Kimura]

As sympathetic as I am to the idea of social credit, there’s a difference between the vertical and horizontal money supply. It’s critical to recognize when we talk about ‘debt’ that we shouldn’t denounce it or interest on debt. For example, paying interest on debt if you’re the federal government boils down to mere accounting entries.

The whole idea of industrial capitalism was that credit creation would be used in a productive fashion for capital investment. These investments would employ labor, which is no longer the case in today’s economy. In today’s environment, when commercial banks create credit, it’s a claim on wealth so to speak. It creates corporate debt, mortgage debt, personal debt, student loan debt, credit card debt, etc. This is the difference between credit creation by a commercial bank as opposed to a central bank’s creation of money.

When a central bank creates $$$$, it can do so for public purpose, such using government spending/$$$$ creation to fund public infrastructure like roads, sewer systems, rail, education, health care, etc. These things take a capital investment which is SIGNIFICANTLY larger than capital investment for manufacturing. For example, the value of NY real estate is worth more than all of the plants/equipment in the US. Most economic undergraduates are taught to ignore this difference. They don’t learn that the price level in textbooks only refers consumer prices and commodities. You will not find a discussion about the supply of credit and asset prices, bonds, equities, real estate, etc. However, 99% of credit in the US economy is going to various financial claims. Let that sink in. On a daily basis, day in and day out, a year’s worth of GNP passes through NY-based clearinghouses and the Chicago Mercantile Exchange. The MAJORITY of payments are in the financial sector.

 

[georgephillip]

As sympathetic as I am to the idea of social credit, there’s a difference between the vertical and horizontal money supply. It’s critical to recognize when we talk about ‘debt’ that we shouldn’t denounce it or interest on debt. For example, paying interest on debt if you’re the federal government boils down to mere accounting entries.

The whole idea of industrial capitalism was that credit creation would be used in a productive fashion for capital investment. These investments would employ labor, which is no longer the case in today’s economy. In today’s environment, when commercial banks create credit, it’s a claim on wealth so to speak. It creates corporate debt, mortgage debt, personal debt, student loan debt, credit card debt, etc. This is the difference between credit creation by a commercial bank as opposed to a central bank’s creation of money.

When a central bank creates $$$$, it can do so for public purpose, such using government spending/$$$$ creation to fund public infrastructure like roads, sewer systems, rail, education, health care, etc. These things take a capital investment which is SIGNIFICANTLY larger than capital investment for manufacturing. For example, the value of NY real estate is worth more than all of the plants/equipment in the US. Most economic undergraduates are taught to ignore this difference. They don’t learn that the price level in textbooks only refers consumer prices and commodities. You will not find a discussion about the supply of credit and asset prices, bonds, equities, real estate, etc. However, 99% of credit in the US economy is going to various financial claims. Let that sink in. On a daily basis, day in and day out, a year’s worth of GNP passes through NY-based clearinghouses and the Chicago Mercantile Exchange. The MAJORITY of payments are in the financial sector.

Chapter Ten of Fred Magdoff's and Michael D. Yates's 2009 book, The ABCs of the Economic Crisis: What Working People Need to Know begins with a quote they attribute to the September 16, 1985 edition of Business Week magazine:

"No, it's not Las Vegas or Atlantic City. It's the US financial system. The volume of transactions has boomed far beyond anything needed to support the economy. Borrowing--politely called leverage--is getting out of hand. And futures enable people to play the market without owning a share of stock. The result: they system is tilting from investment to speculation."

If what Magdoff and Yates wrote is correct, then we are in the fourth decade of speculation's triumph over investment.

Does this mean there is an even larger economic crash than 2008 (or 1929) on our horizon?

 

[georgephillip]

It makes as much sense to ask what the purpose of an economy is as to ask what the purpose of a Giraffe is.

Does it make sense to you to ask if the purpose of an economy is to provide jobs or provide goods and services?

No. Like I said, asking what the purpose of Giraffe is makes as much sense as asking what the purpose of an economy is. An economy simply is. The idea that it's some kind of club or institution created for a purpose is idiotic. Anytime you have two or more people exchanging goods and services, you have an economy.

Once your group of two or more people reaches critical mass, simple barter become awkward, at best. When society reaches a size and complexity that requires formal institutions like government and banks, would you concede how some members of society might be inclined to prefer the first of Douglas's three possible purposes for an economy?

"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."


Social credit - Wikipedia, the free encyclopedia

 

[regent]

The purpose of our economic system should be the same as the purpose of the United States:
to provide for the concept that all men are created equal and all have the rights to life liberty and the pursuit of happiness. In economics I disagree with old Milton that an economic system should run on greed.

 

[BobPlumb]

...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

What is missing seem to me is the cost of doing business. Supplies will be consumed. Replacement parts will have to be purchased. Overhead!

 

[georgephillip]

The purpose of our economic system should be the same as the purpose of the United States:
to provide for the concept that all men are created equal and all have the rights to life liberty and the pursuit of happiness. In economics I disagree with old Milton that an economic system should run on greed.

Michael Hudson has the same opinion about Milton, as you can see from this article:

"Classical economists characterized the rent and interest accruing to the FIRE sector as 'unearned income,' headed by land rent and land-price ('capital') gains, which John Stuart Mill described as what landlords made 'in their sleep.'

"Milton Friedman, by contrast, insisted that 'there is no such thing as a free lunch' – as if the economy were not all about a free lunch and how to get it. And the main way to get it is to dismantle the role of government and sell off the public domain – on credit."

The Chicago Boys? Free Market Theology » CounterPunch: Tells the Facts, Names the Names

 

[georgephillip]

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

What is missing seem to me is the cost of doing business. Supplies will be consumed. Replacement parts will have to be purchased. Overhead!

Douglas did his research during WWI within a centrally controlled economy, at least compared to today:

"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."

I'm unsure whether the "weekly total cost of goods produced' qualifies as overhead or not. I'm starting to suspect a huge practical gulf between the economics required to run a successful small business, and the Economics Douglas was struggling to understand and reform.

Social credit - Wikipedia, the free encyclopedia

 

[Quantum Windbag]

Are all costs distributed simultaneously as purchasing power?

Is profit a cost?

I had to ask Google

"Is Economic Profit a Cost of Production?
Answer
Economic profit is not a cost of production from a company, but rather it is a product of it. It is a result from production from the company. You can find out more information here: www.amosweb.com."

Is Economic Profit a Cost of Production? - Ask.com

And now you see the flaw in Douglas's economic theories.

Do you think it's possible an economy would function more "fairly" without profit?

That one is easy, no.

 

[georgephillip]

Is profit a cost?

I had to ask Google

"Is Economic Profit a Cost of Production?
Answer
Economic profit is not a cost of production from a company, but rather it is a product of it. It is a result from production from the company. You can find out more information here: www.amosweb.com."

Is Economic Profit a Cost of Production? - Ask.com

And now you see the flaw in Douglas's economic theories.

Do you think it's possible an economy would function more "fairly" without profit?

That one is easy, no.

What flaw in Douglas's theory do you see?

Marx thought the unequal distribution of property in a society ensured an unfair amount of compensation for those who already owned the most property.

"Under capitalism, the distinction between necessary labour and surplus labour however becomes obscured by the nature of the market transactions involved.

"Most people are legally free agents who can buy and sell labour on the basis of more or less equal access to markets, and an equal opportunity to better their lot in competition with others.

"Yet, owners of substantial property assets enter the market with an advantage over propertyless people who simply have to sell their labour to survive. It gives property owners the power to command the surplus labour of others.

"When the wage contract is signed, it appears that the employee is paid for the hours that he works, but at the same time, Marx argues, the worker adds an amount of value on the job in excess of the value of his wage/salary: he performs surplus labour."

Surplus labour - Wikipedia, the free encyclopedia

 

[bripat9643]

Does it make sense to you to ask if the purpose of an economy is to provide jobs or provide goods and services?

No. Like I said, asking what the purpose of Giraffe is makes as much sense as asking what the purpose of an economy is. An economy simply is. The idea that it's some kind of club or institution created for a purpose is idiotic. Anytime you have two or more people exchanging goods and services, you have an economy.

Once your group of two or more people reaches critical mass, simple barter become awkward, at best. When society reaches a size and complexity that requires formal institutions like government and banks, would you concede how some members of society might be inclined to prefer the first of Douglas's three possible purposes for an economy?

"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."


Social credit - Wikipedia, the free encyclopedia

Banks are not the government. No matter what size society is, it doesn't require government.

 

[georgephillip]

No. Like I said, asking what the purpose of Giraffe is makes as much sense as asking what the purpose of an economy is. An economy simply is. The idea that it's some kind of club or institution created for a purpose is idiotic. Anytime you have two or more people exchanging goods and services, you have an economy.

Once your group of two or more people reaches critical mass, simple barter become awkward, at best. When society reaches a size and complexity that requires formal institutions like government and banks, would you concede how some members of society might be inclined to prefer the first of Douglas's three possible purposes for an economy?

"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."


Social credit - Wikipedia, the free encyclopedia

Banks are not the government. No matter what size society is, it doesn't require government.

How would you govern a large state or community without government, that is, how would you organize national collectives without some means of steering or piloting the minds of the individuals comprising the collectives?