Please note that I have corrected the definition of the "natural law of
cost below (paragraph 10)to read "mean rate of consumption divided by
the mean rate of production." -- Wally
Wallace M. Klinck wrote:
>
> I think that Prof. Gunning, admittedly new to Douglas's ideas, does not
> appreciate the nature and consequences of Social Credit policy:
>
> The Dividend is not lent to anyone. It is a recognized,
> constitutionally guaranteed, inaleinable birthright payable to ALL
> citizens, rich and poor.
>
> The compensated price is a universal or "global" payment directed at ALL
>
> retail businesses in order to bring about an OVERALL uniform percentage
> reduction in the price level. I understand that, even under the
> limitations of the present debt system, credits were issued in wartime
> Australia to "subsidize" low prices and that the system, although not
> Social Credit, apparently worked very well.
>
> Money advanced by the banks for production would be properly accounted
> in a National Credit Account, a legally established, constitutional
> statistical body. In other words, we would no longer regard our real
> assets as a liability but rather as the real credit that they are.
>
> Prof. Gunning seems fixed upon the idea that because the above measures
> involve creation of new money inflation would result. That this new
> money creates no new costs and is itself cancelled in the process of
> being spent seems to elude him. He seems to forget that the massive
> consumer borrowing necessary today in order to support the market and
> give consumers access to production is itself a creation of new money
> which IS inflationary because it must be charged to later cycles of
> production.
>
> One might point out that Douglas did not say that there was never enough
>
> monetary demand to allow consumers to clear the market of consumables.
> Under existing finance, billions and trillions of dollars can be
> distributed by massive private and public capital projects and
> unneccessary, wasteful and undesirable (or even undesired) activity,
> merely to provide financial incomes--all achieved by wasted effort
> applied under external direction and financed by massive accumlation of
> debt charged to the future. (The negative environmental effects of such
> a policy are obvious.)
>
> But that is the point. Each cycle of production activity should be
> self-liquidating in itself without dependence on further production
> activity.
>
> The fact that consumer "demand" backed by earned financial income may be
>
> adequate to access available consumer production in no way negates the
> validity of the A + B Theorem. It is the ability of that income to
> finally liquidate the financial costs attached to that production that
> is the real issue. The existing necessity to merely transfer them as a
> charge against the future is a vindication of the soundness of the
> Theorem.
>
> Does a worm, happening upon a morsel, wander off to engage in some other
>
> activity in order first to justify consuming the morsel. No, it sees
> it, needs it and eats it! This is the difference between static and
> dynamic economics. Through the existing system of finance, we have
> abstracted ourselves from the dynamics of reality to a system of static
> economics.
>
> Prof. Gunning seems to take no notice of the fact that the physical
> costs of production are met fully as production takes place; nor does he
>
> appear to recognize the natural law of cost, i.e., that actual cost is
> the mean rate of consumption divided by the mean rate of
> production--physical quantities measured in financial terms.
>
> Prof. Gunning seems to ignore the fact that nearly every characteristic
> of the modern economy operating under the present debt system is that
> which would be expected if the conditions described by the A + B Theorem
>
> were indeed operative.
>
> As to "massive government intervention" alleged to be a consequence of
> Social Credit policy, it would seem to me that payment of a National
> Dividend and Compensated Price (similar to a reverse sales-tax) are
> about the simplest measures imaginable. The required essential
> statistics are readily available and computation today by computers
> makes the process quite easy.
>
> The entire industry of government activity directed at keeping people
> busy, i.e., "employed" ("enslaved" might be a better term) in order to
> provide them with incomes to make up for the deficiency in the normal
> operations of the private sector price-system would be eliminated. Also
>
> the creation of unnecessary capital projects in the private as well as
> the public sectors merely to provide income so that PAST production may
> be accessed by the consumer would be eliminated.
>
> Moreover, being provided with increasing independence via income not
> dependent upon servitude would make every citizen increasingly free to
> choose whether or not to participate in any activity presented to him or
>
> her.
>
> The present deficiency of purchasing-power which has led to
> international trade war, and, consequently, military conflict will be
> eliminated in a Social Credit dispensation and this type of production
> activity will be greatly eliminated. The result will be a substantial
> and increasing provision of leisure time in which individuals will be
> able to choose their own ends and activities.
>
> Because of the increasing strictures brought about by the existing non-
> self-liquidating financial system and enormously intrusive and complex
> system of taxation, welfare and government activity has evolved in a
> futile attempt to deal with circumstances which can only become
> increasingly impossible to manage. Social Credit would result in a
> major reduction of the expansion of government and of bureaucratic
> activity.
>
> Full-employment would be recognized for the efficiency failure and the
> regimentation by wage-slavery that this policy in reality is. The
> individual would would experience a new-found freedom in the context of
> economic independence and expanding leisure.
>
> As to Prof. Gunning's concern that the "monied interests" tend to
> control government policies, that is exactly the situation that has been
>
> accomplished by a system of monopoly credit control over society,
> private and public, and the increased channelling of money expenditure
> through governments on programs that exercise state control over
> society. The policy of Social Credit is specifically designed to
> reverse this trend by placing increasing economic independence,
> independent of "work", in the hands of each and every citizen.
>
> Sincerely
> Wally
>
>
>
>
> Pat Gunning wrote:
> > [EMAIL PROTECTED] wrote:
> >
> > >It is our contention that double entry accounting
> > >defines the costs of production as A + B; not merely
> > >A, such that the recorded costs of production and the
> > >flow of purchasing power to consumers have different
> > >determinants that do not automatically coincide. The
> > >validity of this contention stands or falls within
> > >the manifold of accounting, not pure economics.
> > >
> > >So, given the validity of that contention - we've
> > >gotten nowhere discussing it so for the moment I'll
> > >move on in the train of logic - what has to be
> > >coordinated is not only the flow of the costs of
> > >production with the flow of goods in order to have
> > >price stability, but also the flow of purchasing
> > >power to consumers.
> > >
> > I suppose that this is true. We have gotten nowhere discussing it. You
> > are repeating what you said before, albeit seemingly with greater
> > clarity. Or perhaps I am just getting accustomed to hearing this
> > language.
> >
> > I will comment briefly on the A + B theorem below, just reiterating what
> >
> >
> > I have already said. In this paragraph, I want to expand on my point
> > about the "national dividend" proposal. I have grave doubts about
> > whether the national dividend proposal can achieve the goal of causing
> > the kinds of changes you believe will bring about stability and avoid
> > what you believe will be a chronic shortage of consumer purchasing
> > power. It was not clear to me until Wally's message that you all
> > envisioned a massive government intervention program in which government
> >
> >
> > agents would be employed to pick and choose among which consumers and
> > businesses to lend the new money (credit) to. My doubts are due to my
> > knowledge of how democracy works. Government programs tend to get
> > captured by the moneyed and other politically powerful interests.
> > Consumers are typically the weakest among these groups. Some programs
> > (but by all means not all) may begin as well-meaning efforts to
> > accomplish good things. But their policies and the actions of the agents
> >
> >
> > who administer them eventually get co-opted. My recent book helps to
> > describe how this occurs.
> >
> > http://www.constitution.org/pd/gunning/welcdemo.htm
> >
> > Pleased scroll down to "The Understanding Democracy Project."
> >
> > Most of your message was a restatement of the A + B theorem. As I have
> > written before, I remain to be convinced that this is the proper
> > starting point. In order to determine logically whether it is, one must
> > tell precisely what the goal of the exercise is. If the goal is to make
> > a judgment about whether there will be a chronic deficiency in consumer
> > purchase power due to the system of production that entails firms, to
> > use your terms, I reason that the necessary starting point is a
> > comparative analysis. In this comparative analysis, we contrast the
> > pre-firm method of production (or some other method) with the
> > firm-method of production. I have explained why I believe this is so. I
> > have also said this before. So I also am getting nowhere.
> >
> > Unless I missed something, you have so far not given a reason for your
> > belief that the A + B theorem is the correct starting point for this
> > purpose. I have agreed that the A + B theorem itself is logically
> > correct. It is, after all, based on an accounting identity. The real
> > question is whether it is relevant. 1 + 1 = 2 is correct also. But it is
> >
> >
> > not relevant to the question of whether there will be a chronic
> > deficiency of purchasing power. To answer that question, it is my
> > contention that you must tell the goal you are trying to achieve.
> >
> > --
> > Pat Gunning, Feng Chia University, Taiwan;
> > Web pages on Praxeological Economics, Democracy, Taiwan, Ludwig von
> > Mises, Austrian
> > Economics, and my University Classes;
> > http://www.constitution.org/pd/gunning/welcome.htm
> > and
> > http://knight.fcu.edu.tw/~gunning/welcome.htm
> >
> >
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