The Gap consists of both diminutions to the circular flow like profit, savings and re-investment of these in new production AND ADDITIONAL costs like the costs of replacing depreciated capital assets. The cost of capital goods must be included in ultimate prices because the convention of cost account states that “ALL costs must go into price.” Most economists and pundits miss this latter fact and reality. Throw in the rapidly increasing effects of innovation and AI both as an increasing capital cost and the erosion of aggregate individual incomes…..and as flows….there you have A + B.

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JD:  that could well be it Steve

Me:  Yes its logical don’t you think? Which brings to mind Ellen’s other thread regarding suggested papers for ending TBTF. I note that on Steve Keen’s Debtwatch site there is a rhyming Bank of England call for papers on Central Banking, Climate Change and Environmental Sustainability.

Is it not logical, especially when the idea of a universal Dividend seems to rising and resonating with more and more people and a few economists, that calls for papers that would appear to affirm the need for scarcity in the minds of progressive thinking people be suggested by the central and national Banks? I find such calls, especially two such calls very curious. As for environmental sustainability, giving everyone a million dollars and advertising the hell out of them to the point of profligacy is being suggested by no one while a middle class lifestyle, promoting technological innovation that does more with less resources and enables everyone to take a deep breath from the forced to the point of preoccupation pursuit of eroding income security is a sustainable way to keep both the economy functional and the environment safe as well.

Agendas hide in both dark corners and in plain sight, and insufficiently examined orthodoxies and habituated false and contentious dualities are trump cards to be used against those who would otherwise be fighting against a dominating foe.