Me: John and Ken,
This is a macro-economic blog. Why don’t we discuss the the macro-economic insights to be garnered from double entry bookkeeping regarding the scarcity ratio between total available to spend individual incomes and total systemic costs and hence prices? Also, the macro-economic and policy significances to be gathered from the fact that the money, pricing and accounting systems are all digital in nature, that is, equal amounts of debits and credits, prices and money and money and debt sum to zero?
John, you are apparently a cost accountant. Are you aware of the cost accounting convention that all costs must go into price?
KZ: Craig, macroeconomics is something a group or groups of people invent. Follow the inventions. Craig, “all costs my go to price.” Is that average price, marginal price, or transitive price. Got to pick one. And then you’ll have to defend your choice.
Me: Ken, The answer is final retail price because that is the terminal end of ALL costs, of the entire legitimate economic process and hence the terminal expression point for all forms of inflation. The ending point for any process is also an ultimately powerful point for policy expression and effect, and that is when and where the paradigm changing policy of the discount/rebate is implemented. Whatever occurs before it is largely irrelevant so far as policy effect is concerned.
It is of course also true that accounting is complex and can be gamed…..that’s why the new growth area in the new paradigm will be forensic accounting in order to ferret it out and hence increasingly stabilize the incredibly stabilized system wrought by the philosophy and policies of Wisdomics-Gracenomics.
Thank god, you’ll pardon the expression, for guys like you and Bill Black.
KZ: Craig, an old saying amongst haberdashers, “never pay retail.” Aside from the dealing in prices that goes on constantly, making retail price a fluid value, often political or social position can change the price one pays for any commodity. Pricing, and all the process of buying and selling, are pragmatic, rather than paradigmatic. Usually the result of cultural rules of thumb and prejudices more than any “rational” computation. Accounting is complex, but that’s not why it can be “gamed.” It can be gamed and is gamed because it is a human creation, full of inconsistencies and uncertainties. Like all other aspects of culture, buying and selling is made stable “after the fact.” Human buy/sell based on shortcuts and estimates and then give the process policy and paradigmatic stability after the deal is closed. Look at all the big mergers over the last five years to see this process in action. You might call the rough-cut rules and guesses used by humans in buying and selling wisdom. But I would not.
Me: The economic system ending point of retail sale and the abundantly high percentage of the discount/rebate policy render all that you have said in your last post….irrelevant. Why? Because no enterprise can withstand opting out of the policy because to do so is to commit economic suicide due to the fact that net profit margins are almost exclusively of single digit size. Put that together with the fact that doubling everyone’s earned income means doubling every enterprise’s potential sales and you’ve got not only “an offer/policy that no one can rationally refuse”, but also the better and problem resolving alternative to raising prices in a monetarily austere system.
Oh, yeah, yeah you’ll need to craft rules and regulations to accompany the dividend and discount/rebate policies just like every other system that has ever been put together because not everyone is rational and ethical, but if they align with the concept behind the new paradigm the result will be mutually beneficial and more ethically effective than the present system that is based on the tawdry ethics of power, profit and domination.
Philosophy and direct observation are lacking in economics. It’s time they were applied.
FS: The whole of this blog can be abstracted into its describing the failure of economists to understand the difference between concrete and abstract relationships.
Econometrics only produces and only ever will produce concrete relationships.
Abstract relationships are derivable from first principles analysis. These are the only possible examples of valid theoretical understanding. I fail to understand why this appears never to be recognised by economists. Possibly it is the wish to conflate decision making which is not necessarily predictable with the predictable results in the physical world of decisions implemented.
Me: Frank, I perceive that you think I’m a crackpot, but we are very close in actual fact. Economists are like Marley’s ghost they are “forced” to be loaded down by the chains of their own thinking and and they are condemned to remain so by their inability to identify the concept of the new paradigm and the concept behind even it.
So far as first principles are concerned, if the scientific, quantum mechanical and electro-magnetic reality of the cosmos is most accurately and honestly described as a dynamic, interactive and graceful flow then why are we not aligning economic theory and policy with that best analysis? If the adding of space and time enable a certain randomness to this ultimate reality should we just ignore the more basic reality, or align policy and regulation with it so that their effects approximate it instead?
Even though our temporal reality is not the ultimate one, If we want to be accurate, honest and knowledgeable about the exchanges that take place in the economy and be able to know where we can best align it with our intentions of profitability and general flow why do we not analyze it using one of mankind’s greatest inventions double entry bookkeeping?
Why don’t we follow its conventions like the cost accounting convention that “all costs must ultimately go into price”?
Why don’t we recognize that the ending, summing and ultimate expression point for significant economic factors like price, the entire economic process and inflation is retail sale and so recognize that a policy at that point and time might have significant effects?
And just to sure we’re being practical about our temporal reality why don’t we utilize the fact that the pricing, money and accounting systems are all digital in nature and so craft a digital monetary policy that will benefit all agents and enable it to approximate the graceful flow of ultimate reality?
First principles. They ARE important.
JV: If reality is indeed a process, something we both agree on, then Y=C+I in time cannot be real. In other words, Keynesian economics is fiction. And Keynes’ famous dictum about Hayak and his ending up in bedlam, I’m afraid is no more than a case of the pot calling the kettle black. Instead, C=I with the intermediary of Y over time has at least the possibility of representing reality. Unfortunately this potential point of departure would require a rewrite of the entire economics oeuvre. That this is too monumental a task for a single person to undertake ought to be clear.
Me: Remedy the problems surrounding Y = C + I, the presently obvious monopoly paradigm of Debt Only and the equally historically obvious scarcity of aggregate free and available individual income that has attended it….with a universal dividend and 50% discount/rebate policies I have suggested here implemented specifically at the point of retail sale….and every other economic factor can align with and adapt to the new paradigm….exactly as has happened with every other paradigm change.