A Non Fiction Trilogy

PART II: ECONOMICS

 

 

THE ECONOMIC CYCLE

 

 

           Currently anything qualifying as a good or service would “add” to the GNP as so figured, be it cigarettes, overcharging on products, luxury items, etc.    The following idea hopes to provide more distinction between items good or bad for the economy.

 

 

 

                     

                                                          

                                                                                                                          

                                                     

                                                                           

   The principle is this:

 

  Only goods and services that facilitate (efficiently and sustainably) the production of more goods and services are good for the economy.                                                                    

 

           Now this is a self-defining fact, for if goods and services are not facilitated to be produced the economy doesn’t exist. Furthermore it fits well with the concept of GNP as it attempts to maximize production of goods and services (although this alone is not okay, only Net National Welfare is okay).

          By facilitate it is meant goods and services that provide parts, distribution, health (including food, shelter, etc.), production machines, etc.

An example: mind altering chemicals.   The use of such diminishes one’s ability to produce therefore it doesn't facilitate production, therefore it is bad for the economy.   All money spent on mind-altering chemicals should be considered as negative amounts that drain the economy.

I hope to perhaps use this idea to help tie in consumer economics (household spending) with the concept of business productivity to get an across the board productivity concept (business and household interaction).   Below is a list of some facilitators and non-facilitators.

 

 

SOME GOODS AND SERVICES THAT

                             DO                                                                        DO NOT

FACILITATE MORE GOODS AND SERVICES

 

Food

Mind altering chemicals

 

 

Health Care

Cigarettes

 

 

Education

Alcohol

 

 

Manufactured Goods as:

Cosmetics

  Hardware items

 

  Household utensils

Luxury items as:

  Office supplies

  Jewelry

  Industrial equipment

  Extravagant Autos

  High tech items, etc.

                     Houses

 

                      Clothing

Research

 

 

Pornography

Housing

 

 

Non-edifying or excessive

Energy

  Fiction books, TV

 

  Art

Water

  Music

 

   Sports

Plants (for oxygen, etc.)

 

 

Non-educational or excessive

Resources, as:

  Curios

  Wood

  Collectibles

   Ores

 

   Fertilizers

Pollution

   Stone, etc.

 

 

Junk Food

Transportation

 

 

 


ECONOMIC GROWTH

 

Total GNP and how it is spent



                                                              Expansion

                                                                             Contraction  

                                              High      

  

                                              Low

 

           

 

 

Level 1-   GNP meets needs at a sustenance level.

Level 2-   GNP goes beyond sustenance level needs.

 

            Extravagance = contraction (see last chapter)

            Practical planning and investment = expansion

 

        If there is only enough GNP for level #1 then there is only hand to mouth existence.

        If GNP is < needed for level   #1 then there is hunger, etc.

        If extra GNP (level #2, including extra time and resources) is spent wisely then investment multiplies the ability to meet needs beyond hand to mouth.    GNP would expand until a steady state is achieved (with the environment, resources, current technology, current management etc ).

But if some of the GNP is spent on extravagance then:

 

If over time extravagance   =   the increase in level #2 GNP, then GNP

  holds steady.

If over time extravagance   > the increase in level #2 GNP, then GNP

  contracts.

If over time extravagance   <   the increase in level #2 GNP, then GNP

  expands.

 

Could this be the cause of business cycles? As wealth increases people spend more on extravagance which contracts GNP forcing people to be more practical consumers which expands GNP and the cycle repeats?

 


 

CAPITALISM AND SOCIALISM

 

 

           In an ideal socialist system all the goods and services people produce are owned by the state and distributed equally among all the people.

           In a purely capitalist system the goods and services people produce are owned by those who earned them and then traded to others for their goods and services.

 

Some Good and Bad Points of Socialism

 

Some of the good points.


           All the wealth is shared equally among all the people. However sharing is not a new idea, it goes back well before modern socialist doctrine.   Hunter-gather cultures shared food, etc., later sharing occurred in traditions of family and community and in the world's religions (for example in Christianity: Matt 19:21-26), etc.   I believe for a capitalist system to be successful sharing is also very important.  That is those who have had the good fortune and opportunity to earn a great deal of wealth should share and invest it so others can have opportunity also

           So does this make religion or capitalism the same as socialism? No for in religion it is a matter of conscience for one to share. In capitalism it is voluntary for people to share and not even necessarily promoted by the state. In socialism it is a mandatory requirement of the state that people share and one can he punished for not obeying. Another good point of the socialist system is that it is cooperative system, at least in ideal.

 

Some bad points of the socialist system.


            It is unethical, that is for someone not to be able to keep what they have earned (worked to create) is unethical.   I presume this unethical standard has been around for a long time also, it also can be found in the Bible at: 2 Timothy 2:6.

           A socialist system is a centralized system. This creates a number of serious problems. It adds bureaucracy because it adds a layer of collection and distribution that is unnecessary in the decenta1ized Capitalist system

           It is bad for distribution. This had been seen in practice in the former communist Eastern European countries, where distribution by the state, though theoretically run by everyone, means decisions were made by a few people. Such a system is less sensitive to people’s desires and choices of products, nor do prices reflect well the actual cost of goods sold. This in fact is by definition, for if everyone was given a choice what to do with what they earned then it wouldn’t be a socialist system.

          The facts that would lend to people coming up with new ideas and innovations are less available because there is poor feedback at a local leve1 between producers and consumers in a centralized system.

           In capitalism what the consumer chooses to purchase ultimately determines what gets produced. So the consumer actually has the ultimate control over production.  The same holds true for workers shifting to different types of production. With wage differential (capitalism) it tends to become the choice of the workers. With less wage differential (socialism) it tends to become a managers choice.

            This of course is why a system of choice and a decentralized system (capitalism) works much better for consumers and workers because individuals themselves have a much better idea of what their needs, abilities and situations actually are.   Also the opportunity it allows to a far greater number of people to be able to give their input, ideas and innovations into the system, so that even with mistakes people overall are much better off.

            To summarize: goods and services are produced and sold less efficiently under socialism because:

 

1.        Less sensitive and not "automatic” feedback of demand.

 

2.        Less price differential means the real spectrum of demand is unknown.

             

3.        Shifting workers to different production is less efficient because there is less

           incentive and or also less choice, as is a bureaucratic requirement.

 

 

 

Myth of Competition

 

           One of the biggest myths about capitalism is that it needs to be a competitive system.

           This is very far from the truth, for in any truly competitive system we are right back to the law of the jungle fighting against each other, and in a truly competitive system you could only end up with one "winner".  What kind of system would that be?

           Therefore from the standpoint of logic a competitive system wouldn't be beneficial.

           However capitalism is not competitive, rather, as stated before it is a system where people are allowed to keep what they earn, this is ethical.

           I would instead like to use a new term: Free Initiative Efficiency instead of economic competition.

           Now the results of this fact sometimes appear to be competition.   For example if two people are selling furniture and one is able to produce it cheaper because they are, let’s say, a more efficient worker.  Therefore one person goes out of business.   One could say that’s competition, the fact is, it is not competition only a consequence of the situation.

           Competition itself is an attitude where people are trying to compete with one another. In fact, as stated earlier, to make a capitalist system work, people who are fortunate to earn lots of wealth must share that wealth in order to create opportunity for the good of the system.

            One might argue that clearly copyrights or patents are set up to produce competitive situations, but again this is only keeping with the ethical nature of keeping what one earns, furthermore with things like copyrights this also helps to prevent unnecessary duplication, etc.

            Now this issue of competitiveness vs cooperation has only been briefly touched here, however it is important for economists not to miss the true nature of capitalism, for in not realizing the supreme importance of cooperation not competition we get out of the path from the best economic theories and practical policies.


Closing Points

 

           Now by showing some of the bad points of socialism some of the good points of capitalism have been shown, and why capitalism overall is a more effective system than socialism.

          Also some of the pitfalls of capitalism were touched on which are;

 

1.       Sharing is important to the economy but must be voluntary, therefore if people don't voluntarily share it depresses the economy.

 

2.       The tendency to think the capitalist system should be competitive not cooperative, is wrong and leads to poor theory and policy