Reciprocal System #545 "The Road to Permanent Prosperity" ch 11-Production C [Thomas Newsome]

Transcript

hello everyone and uh welcome to my channel this channel is for educational purposes and we look at Great theories of everything ancient and modern and uh try to make sense out of them uh help you to realize their potential in your own life to help you with your paradigm shifting or your Awakening to 5D Consciousness your formation of a holistic [Music] worldview and uh today is our 545th video on the reciprocal system of theory and the reciprocal system of theory was originally uh derived by dwey B Larson back uh in 1959 when he articulated his two fundamental postulates about how he believed the universe op and uh he's one of the few scientists to articulate uh a a theory of everything with motion at the center uh in Larson's first postulate states that the universe is composed enti entirely of one component motion existing in three [Music] dimensions in discrete units and with two reciprocal aspects space and time so for Larsson the universe is made out of motion and motion is the relationship between space and time space and time have a reciprocal relationship which is reflected in fractions the uh all motions uh basically all fundamental scientific quantities such as mass and energy and force and pressure they are all fractions with space or time as the numerator and time or space as the denominator um with the caveat that space or time can have multiple exponents so for example matter Mass equals time to the third power over space to the third power energy is simply time over space and LaRon is referring primarily to what he calls SC motion U motion that has a magnitude but has no specific Direction so therefore it's a little bit more flexible and um a scalar motion can be envisioned using a balloon that you put dots on if you blow up the balloon all the dots are moving away from each other if you contract the balloon all the dots are moving toward each other but they're not moving in any specific Direction they're either moving in or out but uh every do will be moving in or out away from or toward every other dot so there is no specific Direction not until you assign a reference point until you assume that one of the dots is motionless then you will be able to figure out the direction so the directions are part of the reference system not part of the motion itself now Larson has books on physics and chemistry and astronomy and he's got uh articles on many many other subjects um he's got a book on metaphysics with sections on philosophy and religion also some psychology and biology and he has two books on economics and uh they're all based on the same Theory so they all fit together they're all kind of self-consistent um and uh the reciprocal system is a difficult study um Larson uh the stuff's all there but it's not always organized um he's in many cases writing for a scientific audience uh but that scientific audience is not open to uh his interpretation because it flies in the face of what they've already learned so he would have probably been better off writing for a lay audience uh who would have been more receptive to his his uh in treaties but um be that as it may um you need to probably have read a few of larsson's books before you can understand how consistent he is and uh that he's actually on something um but he did articulate a theoretical universe and uh compared his theoretical Universe with the uh measured empirical Universe of modern science and in many cases he was able to reproduce scientific tables strictly from Theory and um his book uh that we're looking at today is one of the books on economics called the road to permanent Prosperity we're in the middle of chapter 11 of that book on production if you want to get a little bit more information on the reciprocal system uh go back and watch one of my first 474 videos on the subject and I'll go into it a in a a little bit more detail if you want to catch up on this book on economics go back about three 3 and 1/2 weeks uh in the archives and start from chapter 1 uh but right now we're going to uh get into chapter 11 production starting uh about uh 2third of the way in uh probably 60% of the way in it is true that the normal economic relationships are subject a temporary modification until the fundamental economic forces have had time to overcome economic friction and many of those who recognize that wage increases must be reflected in the market price level sooner or later have felt that the wage earner would gain an advantage in the interim while the adjustments were taking place but even this transitory gain does not materialize because because the wage increases added add to the flow of money purchasing power immediately the Salient Point here is that it is the wage increase itself that is the addition to the flow of money purchasing power that causes the rise in the general price level whether or not the particular Enterprises that pay the higher wages raise their own prices to compensate for the additional cost is immaterial if the prices of their products are not raised the prices of some other products must be the general price level must go up to absorb the additional money purchasing power in terms of the general economic equation the higher wages increase production price from P to IP or FP sorry this pushes money purchasing power up to FB and the new production Market equation is fbv equals FP The increased flow of purchasing power FB received by the workers passes on uh to the Goods Market and not being counterbalanced by any increase in the volume of goods increases the market price to FP it then continues on to the producers and restores the inflow of money into their treasuries to an equality with the larger outflow to the production market for the perp purchase of Labor and their services of capital the net result is therefore nothing but an equilibrium at a higher price level principle 11 arbitrary increases or decreases in wage rates have no effect on the on the volume of production or the ability of consumer as a whole to buy Goods there is much reluctance these days to accept any contention that an increase in money wages necessarily involves a corresponding increase in prices because this conclusion interferes with many popular and attractive schemes for lifting ourselves into Prosperity by our bootstraps but the purchasing power analysis shows that it is true nevertheless any net increase in the amount of money purchasing power available to Consumers by reason of a wage increase is promptly and inevitably counterbalanced by an increase in the market price level and there is no gain to the economy as a whole this is not an argument against High money wages it merely establishes the fact that high money wages have no beneficial economic effects they do not improve the ab AB ility of the consumers to buy Goods nor do they have any effect toward increasing the volume of production this analysis therefore refutes the contention that raising wages can improve economic conditions and it also exposes the futility of the recurrent agitation for higher wage rates as a means of increasing purchasing power adjustments of money wages upward or downward do not alter the total real purchasing power the ability of consumers to buy Goods in the least any gain that one group may make is offset by a loss to all other persons who work for a living or who have funds invested on a fixed income basis in pensions bonds life insurance annuities mortgages Etc outside of the rather serious inequities that develop between the individuals who are benefited and those who are harmed by the changes and a certain amount of business dislocation during the process of adjustment wage increases do neither good nor harm to the domestic economy as a whole uh those Enterprises that are able to resist the pressure for wage increases wage increases the longer the longest will gain at the expense of those who raise wages first but the general average of business volume and profits will remain unchanged whether there are other non-economic grounds on which arbitrary wage increases can be justified is another question there may possibly be some psychological value in high high wages that is absent in low prices even though they amount to the same thing but this is beyond the scope of economic science if it is within the bounds of Economics at all it belongs to the sociological branch of the subject there is of course ample justification for whatever wage increases are required to keep the price level unchanged as productive eff efficiency improves since falling prices create the same kind of inequities as rising prices but this applies only to the general price level not to the prices of individual items if the inequities are to be removed some systematic method of distrib contributing the wage increases among all segments of the economy will be necessary the analysis shows that economic stability is independent of the money wage level both prices and volume of production employment can be stable at any wage level this is of course in direct conflict with Orthodox economic thought which holds as J.R Hicks puts it that quote a raising of wages above the competitive level will contract the demand for labor and make it impossible to absorb some of the men available end quote several factors have contributed to getting economic thought this far off the track the most important of these Reliance on an erroneous theory of wages will be discussed in chapter 18 the influence of the equally erroneous circular flow concept has already been mentioned then two supply and demand considerations have been introduced into this situation where no change in real quantities take place and supply and demand Theory does not apply another factor that has had an effect on uh economic thinking is the fact that unemployment by reason of threatened business failures during recessions and depressions can be and frequently has been avoided by wage reductions on first consideration this seems to confirm the hypothesis that there is a relation between the amount of unemployment and the wage rates and the experience is generally so interpreted but the analysis in this work shows that the absolute level of wages has no significance in this connection it is wage flexibility that is helpful in recessions when there is an input into the consumer money res reservoirs so that the money purchasing power entering the markets drops to CB where C is a fraction the income accruing to the producer also drops to CB the original volume of production V can then be maintained only if production price can be reduced to CP since wages constitute the largest component of production price no substantial reduction in P beyond that accomplished by eliminating profits can take place without a cut in wages and if there is no wage flexibility The Producers must cut volume thereby creating unemployment ability to cut wages below whatever level existed before the recession is therefore an employment preserving Factor when recessions occur but this does not mean that there is any significance in the the absolute level of wages either before or after the reduction nor does it mean that a reduction of wages would increase employment under conditions in which no deflation is taking place as expressed in principle 11 arbitrary decreases in wage rates have no effect on the volume of production and therefore no effect on employment which in the short run situation is a function of production volume an increase in business taxes has the same effect on the general operation of the economic system as an increase in wage rates in the use of tax money the government acts as the agent of the consumers the general public higher business taxes therefore increase the total amount of money purchasing power available for consumer spending just as a wage increase does even though the additional money does not go directly into the hands of indivi of the individual consumers the amount of money flowing to the mar to the markets is thus increased without any change in the production of goods this raises the general price level and increases the income of The Producers by the amount required to offset the additional cost we next turn to the other side of the picture the market price here we find that the the producer has only a comparatively narrow margin for voluntary action he cannot raise prices relative to the general price level without losing business and consequently reducing his profits he cannot cut prices relative to production costs without reducing the rate of profit per unit furthermore unless he has a cushion in the form of subst substantial reserves the average producer must stay within the Z profit limits either way he cannot afford to uh operate at a loss under normal conditions this producer will attempt to establish prices which in the long run will give him the maximum total profits a compromise between the greatest possible volume of business and the maximum possible rate of profit per unit we are interested now in determining the reaction of the economy in general if the producer is induced by external pressure to modify his normal policy and reduce his prices to some lower level while this will have a prompt effect on the profits as shown on the books of the Enterprise the dispersements to the suppliers of capital will not be altered immediately and the flow of purchasing power from production to the markets will therefore remain un changed for the time being this means that the average market price level likewise remains constant and the only effect of one producer's arbitrary reduction in price will be that some other producers price goes up in all probability the futility of the action will soon be recognized and the original price will be restored if not dividends will have to be cut and since they constitute money per purchasing power in exactly the same manner as wages the total purchasing power generated by production will drop from B to FB where f is a fraction market price will necessarily conform and the new economic equation will then be fbv equals FP no change in production volume has occurred the price level in terms of money has dropped and some purchasing power that had uh that uh had been transferred from owners of capital to other consumers but the real price level the cost of goods in terms of Labor is unchanged and there has been no benefit to the general economy furthermore the gains that are made at the expense of the suppliers of Capital Services cannot be other than transient as a continual replacement of capital is necessary in order to enable continued production and a diversion of earnings away from the suppliers of capital would inevitably dry up the capital Supply and destroy the enterprise we therefore arrive at the conclusion that it is sound policy for the producer to adapt his prices to the General market price level so far as he is able but that arbitrary change is made irrespective of the general price level or in an attempt to influence that price level accomplish nothing principle 12 voluntary market price changes by producers have no effect on the volume of production or the ability of consumers as a whole to buy Goods this principle is in direct conflict with current economic thinking based on supply and demand Theory as brought out in the preceding Pages however that theory is not valid in application to the economy as a whole this this is another place where the concept of the isolated producer cruso and Company can be of considerable assistance in clarifying the situation as the validity of principle 12 is readily verified by examination of the effect of price changes in the economy of this isolated producer as matters now stand one of the greatest contributions that could be made toward economic understanding would be to obtain a general realization of the fact that the market price level is a resultant not a quantity that can be manipulated by government controls or by the pricing policies of the individual producers the general price level is determined by the rate of compensation paid to the suppliers of Labor by the business tax and subsidy rates and by the rate at which money purchasing power is being stored or withdrawn from the storage in the reservoirs and it cannot be changed except by measures which alter one or more of these determinants so-called price control is nothing but a delusion the general level of prices can be prevented from Rising by prohibiting or limiting wage increases or by forcing diversion of excess money into the reservoirs but any price control is effective only to the extent that it accomplishes one or both of these results the direct price fixing that is so often resorted to in emergencies is futile holding down some prices simply means that others must go up holding down all prices by direct um action is simply impossible so hopeless that no one even tries it attempts by business enterprises to influence the general price level by their pricing policies are equally futile but unfortunately the economic profession has not been able to get a clear enough view of the situation to recognize this fact galbreth for example asserts yet quote yet it is plain that a firm that advances its prices after a wage increase could have done so before end quote what he fails to see is that before the wage increase their prices could be increased only at the expense of some other producers who must then reduce their prices since the total money purchasing power available for buying all Goods remains unchanged this would of course initiate a competitive round of repricing which would react against the original producer after the wage increase the producer that granted the increase can increase his prices without any effect on the price situation as a whole in as much as the additional money purchasing power required to pay the higher price is provided by increased by The increased wages where the W wage increase applies only to to a single producer and not to his competitors it is not possible for that producer to offset the amount offset the full amount of the increase by raising his prices as this would result in too much of a loss of business in this case the inevitable increase in the general price level is spread out over the entire economy but where wages are established on an industrywide basis all of the direct competitors are affected equally and here a price increase to compensate for the added Lo added costs leaves both the competitive situation within the industry and the price equilibrium in the rest of the economy unchanged the error in galra appraisal of the situation is particularly obvious when we look at the economy of the isolated producer it can easily be seen that this producer as we have defined him cannot increase his prices before a wage increase and must do so after a cost increase of any kind the forgoing pages portray the producer the the employer in quite a different role in the general economy than the commanding position with respect to wages and prices in which he is commonly visualized by his economic actions the individual producer May influence his own status very materially and that of his employe employes as well but whatever benefits may be accomplished by manipulation of wages and prices are merely differential gains realized at the expense of other producers or other workers as the analysis shows no arbitrary actions in these areas can alter the real price levels either the real real wage level the average wage in terms of the amount of goods that it will buy or the real market price level the average price of goods in terms of the amount of Labor required to buy them any reduction that the producer makes in his own price will not reduce the general price level and any wage increase that he may Grant will not increase the total real income of consumers their ability to buy Goods the really significant actions of the producer from the general economic standpoint are those that he takes to increase his efficiency of the productive process as stated earlier the results achieved by any economic system or organization are mainly determined by the extent to which the producing units are allowed and encouraged to carry out this primary function of controlling and increasing productive efficiency to complete the present discussion we will now take a look at the effect of an increase in productivity as seen in terms of the General economic equation p = b over V according to principle 9 an increase in production volume at a constant rate of productivity does not change the price level as the increase in volume from V to AV is accompanied by a corresponding increase in the payments to the suppliers of labor labor and Capital Services which raise B to AB the quotient AB over AV is still P the original price level however if the larger volume is attained by means of General productivity the payments to the suppliers of Labor and Capital Services do not increase and purchasing power remains at B the economic equation then is B * aval PA the market price thus drops in proportion to the increase in production volume as indicated in the preceding discussion there are some advantages in maintaining constant price level and this could be accomplished by increasing money wages by the equivalent of the increase in productivity the result is AB * AV equals P this equation is identical with that which results when the increase in volume is accomplished by employing more workers but in the latter case the additional purchasing power is shared by additional workers and the average income of the original workers remains at B however if the increase in volume is attained by a greater productive efficiency The Total Money purchasing power AB goes to the original workers and their average income is raised from to AB this the increase in productive efficiency thus accomplishes the kind of a true gain in the ability of the workers to buy Goods that cannot be attained by any kind of juggling of the money labels attached to either wages or Goods now let us review the contents of this chapter the question that issue has been can we put our finger on the factor that determines whether General business conditions are good or bad the answer is yes we can business is good if the money purchasing power result from production is all flowing to the Goods Market so that there is sufficient return from sales to pay all of the cost of production including profits in satisfactory amounts business is not good if some of this money purchasing power is being drained off because money is flowing into the reservoirs that is accumulating in the banks or being with drawn from circulation in this case the money income of business enterprises is not sufficient to take care of all the costs efforts to reduce these costs by cutting wages or laying off workers May save some individual Enterprises but they are fruitless so far as the general economy is concerned as they merely cut the total income of all businesses that much more business is more than good it is booming if money is being withdrawn from the reservoirs and used in the markets because then the money income from sales is greater than the cost of production but the prosperity during the Boom is costly in the long run sooner or later the money reservoirs must be replenished and then we have a depression at least the less severe kind of a depression that we call a recession from the very nature of the rise it must inevitably be succeeded by a fall the only stable condition the only one that can be permanent is a condition of balance where Reservoir input and outflow are equal and business income is therefore in equilibrium with the costs of doing business the answer to the problem of stability is to take appropriate actions that will offset the erratic buying habits of of the consumers and government agencies and will maintain this balance as long as such a balance exists a general increase in wages or in business taxes will have no adverse effect on Market Enterprises market prices will rise enough to absorb the increase in money purchasing power the increase will pass on to the producers who will then be back in the same relative position as before the cost increases the price increase is inevitable and inescapable if will take place regardless of what business enterprises want to do about it even if they try to hold it back the reverse is also true as experience during depressions has demonstrated The Producers cannot keep the market from adjusting itself to a falling purchasing power flow if they keep their prices up in defiance of a falling Market Trend they cannot sell their goods if they hold their prices down in defiance of a rising market trend friend they merely raise the prices of other Goods for the general average of prices is fixed by the relation of the money entering the markets to the goods production volume all right uh I believe that is all we have time for today um we will finish this chapter tomorrow and uh start the next one so thank you for tuning in today and have a great