Theory of Microeconomics and Macroeconomics: Larsonian Econophysics--Part 2

Transcript

hello YouTube this is dr. Ronald abuse ATS founder and chair of the International Society unified science and president trans power corporation a commercial custom software manufacturing and certified systems engineering company I work as a theoretical physicist and as a systems and mechanical engineer now by now most you know that my theoretical physics mentor was Ruby Larson what I've done over the past many many decades is actually around 50 years is to make all of Dewey's work fully computational but Dewey B Larson was also more than that he was a theoretical economist and I've also made his work in economics fully computational and this is what my paper is about theory of microeconomics and macroeconomics Laura Sounion a kind of physics or studying meaning from Jimmy Larson if you haven't already please watch part one first before joining to this part which is part two so today we're going to look at the principles of economics this is not your father's or grandfather's you can Amish this is way more scientific it supersedes all the other theories out there now it's kind of close to Austrian economics except that it's much more computational alright so here we go principles the fundamental component of the economic mechanism you know you can look at all kinds of economics books but you won't find what the fundamental component is so reading from my paper energy conversion plays a major role in physical science biological science and engineering science in mechanical engineering for instance available energy is defined as the maximum amount of the total energy of a process or a set of processes that can be converted to mechanical work the remainder is unavailable energy whereas according to thermodynamics first a lot of counting energy input equals energy output in thermodynamics second law accounting available energy gain equals available energy loss table aid of reference 28 the authors doctoral dissertation which is theory and design of the new rational combustion engine shows that for a regenerative grayton cycle engine energy input is comprised solely of the fuel the energy output is then the net indicated mechanical work the coolant energy adduct heat losses and exhaust cooling cable 8 of reference 28 follows with components of available energy gain including intake on the compression side compression regeneration and combustion and with the contents of available energy loss through the air filter silencer throttle the various ports intake on the expansion side expansion duct heat losses regeneration exhaust silencer cooling and release now the question is what is the fundamental component of the economic mechanism which is analogous to available energy mechanical engineering answer purchasing power none of the conventional economics textbooks listed in the references contain any mention of a fundamental component of economics if they discuss purchasing power at all it is only considered to be an antecedent to demand or as part of purchasing power parity and discussions of international trade however by inspection one can see that in the production process purchasing power is gained at each step whereas in the consumption process purchasing power is lost whether quickly or over a long period of time and of course purchasing power produced equals purchasing power consumed this is a new expression of seis law okay now let's discuss the fundamental equation of the economic mechanism variables in economics can be expressed in terms of goods in which case they'll refer to as real qualities or they can be expressed in terms of currency in which case they are referred to as nominal or money quantities purchasing power B can be represented in real or nominal money terms of the enterprise P and law M ie the number of units V as follows so B sub real equals P sub real times V in terms of goods we said nom equals piece of nom times V in dollars or whatever currency you want to use when airlie nominal variables are assumed so if the subscript nom stands for nominal is absent the variables nominal so we could just say B equals P times V if we let the subscript prod being produced and the subscript cons mean consumed then our form of sales law can be expressed as be consumed equals be produced saves law analogy with the bable energy loss equals available energy gain okay we had that of course a small quantity of goods may be stored in inventory either by the producer by the consumer for a shorter long period of time but eventually the goods or services are consumed in one way now subsection C reservoirs between the producer and the consumer the goods or money purchasing powers stream moves from the producer to the consumer in between there may be various reservoirs which money or goods may be put into the stream put into the stream or into which money or goods may be taken out of the system or stream this means that the consumer price is not necessarily the same as the producer prices we'll see this has a detrimental effect on the operator an economic mechanism causing either inflation or deflation but a method to correct the problem will be presented in the macroeconomics section so these reservoirs can be considered to be like storage centers like inventory for example all right now subsection D 17 fundamental principles yes there are 17 fundamental principles and Laura Sounion ikana physics now that we have identified the fundamental component of economics which is purchasing power and the fundamental equation of economics which is people's B the principles governing the economic mechanism naturally followed Morrison in reference to your pages to 35 to 37 sets for these 17 principles with Commons added by the present author in square brackets okay so principle 1 purchasing power speed is solely by the production of transferable utilities and it is not extinguished until those utilities are destroyed by consumption or otherwise pencil 2 only Goods can pay for goods and I say here in the brackets money is obviously an intermediary principle 3 purchasing power and goods are simply two aspects of the same thing and they are produced at the same time by the same act and the same quantity principle for exchanges between individuals or agencies at the same economic location the same location with respect to the economic streams have no effect on the general economic situations this is because the goods have already been produced and paid for recently transfers between consumers do not alter the economic situation so if you have a used item and you sell it it simply does not affect the general economic situation because it doesn't matter which consumer has the priority drilling principle 5 the income to the producer from goods produced is exactly equal to the expenditures for labor and the services of capital then that result to the producer is zero so nothing is left over unless one wishes to count reserves but these actually belong to their suppliers of capital so the producer has to pay for labour and he has to pay for the services of capital that is interest on whatever's borrowed to the cetera principle 6 the circulating purchasing power arriving at any point in the stream is equal to that leaving glass previous processing point plus or minus net reservoir transactions and that's obviously simple culture principle 7 except is modified by reservoir transactions the purchasing power either money or real available in the goods market is equal to the purchasing power expended in the production market pricing power expended in the production market equals purchasing power available in the goods market for consumers to consume it's another form of Saves law principle 8 any net change in the levels of the consumer purchasing power reservoirs results in a corresponding change in the money price level in the goods market except insofar as may be counterbalanced by a net change in the levels of the goods reservoirs so levels of consumer purchasing power reservoirs influence money price level in the goods market the goods reservoirs can usually be neglected that that's like stores and inventory now of course the consumer reservoirs might be you know what you have in savings which you're storing dollars under your mattress whatever that's a reservoir as a principle 9 the market price levels are independent of the volume of production so the line production does not influence money price levels principle 10 any net flow of money from the consumer reservoirs to the purchasing power stream or vice versa causes a corresponding change either production volume production price or both so money flow from consumer reservoirs may increase or decrease production William Prosser budget principle 11 arbitrary increases or decreases in wage rates have no effect on the volume of production or the ability of consumers as a whole to buy goods so this means that attempts by labor unions to increase wage rates do not change the ability of consumers as a whole by goods because rarely a change in wage rate without a change in production cannot change the ability of consumers as a whole to buy goods obviously principle 12 voluntary market price changes by producers have no effect on the environment production and the ability of consumers as a whole to buy goods principle 13 all consumer purchasing power must be used for the purchase of goods from producers it cannot be used for the purchase of goods already in the hands of consumers or for raising the prices of such goods so when you just exchange you know use item to somebody else you're not really using up your consumer purchasing power because really it's gotta be used for the purchase of goods from producers principle 14 the quantity of money existing within an any economic system has no effect on prices or in the general operation system except and so far as the method by which money is introduced into it withdrawn from the system may cost you a purchasing power reservoir transaction so it's not simply the quantity of money within the economic system this is major problem with even with some conservative economists when it has to consider the velocity of money of washing money is as important as coinage money money is neutral in the long run but not in the short run okay so velocity of money is how many transactions with that same currency occur within say a period of time like a year principle 15 credit can make goods available to one individual or group of individuals only by diverting them from other so credit is certainly not infinite and principle 16 the cost of the services of capital sticks by competitive conditions independently of productivity and by the way cost of capital is not married by much over the centuries but unfortunate central banks in Tennessee the fix interest rate which then caused distortions in the market and I've got to say you hear parenthetically that these artificially low interest rates set by the central banks or are just killing seniors it's difficult to save under such circumstances that these interest rates are artificial they're fake and they distort the system and then finally principle 17 average real wages are determined by productivity and equals a total production curve work or less the items of cause that are determined independently productivity and these are taxes and capital costs so really productivity is what chemists and paying workers its productivity period now according from Morrison here in these 17 basic principles and the general economic equation which Larson expresses equals be worthy while the teachings of the economic science as they apply to the subject matter under consideration these principles rest firmly on solid facts not an assumption speculation or guesswork and they've been derived from those facts by crosses which are logically mathematically exact even though extremely simple because of their factual nature they are specific condition being specific these principles are universal unlike many of the conclusions of conventional economics they are not limited to any particularly economic system or to any special set of conditions they governed the cave dwellers in the strenuous efforts to earn their living at the dawn of history and they will apply with equal force through the streamlined multi-cylinder economic machine of the far distant future they govern economic processes not merely the systems in which these processes are consistent parts and they are applicable to the processes wherever and under whatever system they may appear a familiar contention that a socialist economy subject to a set of principles that difficult lives which rule our individual enterprise system is as absurd as if we were you can't end that the laws of physics applicable to a concrete bridge are not the same as those which applied to a steel structure right did the principles now moving to section 2 micro economics subsection a stages of economic development the human species has existed for approximately two hundred thousand years and by the way anthropologists keep changing their their years but apparently right now is said to be tuning at the house and there's in that long period of time our species has gone through these four economic stages and it's one with some reference to pages from 926 page 44 page 65 and page 73 one each economic unit whether an individual family or tribe obtains and consumes its own products this is the amoeboid stage so there's no trade it's just individual production period to stage to trade develops between individuals families and tribes goods are exchanged for other goods this is the barter stage and it illustrates principle number two in action barter is a single step process so if I pick strawberries and you pick blueberries we can exchange some of each of our products and that's this barter all right so three money is introduced reference to page 73 states club this activates the circulating purchasing power circuit and also results in a separation between producer and consumer in the goods market because market is the consumer work the producer exchanges goods purchasing power for money which passes through the inoperative production market into the hands of the same individual in his capacity as a consumer he then completes the cycle by exchanging the money for goods articles of consumption in the consumer section of the goods market currency page 78 continuing the research starts from zero and makes a certain advance outlay for labor capital materials and he endeavors to sell his finished products for price which will reimburse them for his actual expenditures an additional give him a satisfactory rate of return on the capital that has been invested this is the meaning of exchange stage or sometimes referred to as a small farmer or so proprietor stage money makes for a two-step process okay economic stage for production and consumption are handled separately from reference to page 65 by this innovation the original single step barter transaction which was expanded to a two-step process through the use of a medium of exchange has now become a four-step process now here's an example the cobbler who is still in the 30 Konami stage so far as his own personal productive efforts are concerned exchanges the goods person power that he produces for money and then completes the transaction by exchanging this money for goods articles a consumption the new helper which the cobbler hires participates in a cycle of an entirely different character he never handles goods as purchasing power at any time these changes his labor for money and then exchanges money for goods articles of consumption but this is only half of the full exchange cycle the money to the helper receives comes from the cobbler not from the ultimate consumer to complete the transaction was necessary for the Cobblers that into a new role there is no longer a combination producer and consumer but merely a producer as such he first exchanges goods purchasing power for money and then Colusa cycle by exchanging money for labor alright and according from Dewey here in section it should be noted that in his capacity as a producer the cobbler puts nothing into the economic process and takes nothing out in his capacity as aspired Lavery gets a portion of the proceeds that can be classified as wages and in his capacity as a supplier of tools and equipment he gets another portion it's conversation with the use of that capital the capital being of course the tools and equipment in his capacity as a consumer he exchanges the personal power thus obtained for consumer goods perhaps putting some worth back into the business retaining the ownership thereof when each of these actions is Newton's economic significance rather than in its social significance as actions of the same individual it can be seen that all the proceeds of the business are paid out actually or constructively to the suppliers of Labor and a supplier of capital all the net production of goods goes to consumers and that's principle 5 now let's look at the famous case of Robinson Crusoe this isn't an example of stage 1 economy it's helpful in analyzing complex economic issues to first consider the isolated producer consumer imagine that Robinson Crusoe stranded on an otherwise uninhabited island in the middle of nowhere whatever he consumes he must produce himself there's no one to trade with borrow from steal from or mooch from therefore from Equation 1 - to you we have deals of real cons Robinson Crusoe that's real person power concerned must equal the beasts of real applauded Robinson Crusoe which means the real producing personal produced by Robinson Crusoe that consumption does deagles production in the later stages many individuals try to live off of others by means of the state but if someone gets something for nothing then someone else gets nothing for something my friends to page 119 as Basquiat says in the note in reference 26 the state is that great fiction by which everyone tries to live at the expense of everyone else I urge you to read that reference by retcon last year all right so subsection C states - Robinson Crusoe and Robin Crusoe now suppose a young woman named Rob and washes up on shore and meets her Robinson now I have each other and so trade me mailing real goods and services consumption in production or now so the real consumption of Robinson Crusoe plus the real consumption of Robin Crusoe must equal the real production of honest increase oh and Robin Crusoe okay it's pretty obvious now subsection D stage 3 we get to a small farm eventually Robinson Crusoe mama tree so I rescued and come back to civilization they become small farmers with no employees they sell the farms output for money and with the proceeds paid expenses with money so here we have person power normal consumes small farm must equal purchasing power nominal produced currency so section e says for representative producer retailer and representative for consumer the descendants of Robinson Crusoe live in a large nation state the economic system is now in stage four in this stage which is the modern stage we have producer retailers and worker consumers we will consider representative producer retailer in a particular sector and the representative worker consumer assuming that both are rational and optimizing they wish to maximize benefits minus costs would maximize the ratio of benefits so let's first look at the representative producer retailer because of the wide variation in the capital to labor ratio across written sections we have to consider individual sectors in order to properly compare companies the representative producer retailer in a particular sector producing and selling final consumer gives wishes to maximize total revenue to minimize total callers and thus to maximize profit over time you now we have the symbols here the PV sub P underscore R equals the president Dai Yu that is reflected back to time zero of a particular producer retailer in a particular business sector and that's in dollars res sub P underscore I was currently equivalent monetary reserve of the producer retailer in dollars t equals time period looks good before the variable is 2 here in years capital T sub P sub R equals total number of time periods considered that's the time horizon for the producer retailer in the years R sub that small R sub P and the oracles nominal discounting for time period representing perceived risks of the firm and interest cost of borrowed funds assumed not to change for periods that equals 1 all the way up to capital T underscore P sub R okay capital T Oracle so revenue average producer retailer in sector for time period small T capital T C total cost expensive average producer retailer and sector for time for UT including any taxes that's in college and sub equals number of employees of a particular producer retailer K sub R are just K are actually is a small know this is a very important factor it's the coefficient of revenue productivity of producer retailer relative that of the average firm in the second monster one for the average firm and it may change for each period t K see as a small capital C it was a coefficient of cost to produce a retailer relative to that the average firm inside wait and which is normalised someone for the average firm and that maintains rusa period then the problem of the representative producer retailers to maximize this equation here equation 2 for just take a look at the present value underscore P sub R is equal to the sum over the periods T go on to the total number of periods capital T sub P underscore R so this is going to be equal to n sub e that's number of employees in period t times the difference between K sub R 1 over n sub e 1 times T R sub t minus K sub C T divided by n sub e T times TC over T and then and then we get the discount factor we'll close our supreme underscore R raised to the T power plus whatever reserves we have piano score 0 okay that's the basic the equation that we wish to maximize for the producer retailer the total revenue equals the price per unit times the number of units sold for each product line plus any investment income a total cost includes energy purchases wages paid your employees and just pay for the services of capital and principal paid back to lenders and the new taxes the values of the parameters are calculated by extrapolation from past curves if available or by projection if not see the worth example below and see if we can get this we've got three minutes two minutes to go here for each period by inspection B that's the person power produced normal by the firming those K sub R 1 times T R sub T that's in this period and we consumed nominally by the firm those K sub C T times T C so T the difference the father and net earnings in each period those need the company's reserves or as far back where it's paid out in dividends to shareholders so the reserve equals piece of Raz a piece of our sub T was be surprised on her scorn ominous or firm - that which is consumed by the phenomena terms okay so that's the reserve the reserves are actually owned by their suppliers of capital so the firm actually gets nothing just principle five if total revenue is less than total cost for a period then the reserves will have to be drawn down for long-term survival the firm managers must try it's period to one increase the ratio of K sub R over answer B that has increased relative revenue productivity per employee decrease K sub C divided by n sub E has reduced the relative cost per employee and increase the reserves increases versus get through tough times like recession or depression the author has devoted much of his career to applied optimization or managers actions and scientists and you can see my works they're like optional manager ought to mention you're an optimist scientist the coefficients case of are in case of C are normalized so that the average from the particular industry sector if there's equal to one more successful from will have a higher value of K sub R and a lower value of K sub C and vice versa for less successful firm many phenomena including the distribution of individual IQs follow the bell curve or Gaussian probability distribution so we can assume that this distribution applies to the coefficients the ratio of K are two can see