The Rise of a New Economic Model

Established 4/14/2012.     Version 2.24 (7/10/2016)

 

The purpose of this site is simple:  Construct a new model of economics which suggests protectionism is the optimum form of capitalism. The tabs at the top of the page are the core arguments (mobile users see menu and topic breakout below). The core discussion is broken into six parts, along with the blogs tab to address timely topics (e.g. trade deficit reinterpretation):

1) “Just Measures” as a critique of micro/macro/monetary economics (i.e. flawed logic of money, credit, and wages).
2) “CA Crusoe” as a simple critique of free trade theory.
3) “Money and Machines” as a critique of capital theory (i.e. flawed logic of a non-existent relationship between saving and investment).
4) “Economic Noise” as possible new spin to inflation theory.
5) “Smith’s Elephants” as a critique of the founding father’s core logic problem with regard to subsistence wages.
6) **New** “Breaking Barter” as a critique of the subjective logic (supply and demand theory) of modern economics.

It was suggested by several readers that a brief summary is needed. As a result, a quick synopsis follows in bullet form:

1) The mainstream notion that the price level is determined by the quantity of money in the economic system is rejected.
a. Originality: None. Thomas Tooke and others rejected this idea during English Banking debates of 1800s.
b. Implications: Rejection of modern monetary, micro, macro, international economic (free trade) theory, and GDP logic.

2) Money in the form of credit (created out of thin air) is effectively infinite in supply for credit-worthy customers and amounts to circulating IOUs. Keep in mind that IOUs between businessmen in the 1700s were created out of thin air. Credit amounts to bookkeeping of DOMESTIC wage units.
a. Originality: Partial. Strains of Post Keynesians argue this point. James Steuart writing before Adam Smith emphasized the notion of money as an arbitrary scale, but did not recognize the critical macro/domestic dimension.
b. Implications. Rejection of mainstream economic theory.

3) Credit-based money requires that a minimum wage must  be defined by decree in order to give money its domestic value and necessary rigidity. A minimum wage also provides a rigid baseline from which other sticky wage levels arise. Sticky wages are necessary for two  key reason.  First it allows productivity gains to be properly measured among domestic competitors.  More importantly, it translates  the productivity gains into a “1-to-1” relationship between the resulting consumer savings and the quantity of short term unemployment which result from these gains. Worker mobility necessary for long term employment hinges on this critical principle (consumer savings are spent in new sectors resulting in new employment opportunities). Free trade disrupts this normally healthy domestic money, micro, and macro integration.
a. Originality: I have not been able to identify a prior source for this argument hinging on the minimum wage. It maybe original with me.
b. Implication: Rejection of modern neoclassical economics which argues money is an after thought, unemployment is due to wage rigidity, and free trade as constructive instead of destructive.  Money in a closed economy is seen as the source of capitalism’s stability (rejects Post Keynesian focus on inherent instability of capitalism).  This may be the first complete theory of protectionism.

4) The quantity of money in the system is determined by the demand for wage payment. This restores the logic of cost of production once held by the classical school of the 1700 and 1800s, with the caveat added of a closed economy. In other words, workers must be able to consume what they produce as reflected in costs of production. Exports as mean to increasing wealth is rejected (plantation logic is a failure). Automation is considered beneficial in a closed economy, while potentially harmful in an open economy.
a. Originality: Some hints of this idea existed with Keynesians, and one Marxist Maltman Barry, but overlooked the micro and macro implications of money as a domestic measure of credit of infinite supply.
b. Implication: All prices thus arise from the supply and demand of labor skill sets referenced against an arbitrarily set minimum wage, and not the supply of money or the supply and demand of goods (marginal productivity theory is rejected). An inflationary exception to this logic is made for long term loans against which no goods are immediately produced (e.g. 30 year home loans). All schools of economics are defective.

Should you be aware of any forerunners to this model, please let me know and I will update my positions.

To keep abreast of recent trade news and opinion, I recommended the following sites and book:

Americaneconomicalert.org
prosperousamerica.org
Manufacturingnews.com
Economyincrisis.org

My Amazon Kindle book: Just Measures by Van Geldstone