[From Bruce Gregory (2000.0831.1349)]
Rick Marken (2000.08.31.0930)
Bruce Gregory (2000.0831.0700)
> Here's an example of increased productivity leading to
> growth in a closed system...Me:
> Yes. I'm beginning to think that I made a mistake by turning
> TCP's intrinsic growth rate into a reference signal.I take that back. I tried an "open loop" version of the model
and quickly learned that leakage does not have the expected
effect on Q/Q' (relative productivity), of course. In fact, it
has _no effect_ on Q/Q'. I don't know how to let production
of Q be open loop and still have the model work correctly. But
as I was thinking about this, I realized that production of
Q can't possibly be open loop. I think my model is moving in
the right direction; there must be a reference for Q. It
can't be open loop.I think your example of increased productivity leading to growth
leaves out one important consideration. Let's go with your
imaginary economy where everyone is a subsistence farmer.
Subsistence means that the farmers are producing _exactly_
the amount of Q they want.
Really? I would think they are producing exactly the amount of Q that
they are capable of producing!
Now say productivity increases so that "every farmer can feed
her family by only working half as much as she used to". All
this means is that half the labor is needed to produce the
desired Q. But then you say "she can use her new found leisure
to make pots, baskets, and palm computers to trade with
other farmers". So productivity has increased the size of Q. But
you are also assuming that the increase in Q was _wanted_. That
is, you are now assuming that the Q produced by the subsistence
farmers was _less_ than what they wanted; the farmers actually
wanted _more_ Q than was being produced by subsistence farming.
Were you one of those who said that the darkeys were happy picking
cotton and singing gospel songs by the fireside? That actually they were
getting everything they wanted? If so, have I got a deal for you!
There's this marvelous bridge....
So when productivity (and Q) increases, the new Q is absorbed
into the circular flow of PQ (where P is 1 because it's a barter
economy).But suppose that productivity grew to the point where the
subsistence farmers can produce thousands of "pots, baskets,
and palm computers" for every person in the economy (including
themselves). Obviously, there is not going to be a market for
all this stuff because people don't want or need it. In other
words, Q can get _too big_ in the sense that it can exceed the
wants and needs (the reference for goods an services) of the
composite consumer.
I doubt it. Or to put it another way, we haven't gotten quite there yet.
Porsche dealers have not been forced to conduct fire sales to move
Boxsters off their lots here in the East. Maybe in California...
In my model, there is an explicit reference for Q (actually, for
PQ since this is a model of a money based economy). The reference
makes sense to me for the reasons given above; people have limits
to how much they want.
Can I have a toke on what your smoking? It must be _real_ strong.
At the composite level this reference for
PQ grows because the number of people in the economy grows; it also
grows because people _learn_ to want more and higher quality stuff.
People in the US want desktop computers now because they have
learned to want them -- they have learned what these commodities
can do for them. I think this process of "learning to want better
stuff" is an important contribution of education to the growth of
GNP in western societies. So, according to my model, education
(learning what to want and how to use it) drives growth, _not_
productivity.
An "interesting" theory. Let's see who buys it.
BG
I like him a lot, think he makes a