From: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Newsgroups: misc.headlines,talk.politics.misc,alt.activism,sci.econ
Subject: Re: Boom Boom Boom Boom :)
Date: 28 Aug 92 01:58:16 GMT
Reply-To: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Organization: Pyramid Technologies, Mt. View, California.

In article <1992Aug27.111203.3775@desire.wright.edu>,
demon@desire.wright.edu (Stupendous Man) writes:
|> In article <183238@pyramid.pyramid.com>,
pcollac@pyrnova.mis.pyramid.com (Paul Collacchi) writes:
|> > 
|> > Given a relatively fixed population P, GDP(P) will expand indefinitely
|> > only if P is indefinately consuming more.  In other words, economic
|> > growth is the increased production which arises to meet increased
|> > consumption.  If there is no continuing increase in demand then the
|> > increase in production will become inventory, and production will begin
|> > to drop off until inventory is depleted.  Production dropping off is
|> > the end of the growth cycle.
|> 
|> 	And?  Are we to ignore: aging of the popultion, world wide economies,
|> shifts in demand, new markets, etc.?

Of course not.  He was asking, what I interpreted to be a question about
economic oscillation, and, using a simple model as a basis, I tried to 
paint a picture of the types of opposing forces that exist.  I don't claim
its a valid model, but it paints a reasonable picture of an oscillator.

|> > [ re: monotone growth in a fixed, closed system....]
|>  
|> > The underlying micro-economic model is simply that human beings are
|> > greedy little consumers whose happiness increases linearly with 
|> > consumption.  The truth is there is a limited relationship between
|> > human satisfaction and material consumption and many forms of consumption
|> > cause economic 'indigestion' which result in a decrease in demand. 
|> 
|> 	But what is your point?  How does the above disprove anything in the
|> "derailing" series?

I think your fooling yourself if you think anything was "proved" in the 
derailing series.  But I will answer the question.  One core notion advanced
was that tax cuts "cause" growth.  I could get no understanding of how
this might work since economic growth is an aggregate of human behavior and
human behavior is caused ONLY by human will.  I found it a little mind
boggling, to say the least, that my behavior was "caused" by a tax cut,
any more, say, than a poor man's rioting is "caused" by urban poverty.
(I'm sorry that I don't have any numbers for you on this one, Brett, but
if you don't *get* it, its really quite poignant, and ironic.)

Based on this synthetic reasoning, I deduced, a priori, knowing that I
cause my own behavior, that your model that "tax cuts" cause my and
hence our collective economic behavior was not exactly right.

A tax cut would, however, put more money into circulation.  It wouldn't
increase demand, but it might give people the wherewithal to express 
their existing demand.  Fine.  

(Understand that a tax cut won't increase foreign demand either.  Therefore,
for the purpose of deduction,  if your theory holds at all, it must hold
for 'closed' economies.  Unless you think that domestic tax cuts stimulate
foreign demand.  Therefore, its enough to investigate your theory within
a closed economy, since you cannot argue that increased demand caused by
foreign markets results from domestic tax cuts.  (I think you're arguing
another point, that growth can go on indefinitely.  A different debate.))

|> 
|> > Secondly, since the consumer is the worker-bee, he eventually figures 
|> > out that the has to pay for his indulgences, and therefore makes a
|> > sane act which is to decrease spending.  I think that its classic 
|> > system theory to predict overeaction (stop spending) when faced with the
|> > consequences of having greatly overspent, rather than to simply reduce
|> > spending by a little bit.  In other words, the same consciousness that
|> > wanted instant gratification now wants instant relief from the
|> > consequences.  Consumers just slammed on the breaks when it became clear
|> > to them what had happened.
|> 
|> 	Or the government simply taxed away their disposable income.

In some cases, yes.  But it sounds kind of whiney.  I get taxed.  I save
tons of money.  Elsewhere you argue about the merits of reducing 
spending.  I agree that reduced spending is wonderful.  But can't people
choose to reduce their own spending?  Surely you're not saying that the
government prevents them from doing this.  Also, please note that reduced
spending, when practiced by private citizens, results in reduced demand,
results in reduced growth (in closed economies.)

|> 
|> > There are artificial stimulants to demand, such as "tax cuts" and 
|> > commercial advertising.  These are efforts to 'entice' consumers to
|> > consume more, and can in the short term produce some immediate effects.
|> > But in the long term, sustained growth (consumption) of a relatively
|> > fixed population of people can only occur if the population permanently
|> > practices something equivalent to economic bolemia.
|> 
|> 	Since we have yet (Earth, that is) to experience a static population,
|> and since that will probably never happen, your theories seem ripe
for a text
|> on fantasy economics.
|>

Whose aren't.  Are you agreeing that a fixed population could achieve a
relatively maximal degree of demand, but just don't agree that fixed
populations exist?
  
|> 	It would be nice if you had numbers, instead of rhetoric, especially if
|> you intend to "disprove" someone else's numbers.
|>
I'm not trying to disprove your numbers, just your understanding of
causality.  Tax cuts don't cause human behaviours.  Do you really need
numbers to understand that?

Paul Collacchi
 
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