Non-minimal production cost production locations better for planet than minimal production cost production locations--an example
Roughly speaking, traditionally the majority opinion amongst economists has been, that buying product X, for price P1 from vendor V1, when an equivalent quantity and quality of product X can be bought from vendor v2 for price P2, when price p1 is higher than price P2, automatically damages the world economy, through the negative effect it exerts on the world's net income vs prices equation.
This is incorrect. the negative impact on the world's income vs prices equation, can be more than compensated for by factors related to how the money paid to the vendor circulates after the vendor is paid.
Imagine two planets, planets Alpha and Beta. Nation A is a nation on planet Alpha, and nation B is a nation on planet Beta. Nation A and nation B are identical twins as are planets Alpha and Beta.
Nation A on planet Alpha, faces higher non-wages production costs and higher wage costs when it comes to producing product Sigma, compared to other nations on planet Alpha. This nation A imports the product Sigma it consumes.
Nation B on planet Beta, like nation A on planet Alpha, faces higher non-wages production costs and higher wage costs when it comes to producing product Sigma, compared to other nations on planet Beta. Nation B, unlike nation A on Alpha, nevertheless chooses to produce the product Sigma that it consumes in its own territory, domestically, paying higher prices for product sigma compared to what would be the case if it imported product sigma.
Earth's simple minded economists who regurgitate what they have failed to digest (understand), will be surprised to learn, that nation B's domestic production approach, contributed more to nation B than Nation A's importing approach contributed to nation A; and nation B's domestic production approach, contributed more to the economy of it's planet Beta, compared to the positive impact of nation A's importing approach on the planet it is on, planet Alpha.
There are several reasons for the surprising outcome.
Reduction of costs in money time and human energy required for production per unit, is the major engine of actual (as opposed to illusionary) world economic growth.
Nations facing high production costs and high labor costs can by nature, tend to be more inclined to put resources into attempts to reduce non-wage production costs, compared to nations that enjoy low production costs and low labor costs. Nations featuring high wages can tend to have more money available to spend on goods and services that increase productivity.
After Nation B's management and workers were paid for producing product Sigma, as the money spent and invested by nation B's management and workers passed from person to person through financial transactions, a high percentage of the transactions involved persons purchasing goods and services that increased their productivity, their nation's productivity, and their planet's productivity (productivity per dollar paid and per hour worked).
An example of this was investments that increased productivity in terms of production of product Sigma in nation B.
By way of contrast, on planet Alpha, nation A imported product Sigma because imports of product Sigma were cheaper than domestic production of product Sigma.
The workers and management in nation D, the nation that nation A imported the product Sigma from, started chain reactions that damaged the productivity of the world, when they spent and invested the money that they received as payment for the product Sigma that they exported to planet A.
The people that nation D workers and management bought things from, took the money that they got, and spent it on things that damaged their own productivity as individuals, damaged the productivity of their nation, and damaged the productivity of their planet that they shared with nation A, planet Alpha.
Then those who sold the things that damaged productivity to the workers and management in nation D who got money from nation A for the product sigma, took the money they got for selling the things that damage productivity, and used it to buy more things that damage productivity, on and on it went like that.
Looking at the impact nation A's import-oriented approach had on nation A, compared to the impact nation B's self-sufficient approach had on nation B, nation A's citizens were reduced, through lack of circulation of money leading to poverty, to a state wherein from the productivity per dollar paid and also the productivity per hour worked perspectives, the input-output equations for them as individuals became non-optimal.
Meaning, if they got paid X amount, their productivity per dollar paid would have been greater; but they got paid less than X amount, because of the lack of domestic circulation of money due to the nation A's imports-oriented policy.
If they got paid Y amount, their productivity per hour worked would have been greater, and their productivity per hour spent studying would have been greater; but they got paid less than Y amount, due to the lack of money flowing through the nation A, due to nation A's imports-oriented policy.
By way of contrast in nation B on planet Beta, the reverse held true. In nation B on planet Beta: the citizens of planet Beta were paid not less than the amount at which their productivity per dollar paid was the greatest; rather, they were paid the amount at which their productivity per dollar paid was the greatest, because there was money circulating through the economy of nation B in sufficient quantity so as to allow for such to occur.
In nation B, workers were paid the amount at which their productivity per hour spent working or studying was the greatest, as opposed to a lesser amount, again due to the domestic circulation of money in nation B created through nation B's self-sufficient imports-independent, import-alternatives approach.
Thus in the end, planet B on planet Beta, which resorted to domestic production of product B, through its self-reliance, created a positive impact on planet Beta's economy, which outweighed the negative impact on planet Beta's economy, caused by the adverse impact on the planetary income vs prices ration equation.
Planet A on planet Alpha, by way of contrast, loving low prices, imported product sigma instead of producing product sigma domestically, and thereby created a negative impact on planet Alpha's economy; this negative impact outweighed the advantage produced for planet Alpha's income vs prices ratio equation, which derived from nation A choosing to utilize the lowest price source of product sigma.
@2009 David Virgil Hobbs
This is incorrect. the negative impact on the world's income vs prices equation, can be more than compensated for by factors related to how the money paid to the vendor circulates after the vendor is paid.
Imagine two planets, planets Alpha and Beta. Nation A is a nation on planet Alpha, and nation B is a nation on planet Beta. Nation A and nation B are identical twins as are planets Alpha and Beta.
Nation A on planet Alpha, faces higher non-wages production costs and higher wage costs when it comes to producing product Sigma, compared to other nations on planet Alpha. This nation A imports the product Sigma it consumes.
Nation B on planet Beta, like nation A on planet Alpha, faces higher non-wages production costs and higher wage costs when it comes to producing product Sigma, compared to other nations on planet Beta. Nation B, unlike nation A on Alpha, nevertheless chooses to produce the product Sigma that it consumes in its own territory, domestically, paying higher prices for product sigma compared to what would be the case if it imported product sigma.
Earth's simple minded economists who regurgitate what they have failed to digest (understand), will be surprised to learn, that nation B's domestic production approach, contributed more to nation B than Nation A's importing approach contributed to nation A; and nation B's domestic production approach, contributed more to the economy of it's planet Beta, compared to the positive impact of nation A's importing approach on the planet it is on, planet Alpha.
There are several reasons for the surprising outcome.
Reduction of costs in money time and human energy required for production per unit, is the major engine of actual (as opposed to illusionary) world economic growth.
Nations facing high production costs and high labor costs can by nature, tend to be more inclined to put resources into attempts to reduce non-wage production costs, compared to nations that enjoy low production costs and low labor costs. Nations featuring high wages can tend to have more money available to spend on goods and services that increase productivity.
After Nation B's management and workers were paid for producing product Sigma, as the money spent and invested by nation B's management and workers passed from person to person through financial transactions, a high percentage of the transactions involved persons purchasing goods and services that increased their productivity, their nation's productivity, and their planet's productivity (productivity per dollar paid and per hour worked).
An example of this was investments that increased productivity in terms of production of product Sigma in nation B.
By way of contrast, on planet Alpha, nation A imported product Sigma because imports of product Sigma were cheaper than domestic production of product Sigma.
The workers and management in nation D, the nation that nation A imported the product Sigma from, started chain reactions that damaged the productivity of the world, when they spent and invested the money that they received as payment for the product Sigma that they exported to planet A.
The people that nation D workers and management bought things from, took the money that they got, and spent it on things that damaged their own productivity as individuals, damaged the productivity of their nation, and damaged the productivity of their planet that they shared with nation A, planet Alpha.
Then those who sold the things that damaged productivity to the workers and management in nation D who got money from nation A for the product sigma, took the money they got for selling the things that damage productivity, and used it to buy more things that damage productivity, on and on it went like that.
Looking at the impact nation A's import-oriented approach had on nation A, compared to the impact nation B's self-sufficient approach had on nation B, nation A's citizens were reduced, through lack of circulation of money leading to poverty, to a state wherein from the productivity per dollar paid and also the productivity per hour worked perspectives, the input-output equations for them as individuals became non-optimal.
Meaning, if they got paid X amount, their productivity per dollar paid would have been greater; but they got paid less than X amount, because of the lack of domestic circulation of money due to the nation A's imports-oriented policy.
If they got paid Y amount, their productivity per hour worked would have been greater, and their productivity per hour spent studying would have been greater; but they got paid less than Y amount, due to the lack of money flowing through the nation A, due to nation A's imports-oriented policy.
By way of contrast in nation B on planet Beta, the reverse held true. In nation B on planet Beta: the citizens of planet Beta were paid not less than the amount at which their productivity per dollar paid was the greatest; rather, they were paid the amount at which their productivity per dollar paid was the greatest, because there was money circulating through the economy of nation B in sufficient quantity so as to allow for such to occur.
In nation B, workers were paid the amount at which their productivity per hour spent working or studying was the greatest, as opposed to a lesser amount, again due to the domestic circulation of money in nation B created through nation B's self-sufficient imports-independent, import-alternatives approach.
Thus in the end, planet B on planet Beta, which resorted to domestic production of product B, through its self-reliance, created a positive impact on planet Beta's economy, which outweighed the negative impact on planet Beta's economy, caused by the adverse impact on the planetary income vs prices ration equation.
Planet A on planet Alpha, by way of contrast, loving low prices, imported product sigma instead of producing product sigma domestically, and thereby created a negative impact on planet Alpha's economy; this negative impact outweighed the advantage produced for planet Alpha's income vs prices ratio equation, which derived from nation A choosing to utilize the lowest price source of product sigma.
@2009 David Virgil Hobbs
Labels: free trade, global economy, non-minimal production costs, production costs, protectionism, world economy
posted by David Virgil at 2:54 AM
0 Comments:
Post a Comment
<< Home