Extrapolating from the Model

Let us now extrapolate how we might expect our three groups (considered separately for the sake of clarity) to react to a particular change in economic fundamentals. Economics is primarily about the distribution of ‘scarce’ resources (human and material) between individuals. The total amount of material and human resources to which we have access at any point in time is finite and cannot be altered by human action. Equally the fundamental characteristics of human beings do not change much over time. Yet the means by which resources are allocated to particular outcomes and between individuals is very much open to alteration by human action, indeed to an effectively infinite degree. Within our present economic system, usually described as ‘free-market capitalism’, how this is done depends on relative valuations of different resources and outcomes in money terms. So it would seem reasonable to look closely at the effect changes in money could have on our groups.

So just to reminds us of the model

And although I’m willing to play along with this model, let us actually remind ourselves what the model [data] is actually based on: it is simply based upon ‘diminishing marginal utility’, that is to say it’s not a model about production etc at all. To try and present it as such is nonsense.

With regard to the above, the only quibble that I have is that while the illiterate may call our system ‘free market capitalism’ it is a far cry from such. What we actually have is Socialism mixed with Corporatism, with some free market capitalism thrown into the mix.

Although money is the means of distribution and allocation and this is generally regarded as its primary purpose it has over time required the convention of value in itself, which in reality being nothing but paper and ink or numbers in a computer database, it does not have.

Money is a medium of exchange. When we had commodity money, the money had an exchange value on a commodity use, later, this use value was augmented by the use as ‘money’ value. Fiat ‘money’ has no use value other than its use as ‘money’.

Its ‘real’ value can never be greater than the sum of all available labour and materials and thus it can only have value if there are goods and services available to be exchanged for money.

True.

Yet because of its ‘convention’ value total perceived available wealth actually appears to be greater than this. And the amount of money an individual has access to will determine the way in which he or she values goods and services in terms of that money.

Here the ‘convention’ value would seem to be the use value as ‘money’.

The Perception of Wealth

One might show this relationship as one of under-valuation of real goods and services by the following expression:

%Undervaluation = Perceived Available Money Value (PAMV)/ PAMV + Perceived Available Labour and Materials Value (PALM)

where PAMV = the value an individual gives to all money he or she may have
access to directly, or indirectly through borrowing (taking into account the cost of such borrowing to him/her);

Which is simply saying: this is the subjective value of all money available to the individual, which reiterates the ‘diminishing marginal utility’ of money that we encountered earlier.

and PALM = the value in money terms an individual gives to all labour and materials he/she may have access to

Again, the subjective value in money terms, of goods of services, that can be exchanged against money.

The two definitions have however been arranged into a mathematical equation, which serves absolutely no purpose as far as I can ascertain…at all.

Let’s look at how this relationship affects the outlook of our different groups – Workers,

Consumers and Investors.
Workers, having little access to reserves of money, will generally have a low PAMV so they tend to give labour and materials a relatively high value.

This statement directly contradicts previous statements. We have agreed that the research provided, simply confirmed the ‘diminishing marginal utility’ of money. Thus the less money that you have, the more highly you will value each marginal unit. Therefore, the lower your money stock, the less you will value materials.

Labour is an entirely different concept altogether, and simply lumping it into this paragraph without any explanation or context seems odd to say the least. Suffice to say, the assertions made, are without merit.

They may work for low wages if it is fulfilling work or necessary for survival but may opt not to give their labour away if there are alternatives, legal or illegal.

They, like anyone, will ‘work’ when they value ‘work’ more highly than leisure on their ordinal value scale. Nothing more need be said. To posit alternatives, legal or illegal is simply indulging in idle speculation. It has no merit.

They will tend not to pay ‘over the odds’ unless persuaded to do so by effective marketing or advertising, or the creation of addiction, since this has a significant effect on their ability to purchase other items which can significantly improve their lives.

Here we see the contradiction made earlier. As holders of ‘low cash balances’ the marginal utility of marginal money units is high, thus the lower valuations assigned to goods/services that can be exchanged against this money. The above statement corrects the mistaken earlier interpretation.

Unfortunately, their relative lack of information, education and choice makes them more susceptible to advertising, marketing and manipulation.

Speculation. The educational level may be low, but then again, it may not be. In addition, even for the sake of argument, we accept that their educational level is low, this does not preclude ‘street smarts’ and a natural entrepreneurial spirit. Thus the statement makes invalid assumptions.

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