Cheese Guevara
23rd December 2013, 15:58
Here's a segment by Herman Royce from his book "Free Lunch". Royce says any future economy must eliminate profit and interest. His version of communism is something called CAPE and preserves the use of money. I can't get my head around his vision. Hopefully one of you can:
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"Consider an economy of any size over (say) a week during which, for the sake of explanation, it’s expected to neither grow nor contract: production won’t change, and everyone keeps their jobs and consumes as normal. Production costs for such a stable economy over the week are known in advance: without interest or profit, total producer costs equal total wage costs (either paid directly to the producers’ employees, or indirectly to those of other producers, as Figure 1 demonstrated). Hence, without profit or interest, the total prices of the goods produced over the week can be set to equal the total production costs.
Of course, expectations are not always met. So, at the end of the week, it makes sense to examine what actually happened, what work was really required, especially the time needed to do it. If less work was needed by some producers than anticipated and paid for over the week, then average working hours for the entire economy can be reduced accordingly for the next week, with the necessary work shared. But if the total costs of work reduce, so too can the total prices of the goods produced by that work– by the same proportion. An example will hopefully make this clearer.
Consider a simplified economy, depicted in Figure 7, consisting of three businesses – ‘Ay’,‘Bee’, and ‘Sea’ –each having a forty-hour working week. Between them, the businesses have a total of ten employees paid at the rates indicated in the diagram, so that an anticipated total of four hundred man-hours for the week involves a total expenditure of $10,000. The totalcosts are balanced by the total prices: both $10,000. However, the prices of individual products need not equal their costs of production: individual businesses can have total costs different to their total of prices as long as prices in aggregate for all businesses equal their aggregate costs. (Section 7.5 explains the considerable advantages of having different prices than costs for some products.) Hence, in the diagram below, Ay’s prices exceed its costs by the same $1,000 amount that Sea’s prices fall short of its costs, while Bee’s prices equal its costs, as do those of the total economy.
Now say Sea’s two employees find ways to perform their required work with ten hours less labour each over the week, and they expect to maintain this saving in the future. So, only 380 man-hours –ninety-five percent of the first week’s anticipated work – are actually required to produce the same output. Therefore, in the second week, all the necessary work can be shared over a 38 hour week in the manner depicted in the diagram, with prices likewise reduced to ninety-five percent of those set during the first week. In this way, Sea’s savings prompt everyone to work five percent less, and so earn five percent less – but because this also reduces the economy’s total costs by five percent it allows all prices to be reduced by five percent. Thus, purchasing power is kept constant for all, while avoiding unemployment and recession.
This approach– ‘Cost And Price Equalisation’ (CAPE)– has the main effect of absorbing changes which now give rise to the boom-bust business cycle into altered working hours and prices. If efficiency improvements and/or sales declines and/or reduced consumption and/or anything else decreases the need for work by x percent, the same work is shared over a working week also lowered by x percent. Income and total costs then also reduce by x percent, because of which CAPE requires an x percent reduction of all prices. Similarly, more shared work, whether because of reduced productivity, natural disaster, or any other reason, causes the working week, income and prices to all rise by the same proportion – a much better alternative than the inflation that normally results under capitalism.
So, though people can get less (or more) income, none lose (or gain) purchasing power because all prices drop (or rise) by the same proportion as income. And if prices and income move up or down in unison, then growth or contraction or a steady-state can be handled by sharing the work around. (As mentioned, despite plurocratic decentralisation, some functions can be most efficiently pursued with centralised approaches: if all prices of all businesses are recorded on a single database, all of them can be easily altered periodically by the same CAPE proportion using a simple computer program.)
This provides the basic overview but the devil as always is in the detail – especially concerning the sharing of work. However, other proposals to be detailed in subsequent sections ensure that these details merely complicate rather than undermine CAPE, and so they are discussed in the final section of this chapter.
Make no mistake though: this is not capitalism. It has no profits, maximised or otherwise, or interest, nor does it encourage ruthless labour market competition. Likewise, businesses whose prices adjust in line with changes to the overall economy cannot be regarded as capitalist. But neither does this approach retain the faults of capitalism, because it neither requires growth nor leads to inevitable loss.
____________________
"Consider an economy of any size over (say) a week during which, for the sake of explanation, it’s expected to neither grow nor contract: production won’t change, and everyone keeps their jobs and consumes as normal. Production costs for such a stable economy over the week are known in advance: without interest or profit, total producer costs equal total wage costs (either paid directly to the producers’ employees, or indirectly to those of other producers, as Figure 1 demonstrated). Hence, without profit or interest, the total prices of the goods produced over the week can be set to equal the total production costs.
Of course, expectations are not always met. So, at the end of the week, it makes sense to examine what actually happened, what work was really required, especially the time needed to do it. If less work was needed by some producers than anticipated and paid for over the week, then average working hours for the entire economy can be reduced accordingly for the next week, with the necessary work shared. But if the total costs of work reduce, so too can the total prices of the goods produced by that work– by the same proportion. An example will hopefully make this clearer.
Consider a simplified economy, depicted in Figure 7, consisting of three businesses – ‘Ay’,‘Bee’, and ‘Sea’ –each having a forty-hour working week. Between them, the businesses have a total of ten employees paid at the rates indicated in the diagram, so that an anticipated total of four hundred man-hours for the week involves a total expenditure of $10,000. The totalcosts are balanced by the total prices: both $10,000. However, the prices of individual products need not equal their costs of production: individual businesses can have total costs different to their total of prices as long as prices in aggregate for all businesses equal their aggregate costs. (Section 7.5 explains the considerable advantages of having different prices than costs for some products.) Hence, in the diagram below, Ay’s prices exceed its costs by the same $1,000 amount that Sea’s prices fall short of its costs, while Bee’s prices equal its costs, as do those of the total economy.
Now say Sea’s two employees find ways to perform their required work with ten hours less labour each over the week, and they expect to maintain this saving in the future. So, only 380 man-hours –ninety-five percent of the first week’s anticipated work – are actually required to produce the same output. Therefore, in the second week, all the necessary work can be shared over a 38 hour week in the manner depicted in the diagram, with prices likewise reduced to ninety-five percent of those set during the first week. In this way, Sea’s savings prompt everyone to work five percent less, and so earn five percent less – but because this also reduces the economy’s total costs by five percent it allows all prices to be reduced by five percent. Thus, purchasing power is kept constant for all, while avoiding unemployment and recession.
This approach– ‘Cost And Price Equalisation’ (CAPE)– has the main effect of absorbing changes which now give rise to the boom-bust business cycle into altered working hours and prices. If efficiency improvements and/or sales declines and/or reduced consumption and/or anything else decreases the need for work by x percent, the same work is shared over a working week also lowered by x percent. Income and total costs then also reduce by x percent, because of which CAPE requires an x percent reduction of all prices. Similarly, more shared work, whether because of reduced productivity, natural disaster, or any other reason, causes the working week, income and prices to all rise by the same proportion – a much better alternative than the inflation that normally results under capitalism.
So, though people can get less (or more) income, none lose (or gain) purchasing power because all prices drop (or rise) by the same proportion as income. And if prices and income move up or down in unison, then growth or contraction or a steady-state can be handled by sharing the work around. (As mentioned, despite plurocratic decentralisation, some functions can be most efficiently pursued with centralised approaches: if all prices of all businesses are recorded on a single database, all of them can be easily altered periodically by the same CAPE proportion using a simple computer program.)
This provides the basic overview but the devil as always is in the detail – especially concerning the sharing of work. However, other proposals to be detailed in subsequent sections ensure that these details merely complicate rather than undermine CAPE, and so they are discussed in the final section of this chapter.
Make no mistake though: this is not capitalism. It has no profits, maximised or otherwise, or interest, nor does it encourage ruthless labour market competition. Likewise, businesses whose prices adjust in line with changes to the overall economy cannot be regarded as capitalist. But neither does this approach retain the faults of capitalism, because it neither requires growth nor leads to inevitable loss.