A bad tradition of economics is that logic is assumed to be something trivial
and something that can not be ascertained.
A bad tradition of economics is that logic is assumed to be something trivial and something that can not be ascertained.
Even when we speak of demand and supply, we do not know what we are assuming, and what sort of things are being pointed to and spoken about. What should be called demand, and what is it that should be supplied, as well as the mathematical basis for this should be clarified and defined.
It is not self-evident that physics does not measure this directly. In economics, what can be measured directly is statistics. For this reason, economic mathematics must be based on statistics.
The economic space can be assumed to be formed in four dimensions, with the time axis added to the three dimensions of people, things and money. That is, it is a network of distances—human distance, physical distance, monetary distance, and temporal distance—that comprises an economic space.
The triangular relationships created by people, things, money, space make up the foundation of the economy.
The amount of work, the quantity of things needed, and the vector of income determine the directions in which the economy fluctuates.
And, the space created by people, things and money comprises the individual dimensions in the processes from production to consumption. As an example, the production space is made up of production volume, employment, and income. The space caused by consumption is made up of consumption, consumption population, and cost.
Economic problems are caused by mismatches between the whole and the parts.
Distortions between people, things, and money are what throws the economy into disorder.
First of all, things and people are finite, and although they are capped at the top, money has no upper limit.
The lack of an upper limit on money is one of the reasons why the economy is swayed by the movements of currencies.
Second, there is a mismatch between the whole and the parts. There are differences in the ways value is measured in each of the industries.
Partial imbalances make the overall structure unstable. Consumption is unduly distorted when unreasonable discrepancies widen. And as a result, the balance between flow and stock may be broken.
The reason that entertainers and athletes get higher compensation than the work performed by others is due to differences in the industrial structure. The greater the capability to attract customers, even at low unit costs, the higher the income that can be obtained. If such uneven disparities become abnormally high, the consumption structure will be distorted.
Thirdly, there are qualitative differences between the means of production, income structure and consumption structure.
The income of each person does not match the necessities that individuals require in their lives.
There is not necessarily enough funds available when money is needed. The economy is affected by such imbalances. If the income disparities spread beyond that, the situation will distort the consumption structure. A typical example is a phenomenon called an economic bubble. When there is a growing over-surplus of money, a situation occurs in which more money flows into the stock market than is necessary, causing soaring asset prices, and speculation pushes real demand.
Fourth, there is a point that depends on competition in the market. What is important is reasonable prices, and whether it is good if they are low or it is wrong to pursue only competitiveness. In other words, the institutional mismatches amplify the changes in the economy.
On the contrary, when a monopolistic or oligopolistic situation occurs, it becomes impossible to form appropriate prices.
The economy acts purposefully, and when competition has lost its purpose, it is only harmful. The purpose of the economy is distribution.
Fifth, local fluctuations amplify the overall fluctuations. When some goods are in extremely short supply or when prices soar such as during the shortages of the oil crises, prices overall get out of control and price increases soar.
The movement of the economy is determined by the average of the structure, dispersion and bias of income, production, consumption, population, and finance (debt and equity, revenue, savings).
Money is what is used as a means to distribute the goods needed today. Money is distributed to individuals as some sort of compensation to them. People procure their necessary resources from the market using their own money.
The problem lies in the fact that there is a lack of uniformity in the means to obtain money, and in the goods, and in people's lives as well.
Also, the means of production are not uniformly distributed. And, the quality of the means of production is also not uniform.
The quality of labor is not uniform. Since the quality of labor is not uniform, remuneration and income received as compensation can not be uniform.
There are differences in the quality of labor. The quality of labor also varies depending on the occupation. For example, there are differences in quality between simple manual labor and skilled labor, intellectual work and administrative work. As such, differences in the quality labor can not be taken up uniformly.
Also, the quality of labor differs depending on what is used to evaluate labor. Differences also arise depending on the results and quality of labor, and on the working hours.
I think that it is correct to put unemployment countermeasures at the center of economic policy.
The reason for this is because the economy was originally involved in matters of distribution, and no matter how much profits are gained, without substantial support, this will have no effect on the substance of the real economy.
The real economy involves costs and assets. Revenue, debt and capital are nominal events.
Even if leverage is increased and funds are raised, unless entities are involved in the operation, it will not have a change on the real economy.
The key to economic policy lies in how to control costs and debt.
Income is uncertain and unstable. In contrast, expenditures are deterministic and derived continually.
A company can also be considered to be a device or institution that rectifies unstable and uncertain income into fixed income.
There are several economic fluctuations within the economy. Each fluctuation has factors in it that make up that fluctuation. The fluctuations in the economy are substantially structural.
Expenditure has a specific fluctuation. For example, this is a fluctuation that is created based on the amortization period.
Another criterion is the fluctuation of funding plans.
Other fluctuations can also be considered: fluctuations due to investments, fluctuations due to growth, fluctuations due to consumption.
For example, some things like houses have semi-permanent lifespans depending on the circumstances and they last some 30 or 40 years, while other things are consumed daily like fresh foods.
For management, there is a motivating factor that works to accumulate funds when profitable to prepare for times when deficits occur.
Taxes serve as a motivating factor that attempts to equalize income and profit.
The original purpose of taxes was to level income and profit.
It is easy to prepare a budget when income is constant.
However, it is difficult to level profits for goods with intense price movements like market products. Money surpluses and shortages should be considered to be a situation that is always normally occurring. Prices are not stable when they are based on costs, and they become unpredictable.
Also, for things that are not renewed for a long time like the one-time investments for houses, the industrial structure also changes naturally during the period of the market conditions due to new investments and the market conditions due to renovations.
While some industries require a large amount of capital investment, others do not require any capital investment at all, and the cost structure, asset structure, profit structure, and debt structure have different characteristics in each industry and are not uniform.
Depending on the structure of the industry, companies that have been hibernating may come out.
Some industries have to prepare countermeasures for long-term cycles.
What factors have a decisive role in the prosperity and decline of an industry? It is necessary to clarify those factors.
Also, there are differences in the kinds of investments due to differences in asset structure, cost structure, profit structure and debt structure. As a result, there are differences in the flow of funds, and the economic fluctuations vary from industry to industry.
The changes in the profit structure, cost structure and debt structure in one industry occur due to the growth stage and changes of the environment.
Costs and expenditures are not handled uniformly in all industries. They are different for each industry.
Also, the life cycles are different. Economic policy will not be effective if it is not made with these assumptions. Or else, in in some cases, it may be counterproductive.
That is, it is necessary to change policies according to the stage and environmental changes of each industry.
There is no panacea in economic policy. Deregulation, and deregulation. Shouting for public investment after public investment is as foolish as a quack doctor who thinks it's all right to prescribe aspirin for any and all ailments.
Countermeasure therapy will not lead the economy to a radical solution.
Also, if economic policy depends too much on monetary policy it will cause symptoms of a kind of poisoning. Monetary policy is a powerful drug. If used properly, it will produce a dramatic effect. But it will not only lose its effectiveness if used unnecessarily and randomly, it will cause chronic disease.
We must not forget that even if financial institutions make profits, they can not prevent the stagnation of the real economy.
This is because even if the profits of financial institutions increase, only the imaginary portion expands.
What industries are needed for a nation's economy? That is the point to grasp.
And it is unacceptable not to take the necessary measures to enable those industries to continue.
It is a mistake to short-circuit and cut off an industry because it is mature, and thus its growth can not be expected, and thus it is not competitive. However, the problem lies in the fact that the health of industries can not be preserved by protecting them excessively.
A matter of fact, technological innovation and growth can not be expected for many mature industries. This is because the market will be over-saturated. However, even among such industries, because of which industries they happen to be, they are sometimes industries that are indispensable for the country's economy.
While their technological innovation might not be expected, it is important how to secure the profits of industries that are essential for daily living.
However, the parts of the economy that should not be forgotten are production and distribution, and restricting trade will only increase the distortion of the market. It is necessary to ensure fair competition while maintaining an open market.
It can not be said that economic production, which has focused only on growth and technological innovations, is necessarily sound.
For example, innovations have reduced the need for work requiring skills and shortened the lives of skilled workers. As a result, skilled craftsmen and many special skills have been lost.
In the past, skills that took years to improve also became obsolete in a short time due to technical innovations, and improving skills became meaningless. This is creating a trend in which it is simple and easy to change jobs.
Evaluations based upon experience and skill are gone from the workplace. The only things that are evaluated are youthfulness and physical strength.
Until now, although one was able to work and never suffered unemployment, it has now become more difficult to get a decent job after a certain age. Hand-making skills and craftsmanship have become worthless. However, as we head toward an aging society with a declining birthrate, it seems like we are going against the times.
We should not think about rationalization so simply. Machines work in place of people, but they can also deprive people of jobs. And this also reduces added value.
An economy that presupposes expansion, growth and development is always bounded by limitations. We must not forget that people live in a world of limitations.
If we try to expand indefinitely only by ourselves, we will inevitably come into conflict with powers that are trying to expand in the same way. This could eventually develop into war and bring about a catastrophic disaster to humankind.
The human race needs to learn to share and cooperate. Otherwise, terrible things will continue in production forever.
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