General glut

From Wikipedia, the free encyclopedia

This article does not cite any references or sources. (March 2007) Please help improve this article by adding citations to reliable sources. Unverifiable material may be challenged and removed.

Contents

I. Contents

II. Introduction

III. Non-general Glut as a non-problem

IV. General Glut -- The Cepa New School Essay description of Malthus The General Glut

V. A purely monetary glut -- Further Discussion not following that contained in the Cepa New School essay.

VI. Sources for further study

   (1) the Cepa New School Essay, and 

   (2) the original sources, Simond de Sismondi and Malthus, Ricardo and Say

Introduction

The General glut problem is a problem identified within the classical political economy of the era of Adam Smith and David Ricardo. The problem is that, as labor becomes specialized, if people want a higher standard of living, they must produce more. However, producing more lowers prices and leads to the need to produce yet more in response. If those who have money choose not to spend it, then it is possible for a national economy to become glutted with all of the goods it produces, and still be producing more in hopes of overcoming the deficit. While Say's Law supposedly dealt with this problem, successive economists came up with new scenarios which could throw an economy out of General equilibrium, or require expansion through conquest, which became termed imperialism. It was never considered that since humans always want more, a "glutted" market would simply find unmet desires and satisfy them.

Non-general Glut

Too much production in a given industry or field of production compared to what is being asked for by the market.

General Glut

Too much production in all fields of production in comparison with what resources are available to consumption to purchase said production.

Malthus proposal: glut of production localised in time rather than by industry or field of production would meet the requirement of Say's Law that general gluts cannot exist and yet would constitute just such a general glut.(1) The consequences then are worked out by Malthus, altough before him by Simond de Sismondi first proposes the problem. Malthus is more famous for his earlier writings containing his early thinking which tried to prove the opposite problem, a general over-consumption, as an inevitability to be lived with rather than solved.

Introduction -- Sources of Consumption

The process of production itself can consume ever more of the bulk of its own production, and more so as capital savings feed capital.

Laboring Consumers as individuals

Non-contributing consumers, i.e. "landlords" and other rent receivers

The Cepa New School Essay

Problem -- under availability of funds, need and desire to a body of consumers limited in population in the current moment.

Problem -- the over availability of funds and useful investment capacity to production in the current moment.

Business owners will decrease production to lessen this surplus. This will decrease labor income and rent, aggrevating the inability of consumers to consume.(1) This in turn will lessen the medium term incentive for businesses to consume their production with capital investment as they fail to see an increase in the consumption/production ratio result from their recent producuction decrease. That view will then lead them to decrease production further to lessen the surplus which in turn will decrease labor income and rent, again aggrevating the inability of consumers to consume.(1)

It seems to me, as described in the Cepa New School Essay sited below, that Malthus' problem hovers around an under-funding of consumption rather than on an over-funding of production. Even Malthus's solution, more landlords, who "tax" production with their rent without themselves producing more in exchange (1), points to this as the central issue. As a solution, Malthus has the landlord, a consumer who is well enough funded that he consumes without needing to produce. And so, the issue in the Cepa New School description sited below of Malthus is one not of a general glut of production but of a general under-funding of consumption. Malthus after providing this neat, if strange sounding, solution, goes on to say its a a good solution but might might not always work perfectly because the Landlord might not always consume much of what he gets even though at least he is not himself aggrevating the problem by his own production and defacto as a consumer is always consuming at least something. Malthus assumes the Landlord can consume all but as he is a free agent might not always choose to consume all, thus creating the glut.(1)

Discussion -- a purely monetary glut

I am almost at a loss to see how a landlord could consume all he receives except to conceive that what he could not consume he could apply to production for any purpose and need not be connected to any human consumpton demand at all. But then the line between landlord and capitalist disappears and we only consider the capitalist in his role as rent-reciever in that a rent receiver is not dependent on human consumption except only in what he himself can consume. Capital as arbitrary producer, then, may produce for random periods of time arbitrary and meaningless under production of consumer goods due to the very thoughtlessness of such production as related to the general population. But it seems to me such an under-distribution would not be correlated normally to a surplus of food or housing but would rather fall randomly. As international capital, divourced from taxation and the accompanying parliamentary debate is strictly, as perhaps Malthus's fully consuming landlord, divorced from human needs, a surplus of production would find no need for an accompanying human demand and would continue on its way, serving indirectly human society, un-deterred by recession or depression. As such, capital serves, by the comparative advantage principle, its role in a Democracy. From this perspective, taxation rates far in advance of legislative goals, however socialist they might be, are not necessary to guarantee and incentivize supply. Finally, though, we need to examine General Gluts from the point of view of production divorced from human need. Might not such production falter by the same principle that it faltered in the Sismondi/Malthus concept(1), and falter apart from recourse to human consumption considerations? I think the answer must be a firm YES. Capital production is not just physical production, what some economists label as "real," as in "real GDP", but rather also monetary production. The economy of material production serves the role of the consuming laborer and consuming landlord, whereas the monetary economy serves the role as over-producing capital. Thus, we need a new class of landlord, not producing money but only consuming it to remedy this. Tax-and-spend big government liberalism provides the solution. It supposedly consumes without producing -- the ideal solution for the real general glut of the money economy over what is actually produced.

For Further Study, Other Sources On The Net:

    http://cepa.newschool.edu/het/essays/classic/glut.htm

Original work of Simond de Sismondi:

"Painful experience has shown all the inhabitants of Europe what a dearth was, and a period of general penury among a civilized people."

    -- http://socserv2.socsci.mcmaster.ca/~econ/ugcm/3ll3/sismondi/poliec