Sunday, March 3, 2019

Basic Elements of Mechanical Economics

[The discipline of Economics attempts to bring coherence to exchanges of products, labor and money. Coherence is impossible without some commonality in understanding the interrelationships of three exchanged groups. The following examples attempt to provide insight into the interrelationships.]

When a foreign producer markets a product in the USA, he finds himself selling the product for American dollars. When the sale is completed (no matter what the actual original product cost as measured in any currency), the foreign producer has exchanged ownership of a product for ownership of dollars. In this way, the foreign producer has become an owner of dollars which places him in the same position as all native American owners of dollars.

Welcome to America!

When an American citizen exchanges his labor for money, this citizen finds himself selling ownership of labor hours in exchange for ownership of American dollars. In this way, the American laborer has become owner of dollars which places him in the same position as all other owners of dollars.

It great to be an American!

Now we should ask what is so nice about owning American dollars? Possession of dollars gives access to future ownership of any asset for sale in the dollar economy. Access is bounded/restricted only by the number of dollars available.

Hooray for the free market!

Fortunately for some, money can be given away as if it were a Christmas gift certificate. In this way, the recipient becomes an owner of dollars which places him in the same position as all other owners of dollars.

Hooray for giving!

The difference between money and gift certificates is that money is accepted everywhere while gift certificates are accepted only in the store that created them. The key concept is that both money and certificates can be (within their respective limits) traded for anything for sale. The environment surrounding creation of gift certificates will provide a useful backdrop once we overcome the misleading circumstance that certificates are commonly purchased for cash.

What a convenient parallel!

We have here the basic elements of micro and macro economics.  A change of ownership is an exchange.  Products, labor and money exchange mechanically as directed by their owners.  Exchanges between few owners is micro economics, Interactions between many owners is macro economics. Parallels between money and gift certificates provide a generally unrecognized link between micro and macro economics.

Let's tie these basic elements together!

The mechanical money blogging effort (found on this site) is focused on building coherent relationships between products, labor and money. The above examples display basic mechanical interactions found in past postings and expected future posts. These relationships will continue to underlay future mechanical economic logic until (or unless) better basic relationships are found.



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