"Fallacy of Price Reduction Argument
Of late there have been voluminous propaganda arguments to the effect that the deficit in purchasing power has been offset by the decline in the prices of manufactured articles, the decline in the price of automobiles from several thousand dollars to about $500 each being a favorite exhibit. The irrelevance of this is obvious when it is considered that the deficit in purchasing power results entirely from the fact that in order for industry to operate profitably and at the same time to disburse any funds at all to large incomes, the amount paid back to small incomes must be less than that taken from the consumer originally. This is entirely independent of the price of the product. but necessitates that the price, however small it may be, must always be greater than the cost of production. Thus no matter how greatly prices may be reduced, the money paid back to the small income public by any industrial enterprise operating profitably is always insufficient to enable the public to buy back its total output. The same must therefore be true of all industry when lumped together.
Another specious argument often heard is that all businesses operate at a loss and thereby represent a source of surplus purchasing power. The fallacy here is that almost every one-armed road stand Constitutes a `business.' Consequently, while the total number of such business enterprises is large, the part played by them is inconsequential as compared with the vast corporate enterprises such as railroads, steel, oil, and the like. In fact, a prevailing interest rate greater than zero is itself a statistical average of the profits and losses of all business enterprises and indicates the excess of profits over losses."
- Man-hours and Distribution, M. King Hubbert
http://mkinghubbert-technocracy.blogspot.com/
- By Rich
- By ingliz
- By Fasces