Economic Issues Solvable


Though there might exist a temporary disequilibrium in the commodity markets, there would appear no unemployment in principle in the MuRatopian economy, simply because full employment (or full participation, to be precise) is conditioned in the co-worker's optimal program, and no co-workers are forced to be dismissed by Principle 1. This does not mean, however, that co-workers can fully participate all the time. In the book: The General Theory of Employment, Interest and Money (The Royal Economic Society, 1973), Keynes classified three categories of unemployment: involuntary unemployment, frictional unemployment and voluntary unemployment (p.6). Then, he argued that workers are involuntarily unemployed in a capitalist economy - his definition of unemployment. He related this involuntary unemployment to a change in real wage:
Men are involuntarily unemployed if, in the event of a small rise in the price of wage-goods relatively to the money-wage, both the aggregate supply of labor willing to work for the current money-wage and aggregate demand for it at that wage would be greater than the existing volume of employment. [p.15]

We may follow Keynes' definition of unemployment. Hence, in the MuRatopian economy involuntary unemployment in Keynes' sense is eliminated. There could exist unemployment or unparticipation among new graduates and co-workers who are 'between jobs' as frictional unemployment or unparticipation "due to a temporary want of balance between the relative quantities of specialized resources as a result of miscalculation or intermittent demand; or to time-lags consequent on unforeseen changes; or to the fact that the change-over from one employment to another" (p. 6). In addition, there could also exist voluntary unemployment or unparticipation "due to the refusal or inability of a unit of labor, as a result of legislation or social practices or of combination for collective bargaining or of slow response to change or of mere human obstinacy, to accept a reward corresponding to the value of the product attributable to its marginal productivity" (p. 6). In any case, these frictional and voluntary unemployment or unparticipation are the ones which can be unavoidable even under a perfectly planned economy, and may exist wherever human beings form a society. The MuRatopian economy is not the exception in this sense, but it can entirely eliminate involuntary unemployment which is violently caused by the capitalist economic system. It can also eliminate, as by-product, frictions and conflicts between managers and workers in a centrally planned socialist economy, simply because no distinction between managers and workers exists under a self-manageed MuRatopian economy. Thus, the MuRatopian economy will also overcome another serious problem the present socialist countries face: alienation of labor.

The three principles of the MuRatopian economy will also require a drastic change in managerial and organizational philosophy which has been dominant in the present civilization since Max Weber and Ferdinand Tonnies; that is, the philosophy that organizations are most efficient when they are formed of specialists comprising a part of the whole (from Gemeinschaft to Gesellschaft). Under this philosophy workers are treated as if they are parts of a machine which can be easily replaced with others whenever they become inefficient. Moreover, people themselves misunderstood that organizations consisting of free individuals give them more freedom. Gradually they begin to think, under the influence of this philosophy, that everything can be replaceable - even their partners ! As a result, not only their workplaces but also their homes have become no longer safe shelters, and they are almost split into helpless pieces, distrusting and fighting against each other. In the MuRatopian economy, co-workers and their families treat themselves as the inseparable parts of the whole. Accordingly, co-workers constantly re-educate themselves to upgrade their capabilities and skills and to adapt to a new situation in a rapidly changing new environment. This requires co-workers to be more dynamic in thought and in action, and to let other co-workers share and utilize their own special talents. Eventually this will cultivate mutual trust and mutual understanding. This dynamic and cooperative behavior of all members will be more efficient than a mere collection of specialists (= Gesellschaft). Japanese economic success may be partly ascribed to such dynamic and cooperative organization.

Exploitation and Unfair Income Distribution

We have shown in the MuRatopian book that a long run equilibrium in a capitalist economy, even though it is a full employment Golden Age, is Marx unfair in the sense that workers are forced to accept unequal exchanges (and thus exploited in Marxian terminology), and accordingly the resulting income distribution is unfair toward them. This result would be shocking to the Walrasian economists who believe that the market exchange in a capitalist system is efficient and Pareto optimal. In contrast, we have shown in the book that a long run equilibrium in the MuRatopian economy is Marx fair, and the income distribution based on brain work-time (or income rate optimization) is fair in the long run. This result would be shocking to the orthodox Marxian economists who believe that exploitation in a capitalist economy can be surmounted by a centrally planned socialist economy, at least in principle (but not in reality because of the apparent existence of unfair income distribution in the actual socialist countries). What Marx criticized within a capitalist economy is neatly vanquished in the MuRatopian economy which is characterized by the de-centralized, privately possessed economic system with democracy and individual freedom. Therefore, we would not be afraid of saying that the MuRatopian economy is also a better system than planned socialism in the sense that exploitation and unfair income distribution are eliminated without suppressing democracy and individual freedom. In fact, direct democracy and individual freedom, supported by fair income distribution, will be much further enhanced in the MuRatopian economy.

Recession, Inflation and Stagflation

Contrary to the Walrasian orthodox belief, we have shown in Theorem 6.2 that there is no way to exclude the possibility of long run disequilibria in a capitalist economy, even under the strong assumption of Say's law. Though a perfect foresight, naturally balanced growth path (A Golden Age) may be possible, its existence would occur only by chance (Theorem 6.4). On the contrary, we have shown in Theorem 9.5 that there exists a long run equilibrium in the MuRatopian economy. Therefore, the possibility of consistent recession will be entirely excluded in principle from the MuRatopian economy, though there might exist temporary disequilibria in the commodity markets. However, such temporary disequilibria will never trigger unemployment as in the capitalist economy. In addition, if we keep the income rate constant, no inflation will arise in the MuRatopian economy (Corollary (9.5)). Consequently, stagflation will also not appear in the economy. We would say, therefore, that the MuRatopian economy is a truly ideal economy, free from any awful capitalist epidemic such as unemployment, recession, inflation, and stagflation.

Financial Tycoons

It goes without saying, contrary to general belief, that the modern capitalist and world economies are well controlled, not by the industrialists, but by the financial tycoons through huge financial capital markets, and our economies are moving toward whatever direction they wish. Moreover, the existence of financial capital markets themselves is nothing but a waste of resources in double senses. First, under a capitalist system, some amount of the profits realized by producers have to be distributed among shareholders as dividends without any counter exchanges, and as a result producers have to siphon them back again by issuing new shares or borrowing with claims whenever new investments have to be financed. Second, ownership itself (represented by the shares) is exchanged everyday in search for capital gain or negative loss - a ridiculously endless repetition of zero-sum games from the point of view of the national economy.

In the MuRatopian economy, such waste occurring from financial markets will be eliminated. Savings will be directly used for investments and, by Principle 3, exchanges of possession will not yield any economic benefits. Eventually, financial tycoons will be eliminated together with financial capital markets. It does not mean, however, that financial institutions and financial markets do not exist in the MuRatopian economy. In fact, they do, because the necessity to channel inside money such as loans and debts would surely arise in the economy. But financial markets arising from those necessities are very different from the capitalist financial markets. Interest rates would be set only equal to the transaction costs incurred by the financial institutions, and co-workers can freely make use of the extra amount of money with virtually interest-free. (We have not developed this subject formally in the MuRatopian model.) Hence, financial transactions in the MuRatopian economy will become very simplified and efficient.

Inhumane Incentives to Technological Innovation

In a capitalist economy technological innovations are usually introduced only when they are expected to help maximize immediate profit or minimize cost, and humane and environmental aspects of the effect of these innovations are seldom taken seriously. Accordingly, first of all, many workers have been victimized at their workplaces where these new innovations were first introduced, because enough care has seldom been taken to prevent probable accidents under the capitalist pressure of cost-minimizing optimization. Second, many consumers have been victimized as well, because enough time has seldom been expended to insure safety, and the expenditure on safety itself has been short-cut to maximize immediate profit. Under such circumstances, consumer sovereignty has become a myth in reality, only existing in the Walrasian textbook. Third, many kinds of pollutants have been dumped on the living habitats, or scattered in the air, free of charge, because no markets have been created for such pollutants - the markets which demand extra costs for environment-protective investments. In this way, the incentive to technological innovation has become anti-humane and anti-environmental in a capitalist economy. In short, new technological innovations have been introduced as a means of exploitation. Even worse, conscientious managers themselves cannot stop such inhumane activities within a capitalist system, simply because such conscientious behavior implies poor performance in terms of immediate profit and eventually results in a loss of their own jobs. In this sense, managers (and capitalists themselves as consumers) can also be said to be victims of the capitalist system itself.

In the MuRatopian economy, the inhumane use of technological innovations will be wholy reversed. First, co-workers will object to the introduction of any inhumane and pollution-causing technological innovations into their workplaces, because their workplaces are part of their niches and habitats, and no co-workers are powerless to stop them, compared with the powerlessness of workers in a capitalist economy. Second, since they are all pursuing their own welfare based on consumption goods, instead of being forced to seek profit by the system, they will become more conscious of the safety of their own workplace and their product. Third, they will gradually realize a holistic relation between their lives and environment, and try to prevent any technological innovations which may destroy their environment. In this way, technological innovations will surely be oriented towards the welfare of human beings. Since commodity markets are still competitive in search for higher income rates, incentives to technological innovation will never cease in the MuRatopian economy. This vividly contrasts with a centrally planned economy which lacks such an incentive.

(Based on Chapter 10, Beyond Walras, Keynes and Marx, Peter Lang Publishing, 1988.)