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C00002 00002	SOME ECONOMIC PROPOSITIONS
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SOME ECONOMIC PROPOSITIONS


	1.  In 1973  the U.S.  economy  is growing  very  fast as  it
should.     This   produces  spot  shortages,   because  the   economic
servo-mechanism  by  which  shortages   raise  prices  which   raises
production operates with time constants that depend on the technology
of  the  particular  industries, on  construction  lags,  and  on the
economic situation of industries related to the given one through the
Leontiev matrix.  This  can be relieved by good predictions of future
demand. 

	2. There  is  a  certain  parallelism  between  planning  and
prediction.  Namely, a good economic plan  will make many of the same
decisions  that would be  made by  individual producers if  they knew
future  demand   curves.     There   probably  are   some   important
discrepancies, however. 

	3.  There  ought to  be  a  social  contract that  tells  the
relative  rewards of different  occupations.  This  contract would be
subject to  change by politics  and other  power struggles but  would
reduce the  amount of conflict.   This is  because economic struggles
are needed at present even to maintain a group's present share of  the
GNP.   It  could  be  accomplished  with a  universal  cost-of-living
adjustment  to  salaries with  a  variable deflator  to  adjust total
demand to total supply.  A corresponding regulator on  the price side
should also  exist, but it  should be  less rigorous, because  of the
greater  differentiation of  products makes rigid  rules difficult to
define properly.

	If each teacher or automobile worker received a fixed share
of the per capita personal income, their struggles over income could
be less frequent.  Perhaps this wouldn't suit their union leaders, but
if more frequent struggles were wanted, they could be over non-economic
issues such as discipline.

	4.  Perhaps  there  ought  to  be  futures  markets  in  more
commodities and in labor, i.e.  in such a market one would be able to
buy or sell a man-hour of plumbing in 1976. 

	5. The stock, commodity, and  real estate brokers can be  and
should be substantially wiped out by  a uniform computerized property
exchange  that  everyone could  join  for a  $25  initiation  fee and
charges for keeping track of transactions.  Workers have had to worry
about  technological unemployment  for many  years.   Now let it be  the
brokers' turn. 

	6.    All    technological   improvements    should   produce
unemployment; otherwise they aren't worth making.  Full employment is
and should  be assured by a  general economic servomechanism.   If we
understood this mechanism better, it would work better.

	Perhaps,  a
first step is  to provide the  government with more  precise controls
than  just  controlling  the interest  rate  and  money supply.    One
candidate is government purchase  and sale of other commodities  than
agricultural in order  to buffer markets.  Of course,  there is a lot
of  complaint  about how  this  has  worked out  in  agriculture, but
perhaps the troubles stem from political determination of prices paid
in  particular years and  also because weather  fluctuation generates
more instability  in  agricultural  supply  than  would  be  affected
elsewhere in the economy.  Perhaps there should  be a rigid rule that
the any  government stocks would be reduced to  a fixed level, e.g. a
six months supply within  say three years and  would be bought up  to
that  level  in  order to  have  a  supply.    This number  would  be
predictable  in  general but  all  these  numbers would  be  moved in
parallel in order to have a gross economic effect. 

	I am much less confident than when I first wrote the above,
that the government would do a good job.

	5.  Suppose some  organization  introduced  the credit  as  a
pseudo-monetary unit.  A  credit consists of a fixed physical mixture
of commodities, e. g. 5 pounds of steel + 2 gallons of regular gas  +
1 bushel of wheat +  one haircut in Denver.  They  would buy and sell
credits at current  prices for the commodities involved.  Some people
might find it worthwhile to make loans in credits and charge interest
in credits.  Thus credits would be an inflation proof currency.  This
would  cause a desire to  bargain for wages expressed  in credits.  I
suppose it's a bad idea. 

	6. Occupations  can be  divided into two  categories -  those
that produce a storable product  and those that don't.  If the demand
for a  non-storable  service  is miscalculated,  there  is  either  a
shortage or  an unsalable  service while  a storable  product can  be
stockpiled  if  there is  an  excess  of capacity.    Apart  from the
incentive mechanism to achieve it, it seems moderately clear that the
production  rates  of storable  products  should  not be  allowed  to
fluctuate  rapidly.   They  only need  to be  servoed enough  so that
stocks  don't get  out  of  hand.   If  10  percent  inefficiency  is
tolerable,  then  accumulating   a  year's  supply  of  something  is
tolerable.  While a service  doesn't have a storable  product, delays
in obtaining the service are often tolerable.   For example, there is
ordinarily a delay in obtaining a dentist's appointment. 

	7. The oil  problem is interesting from the economic point of
view.  There is a large  supply of cheaply produced oil in the  U.S.,
but the  demand exceeds this  supply, and foreign oil  is expensive. 
Maintaining  two prices is  an unstable situation,  since people will
find ways of hoarding  the cheap oil.   If people are to  have proper
incentive  to save  oil,  they should  pay  for marginal  oil at  the
marginal price.  Likewise producers should receive the marginal price
for marginal oil they  produce or import.  Assuming  there aren't too
many producers  and their previous productions  are known, once could
assign each producer  a quota  of oil that  he must sell  at the  old
price.  Above that he can charge the marginal price.  The consumption
problem  is harder.  If the users  are charged an average price, they
haven't enough  incentive  to save  oil.   However,  an  individual's
normal usage of oil is hard to determine and subject to finagling.  A
good system might  be to  charge each  user the  marginal price,  but
allow users to apply for subsidies based on factors in their previous
lives  that caused them to  consume much oil.   These factors include
large poorly  insulated houses,  living a  long  distance from  work,
having to chauffeur children, having a  second house or a boat a long
distance  from home, etc.  Each of  these subsidies should decay with
time, perhaps rates  varying according to how  long it would take  to
change  the situation impelling  the subsidy.   Chauffering  and boat
subsidies  would  decline  rapidly,  subsidies  for  uninsulated  but
insulatable houses would decline slower, a subsidy  based on an owned
house would decline slower than one based on a rented house, etc.