14 November 2010

Consumption in production, and production in consumption

Property is not about the ability to consume, property is about the prohibition to consume. Property is about the management of surplus. The question is how does surplus translate into savings and investment, and what do you do with the surplus that goes beyond the ability to invest? 
The production side is not about consumption, it's about investment. The market model defines individuals as consumers, and corporations as producers. That model fails to recognize the family as the fundamental productive unit on the 'consumption' side, and it abstracts from the impulse to consume while in the guise of production so it posits all consumption on the production side, defined by technology, as inputs to the production function. In a perfectly competitive market, all that consumption on the production side would be auctioned away. 
The process of cashing out is the translation of investment back into consumption. Once the surplus becomes sufficiently large it becomes rational for decision-makers to spend their energy cashing out rather than striving to open new markets. It's the foundation of the business cycle. At the peak of the boom it becomes almost impossible, within the relevant time frame, to keep on growing but it becomes easy to cash out. The trade-off between growth and cashing out is at the bottom of the true Keynesian model which explains not just the persistence of booms and busts but also the mechanisms of boom and bust in the first place. 
The proper mode for the transmission of surplus is not trade, but tradition. When tradition is stopped by the accumulation of private property it brings a curse down onto the system. 

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