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Commons Futurity pg.526-528

Commons Futurity VII. The Margin for Profit pg 526-528  In this section, Commons turns to thinking about a specific aspect of modern banker capitalism addressing the question of profit's role in the economy. He starts with some terminology regarding profit share - the share of national income that goes to profit earners and the profit margin - the dynamic aspect that drives a going concern forward. We then move into another set of terms that are rate of profit and profit yield.  The rate of profit is related to the par value of stock and yield is related to market value of stock or outstanding equity. The social question to Commons is what the role of profit in keeping the overall economy and does society or community pay too much or too little for this service. Economists have long thought about the role of profits in driving the economy up or down.  Commons believes there are profit share theories and profit margin theories as two diction categories in economic thinking...
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Commons Futurity pg. 510-526 VI. The Transactional System of Money and Value

VI. The Transactional System of Money and Value  The overall objective of this section is to understand money and its role and relationship to economic value in the institutional economics of John R. Commons. Commons writes that, "It is because Value is a two-dimensional concept (omitting futurity)—with two different causations, the one being the scarcity-value, or price, determined by supply and demand, the other being the greater or smaller output of use-value which will be created in the labor process that follows the transaction. " (Commons, pg. 517, 1934). The point here is again Commons is fighting against what he observes are the limits of other definitions of economic value such as simply individual utility or the classical case of exchange value only.   In this section, Commons make an important move on pages 520 and 521. He states that for a thing to be objective it needs to be independent of any objective will as opposed to other competing definitions. He will ...

Common's Futurity pg. 506-510

 V. Interest and Profit Discount This section starts with a well known adage, likely as well known today as hundred years ago, that risk and uncertainty drive a discounting of the future as compared to the present. Interest rates then a re a measure of that future risk but leading to a specific discount factor today. Commons gives the example of a laborer who is in essence also a creditor to a business or any going concern. The laborer is paid in arrears, but in the meantime is working and creating use value for the employer. A business is also doing the same thing on the commodity and debt markets. A business may borrow a certain amount form a bank promising to repay them in a short period of time.  The business will factor in repaying the loan and also generating a profit, in essence a interest and profit discount of what they are paying for materials and labor today for use value tomorrow. The business may turn out to right or wrong but this is their best forecast at the mo...

Common's Futurity pg. 500-506

 3. Scarcity of Waiting pg. 500-506 Gustav Cassel was a Swedish economist who was alive from 1866 to 1945 so roughly the same time as John R. Commons. commons felt that Cassel was important in understanding interest and waiting.  The key theme was that interest is the price of waiting.   However, from this starting point there are some important differences that matter in what context this waiting occurs. Here again we see Commons surveying and thinking about how economists have written about this issue of interest and waiting. Cassel has criticized how others have thought about interest and waiting as if it was in isolation. in fact for Cassel and Commons in turn, interest and waiting are in fact allowing others to consume or invest. In this sense, two activities are occurring at the same time. It is also important to note that those who save and those who invest are both waiting. The saver has incorporeal property in that debt is issued with their savings and they ...

Commons Futurity pg. 487-500

  IV. Scarcity of Debt and section 2. Capital and Capitals In this section, Commons starts with a discussion of Anne Robert Jacques Turgot. Turgot was the foremost of the physiocratic economics in France in the 18th century.   Importantly, Turgot unraveled the issue of what was “interest”. It was not the “price of money” but rather it was “the price given for the use of a certain quantity of value for a certain time,” (Commons, 1934, pg. 487).  Commons then turns to the idea that capital yield is a key concept.  The yield is how income in money terms is produced by any asset. The Price paid for that assert is a numerical ratio over and above the regular monetary income produced by the capital asset. This price will vary according to demand and supply. It is important to note here that it is unclear whether Commons believes this statement or is ascribing this view to others. Turgot then moved forward with some important conceptions that predate Macleod.  He talke...

Commons Futurity pg. 483-486

 Today, we move on to section IV of the Futurity chapter  and the scarcity of debt. IV. Scarcity of Debt and 1. Scarcity of metallic money Commons starts this section with a discussion of Dave Hume and how he helped divide economics between commodity economists and monetary economists. Hume made a distinction between the stability of the metallic money supply and the change in the money supply.  However, economists did not have the tools to deal with this issue. They transferred labor as in the labor theory of value for their measure of economic value. This was a major problem as it mistook efficiency for scarcity. Hume was actually arguing to address the issue of mercantilism and the idea that a country could only succeed by hoarding gold and silver. Hume disagreed with this analysis and wanted to show why it was wrong. The ultimate concluding aprt of this section is that Hume’s argument, ultimately led to a very long 19th century debate between economists over whether m...

Commons Futurity pg. 472-483

  Here we start with section III, the creation of debt. The focus of Commons turns to Ralph Hawtrey’s thinking in 1919 and understanding the relationship between debts and commodities. Hawtrey was a British civil servant and monetary theorist who lived from 1879-1975. Hawtrtey wrote that money like all creations of human beings serves as a purpose, which may change over time but is artificial and not natural phenomena.  For Hawtrey as with Commons, the purpose of money is not as a store of value but rather as a measure of debt release in an unequal transaction. Critically, a debt is a portion of wealth that is owed to another in exchange for a promise or obligation.  Money is simply the measure we use to account for a transfer of wealth from one person to another to release the debt. Common writes that for Hawtrey, the economy is a system to produce and deliver wealth to another in the exchange process. This is a very different starting point from the individual liberty o...