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<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0 height="100%"><tr> <td valign="top" width=200 BGCOLOR="#FFFFFF" TEXT="#080000"> <bR> </td> <td valign="top" BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <FONT SIZE="5" COLOR="#000000" FACE="Arial" ><B>Concordian economics</B></FONT>     |     <A HREF="index.htm" TARGET="_top" TITLE="Concordian economics"><U>home</U></A></div> <div> <B>Papers</B><B>   |   </B><A HREF="id19.htm" TARGET="_top" TITLE="Chapters"><U>Chapters</U></A><B>   |   </B><A HREF="id24.htm" TARGET="_top" TITLE="Books"><U>Books</U></A><B>   |   </B><A HREF="id18.htm" TARGET="_top" TITLE="Endorsements"><U>Endorsements</U></A><B>   |   </B><A HREF="id20.htm" TARGET="_top" TITLE="Bulletin Board"><U>Bulletin Board</U></A><B>   |   </B><A HREF="id21.htm" TARGET="_top" TITLE="Related Links"><U>Related Links</U></A><B>   |   </B><A HREF="id22.htm" TARGET="_top" TITLE="Contact Us"><U>Contact Us</U></A><B>   |   </B><A HREF="id17.htm" TARGET="_top" TITLE="Meet the Founder"><U>Meet the Founder</U></A></div> <div> Papers</div> <bR> <div> <A HREF="#the_revised_keynes__model" TITLE="Papers"><U>The Revised Keynes' Model</U></A></div> <div> <A HREF="#concordian_economics" TITLE="Papers"><U>Concordian economics: Tools to Return Relevance to Econmics</U></A></div> <div> <A HREF="#economics_for_physicists_and_ecologists" TITLE="Papers"><U>Econmics for Phycists and Ecologists</U></A></div> <div> <A HREF="#on_the_transformation_of_the__dismal" TITLE="Papers"><U>On the transformation of the “disma</U></A>l <A HREF="#on_the_transformation_of_the__dismal" TITLE="Papers"><U>science” of economics into The Economics of JUBILATION</U></A></div> <div> <A HREF="#hoarding_and_most_economists" TITLE="Papers"><U>Hoarding and Most Economists</U></A></div> <div> <A HREF="#non_newtonian_economics" TITLE="Papers"><U>Non-Newtonian Economics</U></A></div> <div> <A HREF="#bold_new_directions_in_politics_and" TITLE="Papers"><U>Bold New Directions in Politics and Economics</U></A></div> <div> <A HREF="#four_economic_rights" TITLE="Papers"><U>Four Economic Rights</U></A></div> <div> <A HREF="#toward_the_definition_of_economic_rights" TITLE="Papers"><U>Toward the Definition of Economic Rights</U></A></div> <div> <A HREF="#the_productivity_standard_a_true" TITLE="Papers"><U>The Productivity Standard A True Golden Standard</U></A></div> <div> <A HREF="#the_creators_of_poverty" TITLE="Papers"><U>The Creators of Poverty</U></A></div> <div> <A HREF="#fisheries_renewal" TITLE="Papers"><U>Fisheries Renewal</U></A></div> <div> <A HREF="#bottom_up_monetary_policy" TITLE="Papers"><U>Bottom-up Monetary Policy</U></A></div> <div> <A HREF="#in_defense_of_alma_mater" TITLE="Papers"><U>In Defense of Alma Mater</U></A></div> <div> <A HREF="#just_compensation" TITLE="Papers"><U>Just Compensation</U></A></div> <bR> <bR> <bR> <bR> <bR> <bR> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div>  <A NAME="the_revised_keynes__model"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>The Revised Keynes' Model* (an Abstract)</div> <bR> <div> <I>Atlantic Economic Journal,</I> Sept. 1982, 10 (3) 52.</div> <div> The original publication is available at www.springerlink.com</div> <bR> <div> Carmine Gorga</div> <bR> <bR> <bR> <div> The current crisis in economic affairs must be due to many </div> <div> factors.  But in a fundamental sense it is due to structural and </div> <div> conceptual weaknesses contained in Keynes' model of the economic </div> <div> system.</div> <div>      </div> <div> The proposition that S = I is not an equivalence, as it must </div> <div> for it to be formally valid.** The terms are neither reflexive nor </div> <div> symmetric nor transitive.</div> <div>      </div> <div> Saving has the potential of assuming 100,000 meanings.  And, </div> <div> by necessity, so does Investment. Consumption means spending; but </div> <div> in contemporary economics this meaning is arbitrarily cut off at </div> <div> spending on consumer goods.  </div> <div>      </div> <div> Keynes' model must be revised.</div> <div>      </div> <div> Manipulating the original model, one obtains:</div> <bR> <div>                   Income = Saving + Consumption        (1)</div> <div>             Investment = Income - Saving                    (2)</div> <div>             Investment = Consumption.                        (3)</div> <div>      </div> <div> The meaning of terms is different in this model.  SAVING </div> <div> means all nonproductive wealth.  This term becomes clearer if it </div> <div> is substituted with the word "<FONT SIZE="4" COLOR="#111111" FACE="Arial" >Hoarding</FONT>." *** INVESTMENT means all </div> <div> productive wealth.  And CONSUMPTION means any expenditure of </div> <div> money (or other wealth).</div> <div>      </div> <div> The relationship between Saving (or better, Hoarding) and </div> <div> Investment is changed from equality to complementarity (originally </div> <div> erroneously identified as inverse proportionality).</div> <div>      </div> <div> Equation (3) becomes a formally valid equivalence by inserting </div> <div> in it the theory of Distribution, and substituting the word Investment </div> <div> with its old meaning of Production.  One thus obtains:</div> <div>             Production = Distribution = Consumption. ****</div> <bR> <bR> <div> NOTES (Not in original publication)</div> <bR> <div> * Copyrighted 1979, 2002</div> <bR> <div> ** Using the looking glass of S = I, unable to distinguish saving from investment,</div> <div> the economics profession has fallen through the rabbit hole of</div> <div> “Adam Smith’s Fallacy.” This is the assumption that private greed turns</div> <div> out to be public good. This is a world in which—as today’s events confirm</div> <div> and Keynes pointed out—“nothing is clear and everything is possible.”</div> <bR> <div> *** Through the looking glass of hoarding, the world looks totally different.</div> <div> Strangely, later, to my unending surprise I had to discover that that is the lens</div> <div> constantly used from Moses, through Jesus of the Parable of the Talents, to</div> <div> Locke. Adam Smith offered a discontinuity in this millennial tradition.</div> <bR> <div> **** In new notation, this equivalence reads: </div> <div>                     Production <IMG SRC="097190d0.png" border=0 width="25" height="13" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> Distribution <IMG SRC="099190d0.png" border=0 width="25" height="13" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> Consumption.</div> <div>                     Graphically, this equivalence can be repreresented as:</div> <bR> <div> <IMG SRC="09afb7c0.png" border=0 width="507" height="380" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div>                           </div> <bR> <div> For detailed analyses, see <FONT SIZE="4" COLOR="#191919" FACE="ChronicleTextG1-Italic" ><I>The Economic Process: An Instantaneous Non-</I></FONT></div> <div> <I>Newtonian Picture </I><FONT SIZE="4" COLOR="#191919" FACE="ChronicleTextG1-Roman" >(University Press of America, 2002) and </FONT><I>The Economics</I></div> <div> <I>of Jubilation: Blinking Adam’s Fallacy Away </I><FONT SIZE="4" COLOR="#191919" FACE="ChronicleTextG1-Roman" >(forthcoming).</FONT></div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U><B>top</B></U></A></div> <bR> <div> <B> <A NAME="concordian_economics"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><B>Concordian Economics</B></div> <div> <B>Tools to Return Relevance to Economics</B></div> <bR> <div> Reprinted with permission from <A HREF="http://www.springerlink.com/content/1w885686112kt7r7/" TARGET="_top" TITLE="http://www.springerlink.com/content/1w88"><U><I>Forum for Social Economics</I></U></A> (<FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://dx.doi.org/10.1007/s12143-008-9017-6" TARGET="_top" TITLE="http://dx.doi.org/10.1007/s12143-008-901"><U>http://dx.doi.org/10.1007/s12143-008-9017-6</U></A></FONT>), May 2008. The original publication is available at http://www.springerlink.com/content/1w885686112kt7r7/. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> By Carmine Gorga*</div> <bR> <bR> <div> <B>Abstract    </B><FONT SIZE="4" COLOR="#000000" FACE="Arial" >With the help of planes and solids, this paper presents an enlargement of the field of observation of economic theory. Through this transformation, the distribution of ownership rights to money and wealth assumes a central position in economic analysis. Thus social relevance is returned to economics. The validity of this operation is confirmed by the return of the millenarian field of economic justice to its traditional function as guidance to economic policy. The paper then presents four sets of economic rights and responsibilities that offer the potential of translating principles of economic justice into the complexities of the modern world. </FONT></div> <bR> <bR> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="Arial" ><B>Keywords </B></FONT><B>  </B>economic theory, economic policy, economic practice, economic justice, economic rights and economic responsibilities, social relevance.</div> <bR> <bR> <bR> <div> * Carmine Gorga is a former Fulbright scholar and the recipient of a Council of Europe Scholarship for his dissertation on “The Political Thought of Louis D. Brandeis.” Dr. Gorga has transformed the linear world of economic theory into a relational discipline in which everything is related to everything else-internally as well as externally. He was assisted in this endeavor by many people, notably for twenty-seven years by Professor Franco Modigliani, a Nobel laureate in economics from MIT. The resulting work, <I>The Economic Process: An Instantaneous Non-Newtonian Picture,</I> was published in 2002. During the last few years, Mr. Gorga has<I> </I>concentrated his attention on the requirements for the unification of economic theory and policy. For details, see www.carmine-gorga.us" <FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://" TARGET="_top" TITLE="http://"><U>www.carmine-gorga.us</U></A></FONT>.</div> <bR> <bR> <div> As problems of human and natural ecology mount up, there is growing in mainstream economics the conception of economics for economics sake. The tendency is to see economics as an autonomous discipline isolated from other sciences, and yet dominating all other social sciences. No matter what concerned people within and without the economics profession maintain, the tendency is to neglect those concerns because mainstream economics has an unstoppable inner force of its own that makes it impossible to change course. This paper assumes that this tendency is due not to the will of any individual economist but to the sheer power of their tools of economic analysis. The action is involuntary. The process is mechanical (<I>cf</I> <I>PAER</I>).</div> <bR> <div> The process is not without consequences. Economic theory has lost control of itself. Perhaps no one has made the case stronger than Alan Blinder (1999), who has said: "...too much of what young scholars write these days is 'theoretical drivel, mathematically elegant but not about anything real.'" As a direct consequence, economic theory has become splintered into various schools, which vie for their own preferred policies. Because of the current disarray, monetary policy has largely been left to the bankers; fiscal policy to the politicians; and hardly anyone speaks of labor or land or industrial policy any longer. In a word, by becoming detached from <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link13"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>reality, both economic theory and policy risk becoming socially ineffective-which does not mean that economic practices are not causing social consequences of their own. </div> <bR> <div> This paper offers a set of new tools that is capable of changing this course of action. Through these tools social relevance reveals itself as an integral part of the constitution of economic theory, policy, and practice. To be specified at the outset, the new tools do not reject but incorporate the old tools of analysis. Using planes and solids in space, in addition to points and lines, economic theory automatically encompasses a larger social reality and returns to the fold of socially relevant sciences with authority to suggest desirable policies and practices. </div> <bR> <div> While the proposed tools in economic theory are the result of forty years of analysis published in Gorga (1982, 2002), desirable policies and practices are distilled from a program of action presented in Gorga (1959, 1964, 1987, 1991a, 1994, 1997, 1999, 2002, and 2007). More extensive treatments can be found in the writings of Benjamin Franklin, Henry George, Louis D. Brandeis, and Louis O. Kelso-with their works, necessarily all their works, read in rapid succession and not any of them as a stand-alone effort. Standing alone, these works are open to debilitating objections. Together, they become an impregnable fortress.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>TOOLS TO CONTROL ECONOMIC THEORY</B></div> <bR> <div> Mainstream economic theory is an impressive intellectual construction with its own internal logic. Its structure is a bastion impervious to any external influence; it has become a mathematical science, and as such it is autonomous of any influence that does not enter into its logical structure. The intellectual apparatus of mainstream economic theory, once deconstructed, revolves around the following tool kit, which we propose to preserve and to build upon.</div> <bR> <div>      </div> <DIV ALIGN="LEFT"></DIV> <div> <B>Existing Tool Kit</B></div> <bR> <div> As everyone knows, economics is built on the theory of supply and demand. The demand of most everything increases as its price decreases; and the supply of everything increases as its price increases. This is the bare structure of most theories in economics, from the theory of growth to the theory of money. To appreciate the full force of this method of analysis one needs to realize that the lines of supply and demand represent sets of numbers-in turn derived from functions of two variables, prices and costs-and then one must see those schedules in movement. As they move up or down, right or left, they meet each other at different points on the Cartesian grid and determine a specific equilibrium of prices and quantities offered and accepted of any item of wealth in the market, from bread to gold. The basic characteristics of this framework of analysis become evident upon reflection. The focus of attention is on the market exchange; all that goes on before or after the exchange lies outside the purview of the analyst. The mainstream economist qua economist can only analyze, forecast, and report on present or likely future tendencies toward equilibrium of items of wealth that are offered in the market in exchange for other items of wealth, be they currency or pet rocks. The consequences that follow from market exchanges lie mostly outside the purview this framework of analysis. Is the production of items being exchanged in the market causing physical damage, or moral depravation?  Is the distribution of ownership rights over items being exchanged causing a concentration of wealth into too few hands? Is the consumption of items being exchanged causing ecological disaster? These are all familiar questions that are at the heart of the economist's concern. Yet, they can at best be acknowledged by the economist, but they will unavoidably be dismissed as belonging to other fields of analysis such as politics, ecology, morality, and the law, fields that lie outside the expertise and control of the economist. </div> <bR> <div> The analysis becomes more complex daily by the sheer weight of accumulated data; hence equations multiply, econometric applications become more sophisticated, and theorems concerning the characteristics of economic relationships become more and more subtle; indeed, there now seems to be a model for every economic activity-and, lately, for many non-economic activities as well; and if the information is missing or it does not quite fit the case, there is the stand-by option of “as if” assumptions. Impressive as these techniques are, beyond all refinements in the state of the art of mainstream economic analysis, most economists admit to its basic limitations; not only that, they also admit that economic theory has been in a state of crisis at least since the publication of Keynes' <I>General Theory</I> in 1936. (What did Keynes say is a question that has plagued the profession ever since.) Three of the most recent recognitions of the crisis span the arc from acknowledgment of the limits of mainstream economics (Mankiw 2006) to criticism about the relevance of mainstream economic theory (Manicas 2007) to the belief that economic theory has improved and that it is expected to improve over time (Warsh 2006).</div> <bR> <div> As the history of minor and major theoretical revolutions and counterrevolutions proves, economists are ready to try nearly any stop-gap measure to resolve the crisis-provided the proposed measure does not affect the structure of the theory. This position is non-negotiable; and it is not the purpose of this paper to negotiate it. What is presented for discussion is a far simpler proposition: if we want more comprehensive and more accurate results, we need different tools of analysis. In addition to points and lines, we shall be using planes and solids in space: at first, only rectangles and spheres.</div> <bR> <div> The consequences of this transformation are far-reaching. Rather than attempting to create an improved mainstream theory, we shall incorporate its vital and functioning core into a new framework of analysis which, for a number of consilient reasons, this writer likes to call Concordian economics: as we will see below, the structure makes room for the perspective of each one of the various schools dominating today's economic analysis; it opens its doors to inputs from various other intellectual disciplines; and it extends itself in a seamless web to cover economic policies and economic practices. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>New Tools in Economic Theory</B></div> <bR> <div> Through laborious logico-mathematical steps (Gorga 2002: 41-158), <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link3_1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>one obtains a restructure of mainstream economic theory (Gorga 1982) and its gradual transformation into Concordian economics. While the book presents a description of that transformation with its resultant new mathematical models (Gorga 2002: 25, 38, 71, 74-6, 121-25, 129-37, 153-58, 168-70, 264, 303-20), the present paper reproduces the core of that ground with primary assistance from geometry; thereafter, it extends the analysis to cover economic policy as well as economic practices for implementation of selected economic policies. </div> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link17"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>The key results of Concordian economic analysis are these. In order to eliminate a set of innate logical contradictions at the very foundation of economic analysis, the nexus between saving and investment is broken and it is replaced by the complementary relation between Investment defined as all productive wealth and Saving defined as all nonproductive wealth-a term that is better replaced with Hoarding.1 The analysis starts anew on the basis of the proposition that Investment is Income minus Hoarding. Furthermore, since money and financial instruments are not wealth, but only represent wealth, in macro, as distinguished from microeconomics, one cannot add money to real wealth.2 The two entities have to be kept separate. And then the question arises: What is the relationship between the two? From Aristotle to the Doctors of the Church there was no doubt as to the answer to this question. During this long stretch of time, much economic analysis was built on the equivalence of money and goods in the exchange. It was the distinction between the two and their linkage in the relation of equivalence that provided the objective base for the determination of conditions of justice in the exchange of wealth. If we accept this answer, to satisfy well-known requirements of the principle of equivalence, we search for a third element to link monetary and real wealth together and we find it in the set of rules and regulations that in every society governs the distribution of ownership rights over real and monetary wealth-and we do not stray away from pure economic theory, because we are presented with the monetary value of those rights. The following diagram (Gorga 2002: 36, 163, 314) incorporates these results; it represents the integration of these values on one plane, in this fashion: </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="05d0b9d0.png" border=0 width="267" height="157" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <div> <I>Figure</I> 1. The Economic Process</div> <bR> <div> In this figure, the values of “production”, namely the values of all real wealth produced over a specified unit of time are assembled into one category of thought that is recognized as aggregate supply. (It is to be noticed that this unit is “pure” because it contains only stocks of real wealth and no monetary wealth. It is also to be noted that in a more complete treatment this value ought to be observed from the point of view of demand as well as supply: thus we ought to have an analysis of the demand and supply of the production of all real wealth.) We follow the same procedure for the values of monetary wealth, thus firmly separating real wealth from monetary wealth, and we call the result “consumption” or aggregate demand. (Ditto for the treatment of all monetary values, which here are not observed from the point of view of supply: The question of the quantity of monetary values created lies outside the scope of this presentation.) We finally repeat the procedure for the aggregate values of ownership rights over real and monetary wealth, and we call the result “distribution” of ownership rights. (At this juncture we assume that the values of ownership rights over real wealth are identical to the values over monetary wealth). In sum, we have enlarged our field of observation from points and lines to planes and interactions among planes; and, rather than leaving the question of the interaction between demand and supply open (cf. Klein 1970: 143), we have continuously specified-and distinguished one from the other-the demand and supply of (a) real goods, (b) monetary instruments, and (c) values of ownership rights over real and monetary wealth.</div> <bR> <div> Figure 1 reads as follows. When real goods and services pass from producers to consumers, monetary instruments of a corresponding value pass from consumers to producers. Then one cycle of the economic process is completed-and it is accompanied by the silent exchange of values of ownership rights over monetary and real wealth. Both money and goods change hands. The unit of account can be the economy of one person, one nation, or the world. In macroeconomics, the exchange occurs neither between two insignificant commodities (<I>cf.</I> Schumpeter 1936) as in microeconomics nor between any two forms of financial instruments as in the economics of Wall Street. In macroeconomics, fully respecting the laws of supply and demand the total production of real wealth is exchanged for the total availability of financial resources-as in Keynes' principle of effective demand (see Brady 1996). Finally, in this figure the exchange visibly occurs under a regimen of social and legal relationships: ownership is apportioned at the moment of creation of wealth; and only owners can legally exchange wealth.</div> <bR> <div> An effective way to analyze the instantaneous relationships captured by Figure 1 is to reduce it all to the economics of only one person. A person who snaps the apple from a tree, vs. gathering seeds, for instance, while respecting as always the rules of supply and demand commits an act of production. This person automatically apportions the ownership of the apple to the self, which means that this person is legally empowered, as it were, to sell the apple to the self. Thereafter, this person is free to eat the apple-or sell it to others. One of the merits of Figure 1 is that it describes the economic process as a whole. Everything is instantaneously related to everything else. Thus we run away from the shattered world of the schools and go back to the world of Classical economists who knew that economics is composed of the integration of Production, Distribution, and Consumption of wealth. This integration can be made more specific by a more extensive and updated reading of the terms, along these lines: The Theory of Production-namely a pure and robust production function-is concerned with the production of real goods and services (as might be studied by Supply-Side economists); the Theory of Distribution is concerned with the distribution of the value of ownership rights over real and monetary wealth (as might be studied by Institutionalists); and the Theory of Consumption is concerned with the consumption-or expenditure-of monetary, <I>i.e.,</I> financial instruments (as might be studied by Demand-Side economists). More importantly, by recognizing that Figure 1 is the flat image of a sphere we bring the mathematics and geometry of economics up to the standards that prevail among modern engineers and scientists (see<I>, e.g.,</I> Thompson 1986: 36), namely:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> Synthetic Model of the Economic System as a Whole</div> <div> (From Gorga 1991b)</div> <bR> <div> p* = fp(p,d,c)</div> <div> d* = fd(p,d,c)</div> <div> c* = fc(p,d,c)</div> <bR> <div> where </div> <div> p* stands for rate of change in total production</div> <div> d* for rate of change in the values of distribution of ownership rights</div> <div> c* for rate of change in total expenditure.</div> <div>  </div> <div> And, most important for our immediate purposes, we can see that the theory of distribution of income and wealth now occupies a very central position in economics. All that relates to the distribution of ownership of income and wealth becomes an immediate and integral concern of economic theory-no longer an afterthought or an issue placed at the margins of economic science. Related issues of social relevance of economics can no longer be shunned aside by the economist on the assumption that they are external to economic theory. These are indeed issues that lie at the very core of economic theory; and one does not stray away from mathematical and quantifiable theory either. What is to be measured and evaluated is the economic value of ownership rights over income and wealth-and the different economic effects of different patterns of distribution of income and wealth. Decisions relative to these issues are taken during the very process of production and exchange of wealth; they are not something to be concerned with only after the more <FONT SIZE="2" COLOR="#000000" FACE="Times New Roman" > <A NAME="ole_link4_1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>impellent problems of production and exchange are resolved, as assumed in Keynesian economics and, mutatis mutandis, in mainstream economics, see<I>, e.g.,</I> Klein ([1947] 1968: 187). The concern about the social relevance of economics-as all Institutionalists have devoutly wished-is now brought within the purview of the economist. </div> <bR> <div> Issues of distribution of economic values of income and wealth are not givens; they lie at the very core of the economic process and are determined by the inner workings of this process. On Mars the situation might be different; on earth, people create not only real or physical wealth-they also assign values to this wealth. Indeed, it is economists (and accountants) who, assisted by the laws of supply and demand, assign these values as best they can. Lawyers only validate these statements by transforming them in negotiable legal instruments that are called ownership rights. These rights might belong to an individual person, to a corporation, or to the state; but they legally belong to someone. And an exchange of real wealth for monetary wealth involves at the same time an exchange of the value of ownership rights over real and monetary wealth. It is thus that, no matter the disclaimer by many economists, economic values are created and are created at the very core of the economic process.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>TOOLS TO CONTROL ECONOMIC POLICY</B></div> <bR> <div> Having discovered that the distribution of ownership rights over income and wealth is an integral part of economic theory, the question becomes: What are the tools to obtain the desired pattern of distribution of income and wealth? This is the eminent question of economic policy. Economic theory tells us that, once this pattern is set, most other questions of economic policy are automatically settled. The answer to the question is well known.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Existing Tool Kit</B></div> <bR> <div> Even though the historic roots of economics lie in moral philosophy, economists have lately assumed that they have nothing to contribute to the discussion concerning the selection of patterns of distribution of income and wealth. They have left the field to lawyers, ethicists, philosophers, sociologists, and political scientists. Mainstream economists believe that they do not have-and, what is more important, they ought not to have-any tools to control the pattern of distribution of income and wealth. Mainstream economists assume that this is a given, namely a determination that is and ought to be left to society as a whole. Economics, as pure science, as an autonomous mathematical science, is supposed to analyze the effects of various societal decisions, but not to intervene in those decisions. It is a direct consequence of this assumption that economic theory is fast becoming socially irrelevant. </div> <bR> <div> Under these conditions, the discussion on economic policy falls into a trap. The discussion becomes the property of various schools of economics, each purporting the benefits of its own dictates and none being able to convince the other schools of the validity of its positions. </div> <bR> <div> We do not need to put a step on this slippery slope. Once it is established that the pattern of distribution of income and wealth is an integral part of economic theory, the analysis is restricted to this question: How can we translate economic theory into economic policy? In the paragraphs below we will offer a set of new/old tools for consideration. This set calls for the construction of the theory of <I>economic</I> justice, and therefore economists will discover that they have much to contribute to it. This is the high road to re-establish social relevance to economics.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Proposed Tools to Control Economic Policy</B></div> <bR> <div> A mere glance at the history of economic thought makes us glean this proposition: The transmission belt that for millennia carried economic theory into economic policy is the doctrine <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link6_1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>of economic justice. While remaining astonishingly constant from Aristotle to the Doctors of the Church (see<I>, e.g.,</I> Wood 2002: 83), this understanding allowed for continuous adaptations to the circumstances of the moment. The doctrine of economic justice was divided into two planks: distributive and commutative justice. Distributive justice guided rules and regulations that govern the division of wealth as it is created; commutative justice guided rules and regulations that govern the transferal of wealth between buyers and sellers at the moment of the exchange. While the Doctors of the Church left much room for discretion in the determination of distributive justice to the parties involved in the economic process, they reached a firm and revolutionary conclusion about the dictates of commutative justice. The commutation of wealth, namely the exchange, occurs in accordance with principles of justice, they discovered, only if it reflects a free market price: a price determined in a market that is not dominated by either governmental or private monopolistic forces (see<I>, e.g.,</I> Schumpeter 1954: 98-99). </div> <bR> <div> While this formula appears simple, it envelops great complexities. With it, the Doctors of the Church unified the social requirements of freedom with those of morality in economics; and it was the exercise of morality that yielded freedom. The application of this formula created the essential conditions for the enterprise system to be as free as it could be at the time.</div> <bR> <div> Over time, this ordered set of priorities was twisted around and its power dissolved. Through insistence on unfettered economic freedom, the unity of freedom and morality-with its inherent social relevance-was shattered and the doctrine of economic justice was lost in the fog of time.</div> <bR> <div> Truth to tell, the dissolution of the doctrine of economic justice was facilitated by the fact that it was never presented with a visible head. People with direct or indirect access to land and natural resources participated in the economic process as a matter of fact through well-established privileges and as a consequence of unspoken sets of rights (indirectly, access to land and natural resources was secured through the commons: for millennia the safety valve to preserve the dignity of the poor). Hence, it never occurred to Aristotle or any of the Doctors of the Church to make explicit the requirements of a third plank that might be called participative justice (Gorga 1999, 2007). For a great variety of reasons, those conditions are no longer in existence. Today, one has to beg in order to participate in the economic process. And if one does not take part in it, one is marginalized; one is shunted to the margins of society. Hence the plank of participative justice, as it is increasingly recognized from many quarters, must be explicitly formulated. When participative justice is added to the other two planks, the doctrine is completed and transformed into the theory of economic justice. Once that is done, one is presented with a framework of analysis that can be represented in this fashion:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="05e0b9d0.png" border=0 width="267" height="157" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> <IMG SRC="05f07120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <DIV ALIGN="LEFT"></DIV> <div> <I>           Figure</I> <I>2</I>. Economic Justice</div> <bR> <div> Figure 2 reads as follows. Participation in the economic process is a matter of justice, because only men and women who participate in the production of wealth are entitled to the distribution of ownership of a share of the wealth created through their participation.3 A just commutation of wealth, a just exchange, is implicit in the very distribution of wealth in accordance with one's participation; but, of course, the principle of commutative justice extends itself to cover the exchange of wealth just created for other wealth existing on the market.  It is in accordance with these objective principles that the pattern of distribution of current income and wealth is and ought to be determined. Economists can render these calculations very precise.</div> <bR> <div> But economists have much broader tasks than these. Figure 2 is a mirror image of Figure 1. If the distribution of ownership rights is an inherent part of the economic process, as we have seen in the previous section, economic justice becomes a natural extension of economic theory. Indeed, one can just as soon separate economic theory from economic justice as one can separate a person from her shadow. (The forced separation of these two entities has ineluctable consequences of its own that ought to be of great interest to the investigative powers of the economist.) Given this condition, a minimum set of questions to be asked by economists in the formulation and evaluation of any economic policy might be: Does the proposed policy favor participation in the creation of wealth? Does it allow for a fair distribution of the wealth thus created? Does it allow for a fair transfer of wealth from one person or group to another? Much could be said on these issues, but since much is already well known, we shall <FONT SIZE="2" COLOR="#000000" FACE="Times New Roman" > <A NAME="ole_link7_1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>shun away from broad and elaborate discussions of these issues.</div> <bR> <div> The wisdom of staying away from broad and elaborate discussions, however, does not necessarily require staying away from the specifics of the case. The specific question is: How can we transfer the principles of economic justice into the complexities of the modern economy?</div> <bR> <div> Needless to say, this is a question that is not formally and comprehensively raised in mainstream theory. This is a question that arises naturally and forcefully within the context of the structure of Concordian economics. </div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>TOOLS TO CONTROL ECONOMIC PRACTICES</B></div> <bR> <div> In the section on economic theory we have seen how does the economic system create wealth, how its value is determined by economists and accountants, and how its value is then transformed in ownership rights by lawyers. In the section on economic policy we have observed how economic justice determines the apportionment of those ownership rights. In this section we shall observe how the economic system operates in practice. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Lack of an Existing Tool Kit</B></div> <bR> <div> “High” mainstream theory is silent on the practices of economics. This neglect is not due to chance; rather, it is due to the assumption that, since economic practices are determined by society at large and are supposedly controlled by allied social disciplines, they lie outside the economist's field of expertise. Indeed, having abandoned the field to lawyers, and ethicists, and philosophers, and sociologists, and political scientists, mainstream economists have become passive takers of a proposition that lies at the very core of the issue. This is the proposition that present ownership rights provide practical rules for the distribution of future ownership rights. The proposition has long legs, because it determines the pattern of future distribution of income and wealth. Economists observe every day the manifold negative consequences of this belief, but feel powerless to even address the issues. This is another juncture at which, by taking themselves out of the discussion, economists are threatening to make economics a socially irrelevant discipline.</div> <bR> <div> To regain their power, economists have only to look at it as an economic, rather than a legal, political, or moral issue. If they do that, they discover that their assumptions are faulty. The error is elementary. The reasoning is circular. In order to enter and to break this circular form of argumentation, namely that present property rights determine future property rights, economists need to remember that property rights are pieces of paper: a piece of paper does not-and cannot-create real wealth. It is not even the <I>exercise</I> of property rights that creates real wealth. Property rights are a bundle of rights that link human beings to things. Their current owners may wish as hard as they can, it is not in the nature of property rights to create wealth.</div> <bR> <div> It is not the use of property rights, but the use of property-namely, <FONT SIZE="2" COLOR="#000000" FACE="Times New Roman" > <A NAME="ole_link19"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>the use of real goods and services-that creates new wealth. The distinction is fundamental. The discussion is shifted away from the abstract legal field on to a concrete field. The discussion is focused on the observation of the economic reality. The use of real goods and services to create new wealth is infused, not by property rights, but by the exercise of economic power. To an economic power corresponds an economic right. As specified below, temporally, logically, economically, and legally, economic rights precede property rights. Economic rights are the generators, the fathers and the mothers, of property rights. The nature of economic rights becomes clear when the two rights, economic rights and property rights, are observed as separate and distinct entities, and then both rights are placed in contraposition with entitlements. The three terms are often used as synonyms. They are not. As specified in Gorga (1999), </div> <bR> <div> First, the content of these three entities is different. The object of property rights are <I>marketable things,</I> tangible or intangible things such as material goods and services. The object of entitlements are <I>human needs, </I>from food to shelter to health. The object of economic rights are <I>economic needs. </I>Second, the legal form of these three entities is different. Property rights are <I>concrete legal</I> titles over existing wealth; economic rights are <I>abstract legal </I>claims over future wealth; and entitlements are <I>moral</I> claims on wealth that legally belong to others. Finally, the quantity that they measure is variable. While both property rights and entitlements relate to existing wealth, and therefore a necessarily finite quantity, economic rights relate to future wealth, an unknown and elastic-if not a potentially infinite-quantity.</div> <bR> <div> Economically, and consequently legally, real wealth is created by the exercise of economic rights-indeed, economic rights and economic responsibilities, as we shall see. Hence economists are fully entitled to extend their competence to the field of economic rights and economic responsibilities. Economists will discover that the field is wholly within their range of expertise and responsibility. At the end of this journey, economists shall be able to offer to lawyers, ethicists, and philosophers, as well as political scientists and politicians, this proposition: Future ownership rights are determined, not by property rights, but by economic rights-indeed, they are determined by economic rights and economic responsibilities. Thus the closed circuit that at present imprisons economic theory, the proposition that property rights beget property rights, is broken. Economists are in charge of economic issues.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>New Tools to Control Economic Practices</B></div> <bR> <div> The transmission belt that carries principles of economic justice into the complexity of modern economic life, and shapes objective guidelines for the formulation and evaluation of just economic policies is the presence of economic rights and economic responsibilities (ERs&ERs), both lodged in the same person at the same time. These two conditions need to be clarified. Economic rights and responsibilities need to be lodged into the same person, otherwise one does not follow an economic discourse in which everything is strictly related to everything else; rather, one follows escapism: if my father, my uncle, or the state is responsible for my welfare, we are lost, as Keynes used to say, “in a haze where nothing is clear and everything is possible” (Keynes 1936: 292). The second condition is equally important. Economic rights are rooted, not in abstract morality, but in our own concrete economic responsibilities (<I>cf.</I> Gorga 1999).  </div> <bR> <div> ERs&ERs come forward in response to the well-known requirements of the factors of production identified by Classical economists as land, capital, and labor-with the addition of a modern distinction between financial and physical capital. Guided by these economic needs, our focus of attention is on the satisfaction of the plank of participative justice; successive iterations that are mostly skipped in this presentation would reveal that the same rights and responsibilities satisfy also the requirements of the planks of distributive justice and commutative justice. A minimal set of economic rights and corresponding responsibilities is as follows: </div> <bR> <div> 1. <I>We all have the right of access to land and natural resources. </I>This is a natural right. It belongs to us just in virtue of our humanness. Land and natural resources are our original commons. They belong to us all. This is an essential right, because without the possibility of exercising it, we are deprived of the possibility of participating in the economic process. And without this participation, we are marginalized; we are made dependent on the good will of others. The most direct way of securing this right in the complexity of the modern world is neither through squatting nor through expropriation; rather, it is through the exercise of <B>the responsibility to pay taxes</B> for the exclusive use of those resources that are under our command-with a corresponding reduction of taxes on buildings and man-made improvements on the land. The exercise of the responsibility to pay taxes on land has a double function: It secures our right to the use of the resources that are under our command and it also makes room for others to access land and natural resources that they need. Land taxation is the economic bridge between hoarding, namely the accumulation of idle land, and the right of access to that land with its natural resources. Paying taxes on the value of land and natural resources gradually encourages dis-hoarding, hence it lowers the price of the land, and correspondingly opens up the resources of that land to all those who need them and can make use of them. Worrisome hoarding is especially that which occurs both downtown and in the belt surrounding major cities and towns. It is to leapfrog over this belt that people go to the suburbs in search for affordable land, thus creating overstretched lines of communication and protection and overlong commuting lines-with consequent waste of fuel that overtaxes <FONT SIZE="2" COLOR="#000000" FACE="Times New Roman" > <A NAME="ole_link12"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>nonrenewable resources, the ozone layer, the pocketbook, and the nervous system. Paying taxes on land value is a most fair form of taxation, because it implies returning to the community part of the value that is created, not by the individual owner, but by the community. Land that sits idle does not produce income, true; yet, it produces capital appreciation over time: Rare is the case of capital loss; and even when that occurs, the relative loss tends to be smaller than the loss on other assets. (To see how this pair of ERs&ERs meets also the requirements of distributive and commutative justice, let us simply consider that, if one avoids taxes, the total tax load is not going to be distributed fairly among the population. And if one avoids taxes, one obtains something-<I>i.e.,</I> private control over a quantity of resources-for which one does not offer proportionate compensation to the rest of the community.)</div> <bR> <div> 2. <I>We all have the right of access to national credit.</I> Since national credit is the power of a nation to create money, and since the value of money is given by the value of wealth left over by past generations and the creativity of every person in a nation, national credit is the last frontier, the last commons. Without access to credit today one is made economically impotent. Worse, since this advantage is granted to the privileged few, it is automatically denied to the majority of the population who are henceforth condemned to pay a higher rate of interest, if they obtain credit at all. Of course, such a loan should be extended only on the basis of <B>the responsibility to repay the loan</B>. And these loans will have a high chance of being repaid because they ought to be issued at cost and issued exclusively to individually owned enterprises, Employee Stock Ownership Plans (ESOPs), and cooperatives, as well as states and municipalities, and issued exclusively for capital formation, namely for the creation of new wealth-not to buy financial paper, consumer goods or goods to be hoarded or to cover administrative expenses of states and municipalities. Capital credit liberates people, while consumer credit enslaves them.</div> <bR> <div> 3. <I>We all have the right to the fruits of our labor</I>. This right should not be limited to the right to obtain only a wage. It should be extended to cover the other major fruit of economic growth over time: capital appreciation-as well as being subject to capital loss, of course. The only justification for reserving capital appreciation for stockholders, the owners of a corporation, and excluding workers from it, can be found in the fact that loans are given only to owners of past wealth (the Catch-22 of today's economic reasoning: “save and invest and you too can become rich”-as if this proposition were either economically feasible or ecologically sustainable.) But from now on this right can be extended to people who do not have prior wealth through the right of access to national credit-especially by legally transforming workers into owners through individually owned enterprises, Employee Stock Ownership Plans (ESOPs), and cooperatives. Of course, this full right should be extended only in correspondence with <B>the responsibility to offer services </B>of value<B> </B>equivalent to projected compensation. And there will be an outpouring of such services because, while in a command and control economy workers are requested to check their brain at the factory gates, in a socially responsible economy-an economy in which rights are exercised on the basis of responsibilities-workers/owners are legally, socially, and psychologically empowered to exercise their brain fully at their work post. </div> <bR> <div> 4. <I>We all have the right to protect our wealth.</I> This right seems to be universally accepted, except in one case that matters most: in the case of the trustification process, the process used especially after the Civil War in the United States to create <FONT SIZE="2" COLOR="#000000" FACE="Arial" ></FONT>corporate trusts and repeated in a hundred subtle variations ever since. (People feel free, not only to acquire shares of the stock of one corporation, but free to use that stock to acquire another whole corporation by all forms of trusts, mergers, and acquisition. The very idea of the corporation, forever a public entity, has thus been privatized and monetized.) There are two ways in which corporations grow: One is through internal growth, and this approach ought to be protected in no uncertain terms; the other is through external purchase and, with limits, this manifestation ought to be prohibited in no uncertain terms. Why? Because this prohibition is the only certain way to protect the wealth of present owners. And if it is assumed that most stockholders of the modern corporation are happy to have their shares bought and sold on the market, it must be granted that growth-by-purchase takes wealth away from workers who have contributed to create that value-and many times, in the trustification process, lose their work site as well. All in the name of efficiency-a misnomer that stands for private financial gain generated at the expense of shifting costs onto the shoulders of the community at large. Of course, this right ought to be purchased only at the cost of <B>the responsibility to respect the wealth of others</B>. These are <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link14"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>two-way streets. We cannot even attempt to restrain the Pac-Man economy, while we use Pac-Man instruments.</div> <bR> <div> These economic rights and responsibilities can be exercised by anyone who does not only want to receive economic justice, but also wants to grant economic justice to others. Indeed, these are the essential conditions for the establishment of economic justice, as well as the establishment of a free enterprise system, in the modern world. As a consequence of the dynamics of the implementation of these four marginal changes in our current practices, economic freedom will be expanded to embrace all who want to subject themselves to the rigors of the economic process-and then the few remaining hard cases can be easily taken care of by charity. No. There is no compulsion in any of the above suggestions. The landowner can pay more taxes and control more land or can escape the tax levy altogether by reducing land ownership to zero; the applicant for a national loan can escape the constraints suggested for access to national credit by tapping into private capital markets; the worker can escape the responsibilities of ownership by vying for a job rather than an equity position; and the owner of physical capital can escape the constraints implicit in the proposed anti-trust policy by remaining below the trigger of an agreed-upon threshold for growth-by-purchase prohibition. This prohibition should apply to the largest corporations first and be gradually expanded to include eventually all except, let us say, corporations engaged in intrastate or regional commerce.</div> <bR> <div> Intellectually, the proposed economic rights and economic responsibilities perform functions outlined in the conception of “general abstract rules” by Hayek (1960: 153), the “original position” by Rawls (1971: 12, 72, 136, 538), the “reverse theory” by Nozick (1974: 238), and the “Principle of Generic Consistency” by Gewirth (1985: 19); practically, they will function as Gladwell's (2000) “tipping points”. Ultimately, it was a poet, Vincent Ferrini (2002), who caught the essence of economic rights and economic responsibilities by identifying their ability to provide “the answers to universal poverty and the anxieties of the affluent.”</div> <bR> <div> Operating as tipping points in our <I>modus</I> <I>vivendi</I>, ERs&ERs will set in motion a process of interdependence that respects the reality of economic affairs, and the reality of human relationships. Recognizing that most people and most businesses always act morally, the increasing number of “bad apples” that at times seem to receive all the attention (and envious support) of a superficial intellectual world will be recognized as dangerous exceptions, perhaps ostracized, but certainly no longer applauded. Once the tendencies of these people are kept in check, all wealth will be distributed, not equally-that is meaningless utopianism-but fairly. The assurance for this result resides in the transformation of the current social contract into a legal contract: when landowners pay their share of land taxes, they will sell their hoards and access to land and natural resources will automatically be opened up for most people; when people will get access to national credit, many will become independent entrepreneurs; when workers are transformed into owners, they will have the legal tools to demand a fair distribution of income; when growth-by-purchase will mostly become a forbidden activity, most corporations and most employee/owners will preserve their independence. These measures, by consistently curbing the excesses of the few for a period of at least ten years, will cumulatively lead to a fair distribution of income and wealth. To reassure ourselves of this outcome, let us comprehensively look at the issues from another point of view. If land owners were to use their possessions of land and natural resources efficiently (with efficiency measured through lower private capitalization and higher effective demand), would there be such wanting in the world? If national credit were made available to all entrepreneurs at cost, would we not translate the immanent reservoir of creative powers into economically profitable ventures? If workers were transformed into worker/owners, would we not increase our extant productive capacity incommensurably? If corporate growth-by-purchase-with accompanying translation of that economic power into corruption of our political system-were curbed, would we not obtain less concentration of economic power into a few hands?</div> <bR> <div> All four ERs&ERs naturally lead to a fairer distribution of income than prevails today. Eventually, with a fair distribution of income and wealth, there will no longer be any need for <FONT SIZE="2" COLOR="#000000" FACE="Arial" ></FONT>redistributive programs, which are an expression of double utopianism (first, people as if living in la-la land are allowed to accumulate much, no matter how; and then they are expected to <FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link9"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>peacefully discharge their ill-gotten wealth). Preserving their current wealth, the rich will grow richer at a steady but slower pace; and the poor will no longer be poor, because they will have all they need. Lacking fuel at both ends, violent oscillations in the business cycle will be abated.</div> <bR> <div> We will thus recover the essential truth of economics. This is the truth that there are two conditions of growth: economic freedom and economic justice, as concrete expressions of freedom and morality. Both are essential. The relationship between the two is quite clear: While freedom does not necessarily bring justice with it, justice unavoidably brings freedom. One can abuse freedom by denying freedom to others, one can never abuse justice. Hence, the initial condition of freedom for all is proof positive of the existence of economic justice in the land. This is economics that is socially relevant. And the relevance is not an afterthought. The relevance is implicit. The social import of economic theory is realized when the distribution of ownership rights is seen as an integral part of its constitution; and the social import of economic justice and economic rights and responsibilities is simply stated: We must prevent all foreseeable injustices from occurring. Once an injustice has occurred, there is nothing that can be done to undo the dastard deed. This is the bosom of realism.</div> <bR> <div> One last question: Is the proposed program of action the latest expression of utopianism? The curt answer is: No. Utopianism has consistently been based on the wishful thinking of a single person. The proposed program of action results from filling in the gaps of a millenarian train of thought that, in a seamless web, extends itself at least from morality to economic theory and from there-through economic justice-to economic policy and practice. Utopianism promises immediate results, as if by magic. This proposed program of action asks for concerted, protracted effort. Whatever life Utopianism has, it is based on the fanatical following of a small group of people who try to force it upon the will of the multitudes. The proposed program of action is expected to be readily understood and spontaneously implemented by the multitudes. </div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>CONCLUSION</B></div> <bR> <div> The lament that economics lacks social relevance assumes many forms, but these are mostly centered on the treatment of issues of distribution of income and wealth. We have found that these issues are not even investigated by economists today because they assume that they lie beyond the field of economics. Hence, by placing this issue at the very core of economics, we have given back social relevance first to economic theory, then to economic policy, and finally to economic practices. Without ever abandoning the field of economics, we have established a continuity of discourse between three stepping stones in economic analysis. We have followed this line of reasoning. Since money and financial instruments are not wealth, but only represent wealth, in macroeconomics one cannot add money to real wealth. The two have to be kept separate. This condition raises the question about the relation between money and real wealth. As in the economics tradition from Aristotle to the Doctors of the Church, we have recognized that money and real wealth must be equivalent in value. But equivalence is a formal relation among three terms. What is the third term? The third term that links money to real wealth is the economic value of ownership rights; hence, we have presented a restructure of economic theory that reflects the need to study not only the monetary economy but also the real and the legal economy at the same time. From this new framework of analysis, novel answers are given to the question: How is the distribution of ownership rights achieved today, and how “should” it be achieved? An investigation of the economic, rather than the legal, moral, or philosophical aspects of this question leads to the transformation of an age-old doctrine into the theory of economic justice and to the discovery that the creation of wealth is achieved, not through the exercise of property rights, which are static, but through the exercise of well-defined economic rights and economic responsibilities, which take care of the dynamic needs of the economic world. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>FOOTNOTES</B></div> <bR> <div> Every step of the way in Concordian economics, decisions are taken following relentlessly the dictates of fundamental rules of logic. For instance, analysis reveals that since current definitions of saving and investment contain items that are productive (farmed land) and items that are nonproductive (fallow land) of further wealth, both saving and investment respect neither the principle of identity nor the principle of non-contradiction and therefore they cannot be equivalent to each other, as they ought to be for their relation of equality to be formally valid (see, e.g., Allen 1970: 748).</div> <bR> <div> The separation of real wealth from monetary wealth is an integral part of the transformation of Keynes' model into the series of mathematical models that provide structure to Concordian economics. This is a procedure that, outlined with the help of geometry (Gorga 2002: 32-37), starts with the enlargement of the definition of consumption from expenditure on consumer goods to spending in all its manifestations (<I>ibid</I>., 139-50), passes through the definition of money (<I>ibid</I>., 222) and the monetary formulation of the Flows Model (<I>ibid</I>., 309-12), and ends with the establishment of the equivalence of the processes of production, distribution, and consumption (<I>ibid</I>., 312-19). The description of these three processes and the economic process as a whole form the substance of Concordian economic theory (<I>ibid</I>., 159-234). </div> <bR> <div> What to do with the widow, the orphan, and the handicapped is a moral issue. Economics does not do anything for them. Indeed, as proved by the history of the world, even in the richest of the communities at the height of the business cycle, economics cannot do anything for them. Their number can become so overwhelming, their needs so vast, that even charity becomes powerless. Economics cannot do anything for the widow, the orphan, and the handicapped-unless, of course, they own stocks and bonds. But then they are not poor; they do not need any assistance through morality. They are capitalists and by the virtue of being capitalists, by the virtue of owning the machines, they participate-through remote control of the machines-by right in the economic process.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>REFERENCES</B></div> <bR> <div> Allen, R. G. D. (1970) <I>Mathematical Economic, </I>2nd ed., London and New York: Macmillan, St. Martin's.</div> <bR> <div> Blinder, A. (1999) Quoted in "Students Seek Some Reality Amid the Math Of Economics," by Michael M. Weinstein,<I> The New York Times</I>, September 18, 1999, pp. A17, A19.</div> <bR> <div> Brady, M.E. (1996) “A Comparison-Contrast of J.M. Keynes' Mathematical Modeling Approach in <I>The General Theory</I> with some of his <I>General Theory</I> interpreters, especially J.E. Meade”, <I>History of  Economics Review</I> (25): 129-158.</div> <bR> <div> Fanfani, A. (2003) <I>Catholicism, Protestantism, and Capitalism</I>, Norfolk, VA: IHS Press.</div> <bR> <div> Ferrini, V. (2002) “Gorga worthy of note”, <I>Gloucester Daily Times. </I>December 11, A6. </div> <bR> <div> Gewirth, A. (1985) "Economic Justice: Concepts and Criteria," in K. Kipnis and D. T. Meyers, (eds.) <I>Economic Justice: Private Rights and Public Responsibilities</I>, Totowa, N.J.: Rowman & Allanheld.</div> <bR> <div> Gladwell, M. (2000) <I>The Tipping Point: How Little Things Can Make a Big Difference, </I>NY: Little, Brown & Company.</div> <bR> <div> Gorga, C. (1959) <I>A Synthesis of the Political Thought of Louis D. Brandeis</I>. Graduation Dissertation University of Naples.</div> <bR> <div> Gorga, C. (1964) "Not Simply a National Fund, but a Stabilization and Development Fund”, <I>Mondo Economico</I> 19(14): 14-16.</div> <bR> <div> Gorga, C. (1982) “The Revised Keynes' Model” (an Abstract), <I>Atlantic Economic Journal</I> 10(3): 52.</div> <bR> <div> Gorga, C. and Kurland, N. G. (<FONT SIZE="2" COLOR="#000000" FACE="Arial" > <A NAME="ole_link2"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></FONT>1987) “The Productivity Standard: A True Golden Standard,” in <I>Every Worker An Owner: A Revolutionary Free Enterprise Challenge to Marxism,</I> D. M. Kurland (ed.) Washington, DC: Center for Economic and Social Justice.</div> <bR> <div> Gorga, C. (1991a) “The Dynamics of the Economic System,” unpub. man. </div> <bR> <div> Gorga, C. (1991b) "Bold New Directions in Politics and Economics," <I>The Human Economy Newsletter, </I>12(1): 3-6, 12. </div> <bR> <div> Gorga, C. 1994. "Four Economic Rights: Social Renewal Through Economic Justice for All,”<I> Social Justice Rev. </I>85(1-2): 3-6.</div> <bR> <div> Gorga, C. and Weeks, S. B. (1997) “Fisheries Renewal: A Renewal of the Soul of Business,” <I>Catholic Social Science Rev.</I> 2: 145-161.</div> <bR> <div> Gorga, C. (1999) "Toward the Definition of Economic Rights,”<I> Journal of Markets and Morality, </I>2(1): 88-101.</div> <bR> <div> Gorga, C. (2002) <I>The Economic Process: An Instantaneous Non-Newtonian Picture,</I> Lanham, MD. and Oxford: University Press of America.</div> <bR> <div> Gorga, C. (2007) “Economic Justice,” in <I>Catholic Social Thought, Social Science, and Social Policy: An Encyclopedia,</I> Lanham, MD: Scarecrow Press.</div> <bR> <div> Hayek, F. A. (1960) <I>The Constitution of Liberty</I>, Chicago: University of Chicago Press.</div> <bR> <div> Keynes, J. M. (1936) <I>The General Theory of Employment, Interest, and Money</I>, NY: Harcourt.</div> <bR> <div> Klein, L. R<B>.</B> (1968 [1947]) <I>The Keynesian Revolution</I>, 2nd ed. New York: Macmillan 1968.</div> <bR> <div> Klein, L. R. (1970) “The Use of Econometric Models as a Guide to Economic Policy,” in <I>Selected Readings in Econometrics</I>. Cambridge and London: MIT Press. </div> <bR> <div> Manicas, P. T. (2007) “Endogenous Growth Theory: The Most Recent `Revolution' in Economics,” <I>post-autistic economics review</I> 41:39-53.</div> <bR> <div> Mankiw, N. G. (2006) “The Macroeconomist as Scientist and Engineer,” <I>Journal of Economic Perspectives </I>20:29-46.</div> <bR> <div> Nozick, R. (1974) <I>Anarchy, State, and Utopia</I>, NY: Basic Books.</div> <bR> <div> Rawls, J. (1971) <I>A Theory of Justice</I>, Cambridge, MA: Harvard University Press.</div> <bR> <div> Schumpeter, J. A. (1936) "The general theory of employment, interest and money," <I>Journal of American Statistical Association</I> (31): 791-95.</div> <bR> <div> Schumpeter, J. A. (1954)<B> </B><I>History of Economic Analysis,</I><B> </B>NY: Oxford University Press.</div> <bR> <div> Thompson, J. M. T. (1986) <I>Nonlinear Dynamics and Chaos, Geometric Methods for Engineers and Scientists, </I>New York: Wiley.</div> <bR> <div> Warsh, D. (2006) <I>Knowledge and the Wealth of Nations: A Story of Economic Discovery</I>, New York: Norton.</div> <bR> <div> Wood, D. (2002) <I>Medieval Economic Thought</I>, Cambridge, UK: Cambridge University Press.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>ACKNOWLEDGMENTS</B></div> <bR> <div> This paper is uniquely due to several maieutic interventions, truly beyond the call of duty, by Dr. Wilfred Dolfsma. I also would like to acknowledge a clarification brought to this paper by Godfrey Dunkley. If this paper has become a cogent presentation less exposed to potential debilitating criticism of single points, it is due to innumerable constructive suggestions by two referees of <I>Forum</I>.  A more detailed background for this paper is contained in “The Economics of Jubilation”, an unpublished monograph that has been well received by such a diverse audience as Dr. Michael E. Brady, Dr. John C. Rao, Professor William J. Baumol, and Professor Roger H. Gordon. That work, in turn, is based on a framework of analysis which was greatly assisted for 27 years by Professor Franco Modigliani and 21 years by Professor Meyer L. Burstein, among others.</div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top </U></A></div> <bR> <bR> <bR> <div>  <A NAME="economics_for_physicists_and_ecologists"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="6" COLOR="#003300" FACE="Arial" >Economics for Physicists and Ecologists</FONT></div> <bR> <bR> <div> Reprinted by permission of <I>Transactions on Advanced Research</I> </div> <div> (January<B> </B>2008 Volume 4 Number 1): pp. 6-9. This paper is also available at http://internetjournals.net/journals/tar/IPSI%20TAR%20Jan%202008.pdf" <FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><U>http://internetjournals.net/journals/tar/IPSI%20TAR%20Jan%202008.pdf</U></FONT></div> <bR> <div> Gorga, Carmine</div> <bR> <div> C. Gorga is with Concordians.org Inc. (e-mail: <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="mailto:cgorga@jhu.edu" TARGET="_top" TITLE="mailto:cgorga@jhu.edu"><U><U>cgorga@jhu.edu</U></U></A></FONT>) </div> <bR> <bR> <div> <B>Abstract   </B>The lack of communication among physicists, ecologists, and economists can be mostly attributed to the type of mathematics economists use as well as their study of flows of money rather than stocks of real wealth. This paper presents the essential characteristics of a new framework of economic analysis, Concordian economics, which uses standard mathematics and geometry and observes stocks as well as flows of real and monetary wealth. This paper thus attempts to build bridges among the relative disciplines, because it is becoming increasingly clear that vexing problems of human and natural ecology can be solved only through collaboration among economists, physicists, and ecologists.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>1. INTRODUCTION</B></div> <bR> <div> There is a well-known lack of communication among physicists, ecologists, and economists. Using a new framework of economic analysis, Concordian economics [1], a system of thought that results from the relentless application of age-old tools of logic and epistemology to mainstream economic theory, this paper attempts to build bridges among the various disciplines so that lines of communication can be opened and solutions can be found to today's vexing problems of economics and ecology. Physicists, being practical problem solvers, and ecologists, being deeply concerned about the status quo, might join together in this mission to let economics reach the splendor of its full potential. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>2. PROBLEM STATEMENT</B></div> <bR> <div> Lack of communication among physicists, ecologists, and economists is rooted in the practice of economists, who have developed their own specialized form of mathematics to analyze economic problems; and have reduced the number of admissible problems to those that exist in the market at the moment of the exchange. Thus they analyze only flows, not stocks of wealth; and they observe only money, not real resources. In particular, physicists have long remarked that modern economic theory cannot possibly be a fit description of the reality because, among other reasons, it is a closed system without inlets and outlets [2]. Ecologists, on their part, never seem to engage economists because, among other reasons, while they are mainly concerned with stocks of real wealth, economists are mainly concerned with flows of money [3].</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>3. FINDINGS</B></div> <bR> <div> Three essential findings of Concordian economics are reported here with the assistance of modern mathematics and geometry: stocks are separated from flows of wealth; the real economy is separated from the monetary economy; these two parts of the economic process are then joined together through the introduction of the legal and institutional economy into the equations. </div> <div> Through painstaking analysis (Gorga 2002, 23-158) [4], real wealth (RW) is defined as stocks of consumer goods (CG), plus capital goods (KG) and goods hoarded (GH). The fundamental model of production (P) is formulated as follows (<I>Ibid., </I>38, 313): </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> P = CG + KG + GH</div> <div> IA = P - GH</div> <div> IA = (CG + KG)</div> <bR> <div> where IA = Investment Assets (until sold).</div> <div> Monetary wealth (MW) is defined as the sum of all financial instruments used to purchase CG, KG, and GH as well as other financial instruments: corresponding equations form the model of consumption (<I>Ibid., </I>318). The legal economy is defined as the value of all rights of ownership over real and monetary wealth: corresponding equations form the model of distribution (<I>Ibid., </I>316). Since the structure of these models is self-similar, they are omitted here.</div> <div> The three systems of equations form an equivalence [5], the equivalence of production to distribution and to consumption. They describe the same entity, the economic process, from three strictly interconnected points of view. In more detail, this equivalence refers to the production of all real wealth; the distribution of ownership rights over both monetary and real wealth; and consumption (or expenditure) of monetary instruments to purchase real wealth. This equivalence can be more easily observed with the assistance of geometry. Thus, using established protocols, it is possible to synthesize the above three systems of equations into one unit represented by the following diagram:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="06707120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> <IMG SRC="06807120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"><IMG SRC="06d0b9f0.png" border=0 width="267" height="159" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <div> <I><B>Figure</B></I><B> 1. The Economic Process</B></div> <bR> <div> Figure 1 represents the economic process at the moment of the exchange-as in mainstream economics, but with an enlarged focus. The unit of account can be the economy of an individual person, an individual firm, the local, the national, or the world economy. Figure 1 reads as follows: When goods and services pass from producers to consumers, monetary instruments of a corresponding value pass from consumers to producers. For the exchange to occur, the transactors must be the owners of both money and real wealth. Then, one cycle of the economic process is completed. As can be seen, Concordian economics is wholly relational and inherently dynamic. This second characteristic becomes more explicit if one sees each rectangle of Figure 1 as a Poincaré section. In Figure 1 the economic process is observed at one static moment in time.</div> <div>  <A NAME="ole_link1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>There are three approaches for a comprehensive study of the dynamics of the economic process. One is the analytical/mathematical approach. It yields the following generalized system of equations:</div> <DIV ALIGN="LEFT"></DIV> <div> <I>p? = fp(p,d,c)</I></div> <div> <I>d? = fd(p,d,c)</I></div> <div> <I>c? = fc(p,d,c),</I></div> <bR> <div> where <I>p</I>? = rate of change in the production of real wealth, <I>d</I>? = rate of change in the pattern of distribution of ownership rights over real and monetary wealth, and <I>c</I>? = rate of change in the consumption or expenditure of monetary wealth. </div> <div> The second approach for the study of the dynamics of the economic process is the historical/latitudinal one. This study calls for following the dynamic transformation of the system, ideally from the beginning of time till today. Starting from flows of real and monetary wealth one obtains a result that is very familiar to modern physicists, a strange attractor or a Lorenz attractor, see, e.g., Thompson (1986, 228) [6]. A few cycles are reproduced here: </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="063081a0.png" border=0 width="8" height="26" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> <IMG SRC="06fdee90.jpg" border=0 width="734" height="489" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> <I><B>Figure</B></I><B> 2. Flows of Values</B></div> <bR> <div> With Figure 2, we are not only within the economic process-an area that is a black box to mainstream economics [7]; we have also found the inlets and outlets requested by physicists. The inlets are flows of real and monetary wealth; the outlets are consumer goods, goods hoarded, and money hoarded. It is only capital goods and money to purchase real wealth that remain permanently within the system. The flows of the legal/institutional economy are fully inserted in this construction: They are invisibly present at the moment of the exchange. In order to buy and sell wealth one has forever had to have ownership of that wealth. Indeed, to think of the extreme complexity of the reactions that occur within the economic system, the reader is encouraged to mentally close the two halves of Figure 2 thus creating the image of a torus or a cyclotron. In the reality of daily life, stocks and flows of real and monetary values do not organize themselves into neat patterns, but tend to intermingle and interact with each other.      </div> <div> The third approach is the longitudinal/programmatic one, through which one obtains an external view of the economic system as a whole. This is a new perspective that yields a simplified understanding of other characteristics of the economic system. This mode of analysis can be briefly described as follows: If the economic system were composed of three identical, synchronous, and compenetrating spheres (obtained by rotating each rectangle of Figure 1 at ever increasing speed and in all directions about their geometric center), the system would leave behind only one trajectory as an indication of its dynamics. This line-whatever its pattern-would indicate that the three spheres were in continuous equilibrium with each other. This is not the case in economics: <FONT SIZE="2" COLOR="#000000" FACE="Arial" >As Mandelbrot (1983, 1) [8] is fond of saying, "Clouds are not spheres, mountains are not cones, coastlines are not circles, and bark is not smooth, nor does lightning travel in straight lines." Can economic systems be expected to be represented by perfect solids? </FONT>To say the least, the trajectory of aggregate values of monetary wealth (MW) can be expected to soon leave the initial condition of equilibrium (0,0,0) and, spurred by the facility with which monetary instruments can be produced, grow at a faster rate than the trajectory of values of real wealth (RW). Also, the spheres representing the pattern of distribution of values of ownership rights over real <I>and</I> monetary wealth, which are known to remain rather static over time, can be conflated into two overlapping straight lines to be identified as DO. Then, over time, eliminating all short and long term, cyclical, random, or aperiodic loops, breaks, and turns, the system as a whole can be expected to leave behind idealized traces of motion as in the following figure:</div> <bR> <div>       <FONT SIZE="3" COLOR="#000000" FACE="Arial" ><IMG SRC="07395820.png" border=0 width="917" height="386" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></FONT></div> <DIV ALIGN="LEFT"></DIV> <div> <I><B>Figure 3</B></I><B>. Trajectories of the System as a Whole.</B></div> <bR> <div> The distance between RW and MW will eventually yield the mathematical measurement of the “bubble”. Current efforts to identify the bubble are especially intense [9]; physicists adept at chaos theory have been investigating this issue for quite some time [10]. Area "a"-with its alternative sub-areas a' and a''-attempts to describe the condition of disequilibrium (the bubble) that so often develops between monetary and real wealth and suggests that the smaller this area, the smaller the loss of real income over time. How to close the gap between the real and the monetary economy in the shortest possible time is clearly a problem of control, namely, a problem of economic policy-the problem of creating a just and sustainable economy.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>4. CONCLUSION</B></div> <bR> <div> There is much work to be done. As can be seen, the intellectual framework is mostly done; it is the practical work that is all to be done. This is the work of organizing the data in accordance with the categories of thought specified above; this is the work of analyzing the data with the assistance of modern tools of scientific research. The tempi for the performance of this work can be enormously speeded up if physicists, ecologists, and economists assiduously work together [11].</div> <div>      </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>REFERENCES</B></div> <div> Gorga, C. (forthcoming), “Concordian economics: Tools to return relevance to economics” <I>Forum on Social Economics</I>.</div> <bR> <div> Nadeau, R. (2008). “Brother, Can You Spare Me a Planet? (Extended version) Mainstream Economics and the Environmental Crisis.” <I>Scientific American, </I>March<I>.</I></div> <bR> <div> Daly, H. E. (2008). “Frugality First.” In <I>Frugality: Rebalancing Material and Spiritual Values in Economic Life</I>, Bouckaert, L., Opdebeeck, H., and Zsolnai, L. (eds.), Oxford, Bern, Berlin, Bruxelles, Frankfurt am Main, New York, Wien: Peter Lang; pp. 207-226.</div> <bR> <div> Gorga, C. (2002). <I>The Economic Process: An Instantaneous Non-Newtonian Picture. </I>University Press of America, Lanham, Md., and Oxford. </div> <bR> <div> <FONT SIZE="2" COLOR="#000000" FACE="Arial" >Gorga, C. (2007). “On the Equivalence of Matter to Energy and to Spirit,” </FONT><I>Transactions on Advanced Research</I> Vol. 3, N. 2: 40-45.</div> <bR> <div> Thompson, J. M. T. (1986). <I>Nonlinear Dynamics and Chaos, Geometric Methods for Engineers and Scientists. </I>New York: Wiley.</div> <bR> <div> Petrongolo, B. and Pissarides, C. A. (2001) “Looking into the Black Box: A Survey of the Matching Function,” <I>Journal of Economic Literature, </I>Vol. XXXIX: 424.</div> <bR> <div> Mandelbrot, B. B. (1983). <I>The Fractal Geometry of Nature</I>. New York: W. H. Freeman.</div> <bR> <div> Because of its guidance from Ben  Bernanke, most notable today is the work done at the Bendheim Center for Finance at Princeton (<I>Princeton Weekly Bulletin</I>, May 26, 1997 and ff.). </div> <bR> <div> See much work done at the Santa Fe Institute.</div> <bR> <div> Matthews, E. (2000). <I>The Weight of Nations: Material Outflows from Industrial Economies.</I> Washington, D.C.: World Resources Institute.</div> <bR> <bR> <div> <B>Brief Biographical Sketch of the Author</B></div> <div> <B>     </B></div> <div> Carmine Gorga is a former Fulbright scholar and the recipient of a Council of Europe Scholarship for his dissertation on ”The Political Thought of Louis D. Brandeis.” Using age-old principles of logic and epistemology, in a book and a series of papers Dr. Gorga has transformed the linear world of economic theory into a relational discipline in which everything is related to everything else-internally as well as externally. He was assisted in this endeavor by many people, notably for twenty-seven years by Professor Franco Modigliani, a Nobel laureate in economics at MIT. The resulting work, <I>The Economic Process: An Instantaneous Non-Newtonian Picture,</I> was published in 2002. For reviews, see http://www.carmine-gorga.us/id18.htm" <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><U>http://www.carmine-gorga.us/id18.htm</U></FONT>. During the last few years, Mr. Gorga has<I> </I>concentrated his attention on matters of methodology for the reunification of the sciences. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <div> <B> <A NAME="on_the_transformation_of_the__dismal"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></B><FONT SIZE="6" COLOR="#000000" FACE="Arial" ><B>Concordian Economics</B></FONT></div> <bR> <div> <B>On the transformation of the “dismal science” of economics into </B></div> <div> <B>The Economics of </B><B>JUBILATION</B></div> <bR> <div> <B>by </B><FONT SIZE="3" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.carmine-gorga.us/" TARGET="_top" TITLE="http://www.carmine-gorga.us/"><U><B>Carmine Gorga</B></U></A></FONT><B>*</B></div> <bR> <div> *President, Polis-tics Inc.</div> <div> 87 Middle Street, Gloucester, MA 01930 </div> <div> <I>Tel: </I>978-283-5926 <I>Fax and Voice:</I>  978-283-4936 </div> <div> <A HREF="mailto:cgorga@jhu.edu" TARGET="_top" TITLE="mailto:cgorga@jhu.edu"><U><B>cgorga@jhu.edu</B></U></A></div> <div> <B>November 2009</B></div> <bR> <div> This paper was delivered at the IPSI Conference in Amalfi on March 5, 2010 and is scheduled for publication in a 2011 issue of <I>Transactions on Advanced Research.</I></div> <bR> <div> <B>Abstract</B></div> <bR> <div> This paper offers the bare bones of the logic, non-linear mathematics, and fractal geometry used in the transformation of the “dismal science” of economics into The Economics of Jubilation.</div> <bR> <div> <B>Keywords  </B>Keynes - Economics - Mainstream economics - Concordian economics - Logic - Nonlinear mathematics - Chaos theory - Economics of Jubilation - Economic justice -  <A NAME="ole_link1_1"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>Economic rights - Economic responsibilities</div> <bR> <div> <B>Acknowledgments</B></div> <div> The framework of analysis on which this paper draws is uniquely due to 27 years of exhaustive probing by Franco Modigliani and 23 years of assistance from Meyer L. Burstein. Mitchell S. Lurio and Norman G. Kurland have been great teachers of economic policy. This paper is especially due to editing assistance form Ralph Cole Waddey and reassuring guidance by Dr. Damon Cummings, Dr. Michael E. Brady, and Dr. Veljko Milutinovic.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> INTRODUCTION</div> <bR> <div> If Keynes (1936, pp. vi-vii) was right in stating that the key problem with the economic theory of his day was the neglect of money in its analysis, we can reasonably rest assured we are right in assuming that the key problem with the economic theory of our days is its neglect of real wealth. This oscillation between extremes is one of the reasons why economic theory remains a “dismal science”; there are many others; and they compel us to abandon the mainstream framework of analysis (cf. Gorga, 2010a). The best solution to this state of affairs is offered by the transformation of mainstream economics into The Economics of Jubilation.</div> <div> The Economics of Jubilation is a new framework of analysis in which not only money and real wealth but also the ownership of wealth are recognized as essential elements of the economic system (Gorga, 2002, 2006 [2009], 2008a, and 2010b). </div> <div> With the assistance of basic tools of logic, mathematics, and geometry in this paper we shall see how mainstream economics is transformed into the Economics of Jubilation. </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> FINDINGS</div> <div> Keynes' model of the economic system (Keynes, 1936, p. 63) reads as follows:</div> <DIV ALIGN="LEFT"></DIV> <div> Income = Consumption + Investment </div> <div> Saving = Income - Consumption</div> <div> Saving = Investment.</div> <bR> <div> A detailed analysis (see, Gorga, 2002, pp. 41-57, 79-82, 93-103, 139-153) reveals that this model, the model on which mainstream economics is built, does not respect any of the fundamental principles of logic such as the principle of identity, the principle of non-contradiction, or the principle of equivalence. Here suffice it to report that in the calculation of R. W. Goldsmith (1955-1956, Vol. II, p. 69n) the definition of saving can assume 100,000 possible meanings. And the geometry of mainstream economics is widely acknowledged to be a “black box” (see, e.g., Petrongolo and Pissarides, 2001).</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> 3. SOLUTIONS</div> <div> The simplest method to transform Keynes' model into a system of thought that respects basic principles of logic is to rotate the model 360<FONT SIZE="1" COLOR="#000000" FACE="Arial" >0 </FONT>around investment (Gorga, 2002, pp. 129-130). In this fashion:</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="075db2b0.png" border=0 width="475" height="299" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 1. Pivoting Keynes' Model.</div> <bR> <div> One then obtains the following Flows Model, the foundational model of Concordian economics (Gorga, 2002, 2008a, and 2010b):</div> <div> Income = Consumption + Saving (or Hoarding)</div> <div> Investment = Income - Saving (or Hoarding)</div> <div> Investment = Consumption.</div> <bR> <div> A brief account of this transformation is as follows. Since in mainstream economics saving equals investment, the first equation of the Flows Model is the same as the first equation of Keynes' model; but the meaning of terms is completely different. Consumption in Concordian economics means, not expenditure on consumer goods as in mainstream economics, but expenditure <I>tout court</I> and thus covers all types of expenditure. And saving means hoarding-wealth, whether real or monetary, that, in M. L. Burstein precise phrase, has zero use rate. It is the second equation of the new model that appears to be entirely new. Upon analysis, however, it turns out to be perhaps the first equation ever written in economics. It is nothing but the mathematical formulation of the Parable of the Talents, a parable that expresses the very core of the economics of Jesus-a system of economic thought that is a reformulation and a continuation of the economics of Moses (see, Gorga, 2006 [2009]).</div> <div> Transferring the Parable of the Talents into a Lorenz diagram, one obtains</div> <bR> <bR> <div>                                                                             100%                                                                                                                                             Hoarding                                                          </div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="08ca8b80.png" border=0 width="424" height="184" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"><IMG SRC="08107120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"> </div> <div>                   <FONT SIZE="1" COLOR="#000000" FACE="Arial" >0%                                                                                                                                         Investment </FONT></div> <div>  <FONT SIZE="1" COLOR="#000000" FACE="Arial" >Figure 2. The Parable of the Talents</FONT>.</div> <bR> <div> This presentation of the Parable of the Talents helps us state in no uncertain terms that (1) more hoarding, less investment, hence less economic growth; (2) more hoarding of real wealth, more money in circulation that does not correspond to wealth, hence more inflation; (3) more wealth hoarded by the few, more poverty for the many. For details, see Gorga (2002, pp. 235-302, 329-353).</div> <div> The third equation of the Flows Model, Investment = Consumption, allows us to define <B>Investment</B> unequivocally as production of real wealth and <B>Consumption</B> as expenditure of money. From which it follows that Investment is only and always investment, hence it respects the dictates of principle of identity and the principle of non-contradiction; ditto for Consumption,<B> </B>which is only and always consumption. Is Investment<B> </B><I>equivalent</I> to Consumption?</div> <div> Linking the two components of this equation to each other through the Distribution of ownership rights over real and monetary wealth, one transforms the third equation of Concordian economics into the following equivalence:</div> <DIV ALIGN="LEFT"></DIV> <div> Production ? Distribution ? Consumption.</div> <div> Thus Concordian economics does not only respect fundamental principles of logic, it also automatically separates real wealth form monetary wealth; and, as distinguished from classical economics and Keynesian economics, it includes them both in its analysis. In addition, it places the Distribution of ownership rights over real and monetary wealth at the very core of its analysis.</div> <div> The equivalence of production to distribution to consumption can be better appreciated placing it into a geometric format. Thus:</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="07807160.png" border=0 width="7" height="22" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"><IMG SRC="06d0b9f0.png" border=0 width="267" height="159" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 3. The Economic Process.</div> <bR> <div> As distinguished from the “black box” of mainstream economics, the geometry of Concordian economics allows us to observe the inner mechanisms of the economic process as a whole. Figure 3 reads as follows. When goods and services pass from the producer to the consumer, money passes form the consumer to the producer. Both money and real wealth change hands in an exchange; and for this to occur, they must be both rightfully owned by the transactors. Hence, the observation of the economic consequences of the phenomenon of distribution of ownership rights that occur at the very core of economic analysis is not only a legal but an economic necessity.</div> <div> Needless to say, Production, or Aggregate Supply, is a complex process in itself that is better analyzed in a disaggregated form. Ditto for Distribution and Consumption. Using Poincaré sections of Figure 3, we construct the following models:</div> <DIV ALIGN="LEFT"></DIV> <div> <B>Model of Production (P)</B></div> <bR> <div> P = CG + KG + GH</div> <div> KG = P - (GH + CG)</div> <div> KG = OKG </div> <div> where</div> <div> CG stands for Consumer Goods</div> <div> KG for Capital Goods</div> <div> GH for Goods Hoarded</div> <div> OKG for value of Ownership of Capital Goods</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Model of Distribution (D)</B></div> <bR> <div> D  = OCG + OKG  + OGH</div> <div> OKG = D - (OGH + OCG)</div> <div> OKG = I</div> <bR> <div> where</div> <div> D stands for Distribution or Real Income observed from the point of view of distribution of ownership rights</div> <div> OCG for value of Ownership of Consumer Goods</div> <div> OKG for value of Ownership of Capital Goods</div> <div> OGH for value of Ownership of Goods Hoarded</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Model of Consumption (C)</B></div> <bR> <div> C  = E<FONT SIZE="1" COLOR="#000000" FACE="Arial" >h</FONT> + E</div> <div> I  = C - E<FONT SIZE="1" COLOR="#000000" FACE="Arial" >h</FONT></div> <div> I = E</div> <bR> <div> where </div> <div> C stands for Consumption or Money Income observed </div> <div> from the point of view of consumption</div> <div> E<FONT SIZE="1" COLOR="#000000" FACE="Arial" >h</FONT> for money reserved for Hoarding-Expenditure</div> <div> E for money reserved for Expenditure (on consumer goods and capital goods)</div> <div> I for Investment</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Synthetic Model of the Economic System as a Whole</B></div> <div> (see, e.g., Thompson, 1986, p. 36)</div> <bR> <div> p? = fp(p,d,c)</div> <div> d? = fd(p,d,c)</div> <div> c? = fc(p,d,c)</div> <bR> <div> where </div> <div> p? stands for rate of change in total production</div> <div> d? for rate of change in the values of distribution of ownership rights</div> <div> c? for rate of change in total expenditure.</div> <bR> <div> Again, geometry can be of tremendous assistance to see the complexity of the economic system as a whole. Combining the result of Poincaré sections of each of the three component elements of Figure 3, we obtain:  </div> <div>    </div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="06fdee90.jpg" border=0 width="734" height="489" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"><IMG SRC="06807120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 4. Flows of Values.   </div> <bR> <div> Physicists and mathematicians are accustomed to seeing this figure as a “strange attractor” (see, e.g., Mandelbrot, 1983, esp. pp. 193-99). This writer looks forward to the day in which data will either confirm or deny the validity of the assumption that the economic system behaves like any other biological and physical system as observed through the lenses of chaos theory.</div> <div> Then, assisted by the following longitudinal analysis of Figure 3, as it can be seen from the following figure (see, Gorga, 2008b) it might even be possible to define and measure the “bubble” as the degree of separation of the trend line of Monetary Wealth (MW) from the trend line of Real Wealth (RW):</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="07d1e710.png" border=0 width="798" height="369" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 5. Trajectories of the System as a Whole.</div> <bR> <div> Clearly, to reduce effects of the bubble on the shortest possible timetable and bring the trend line of real wealth in full alignment with the trend line of monetary wealth is a question of control-a question of creating a just and sustainable economy.</div> <div> For this purpose, recourse to the ancients is again invaluable. In this search, one meets the economic discourse that was carried out from Moses and Aristotle to the Doctors of the Church on the wave of the doctrine of economic justice, which was composed of distributive justice and commutative justice. One simply needs to add to it the plank of participative justice and transform it into the theory of economic justice (see Gorga, 1999). Thus:</div> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="06807120.png" border=0 width="7" height="18" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 6. Economic Justice</div> <div> As it can be seen, Figure 6 is the shadow of Figure 3. Observed side to side, these two figures make it clear that one can just as soon separate the economic process from the theory and practice of economic justice as one can separate a person from her shadow.</div> <div> The question then becomes how can we introduce the wisdom of the ages into the complexity of the modern world? Detailed analysis indicates that the following four economic rights and responsibilities will go a long way toward reaching this goal (see, e.g., Gorga 2008a):</div> <div> We all have the right of access to natural resources-and the responsibility to pay taxes for the exclusive use of those resources;</div> <bR> <div> We all have the right of access to national credit-and the responsibility to repay loans obtained on the basis of national credit;</div> <bR> <div> We all have the right to the fruits of our labor-and the responsibility to offer services equal to the value of our compensation;</div> <bR> <div> We all have the right to protect our wealth-and the responsibility to respect the wealth of others. </div> <bR> <bR> <bR> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> 4. CONCLUSION</div> <div> The transformation of mainstream economics into the Economics of Jubilation allows us to integrate all key elements of the economic process and eventually will allow us to get a better control of economic events. </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>References</B></div> <bR> <div> Goldsmith, Raymond W.  1955-1956. <I>A Study of Saving in the United States, </I>3 vols.; Princeton, NJ: Princeton<B> </B>University Press.</div> <div> Gorga, Carmine. 1999. “Toward the Definition of Economic Rights,”<I> J. Markets and Morality, </I>2:1, pp. 88-101.*</div> <div> _____ . 2002.  <I>The Economic Process: An Instantaneous Non-Newtonian Picture.</I> Lanham, MD and Oxford: University Press of America.</div> <div> _____ . 2006 [2009]. “The Economics of Jubilation - Blinking Adam's Fallacy Away”. Available at SSRN: <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://ssrn.com/abstract=1489570" TARGET="_top" TITLE="http://ssrn.com/abstract=1489570"><U>http://ssrn.com/abstract=1489570</U></A></FONT>.</div> <div> _____ . 2008a. “Concordian Economics: Tools to Return Relevance to Economics”, <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.springerlink.com/content/1w885686112kt7r7/" TARGET="_top" TITLE="http://www.springerlink.com/content/1w88"><U><I>Forum for Social Economics</I></U></A></FONT>, <FONT SIZE="2" COLOR="#00681C" FACE="Arial" >springerlink.com</FONT>" <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www." TARGET="_top" TITLE="http://www."><U>www.springerlink.com</U></A></FONT>, May.*</div> <div> _____ . 2008b. “Economics for Physicists and Ecologists,” <I>Transactions on Advanced Research </I><FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://internetjournals.net/journals/tar/IPSI%20TAR%20Jan%202008.pdf" TARGET="_top" TITLE="http://internetjournals.net/journals/tar"><U>January, Vol. 4 (1) 6-9.</U></A></FONT> <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://internetjournals.net/journals/tar/IPSI%20TAR%20Jan%202008.pdf" TARGET="_top" TITLE="http://internetjournals.net/journals/tar"><U>http://internetjournals.net/journals/tar/IPSI%20TAR%20Jan%202008.pdf</U></A></FONT></div> <div> _____. 2010a (forthcoming). “From the Dismal Science to the Economics of Jubilation.” <I>In</I> Frank Columbus, ed., <I>Economic Theory</I>. Hauppauge, NY: Nova Science Publishers.</div> <div> _____. 2010b (fortcoming). <I>The Economic Process: An Instantaneous Non-Newtonian Picture.</I> Lanham, MD and Oxford: University Press of America. A paperback expanded edition.</div> <div> Keynes, J. Maynard. 1936. <I>The General Theory of Employment, Interest, and Money</I>. NY: Harcourt.</div> <div> Mandelbrot, Benoit, B. 1983. <I>The Fractal Geometry of Nature</I>. New York: Freeman.</div> <div> Petrongolo, Barbara and Pissarides, Christopher A. 2001. “Looking into the Black Box: A Survey of the Matching Function,” <I>Journal of Economic Literature, </I>Vol. XXXIX, p. 424.</div> <div> Thompson, J. M. T. (1986). <I>Nonlinear Dynamics and Chaos, Geometric Methods for Engineers and Scientists. </I>New York: Wiley.</div> <bR> <div> * These essays are reprinted in Gorga, Carmine. 2009. <I>To My Polis, With Love: May Gloucester Show the World the Ways of Frugality</I>. Gloucester, MA: The Somist Institute.</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <div>  <A NAME="hoarding_and_most_economists"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A> <FONT SIZE="6" COLOR="#000000" FACE="Arial" >Hoarding and Most Economists</FONT></div> <bR> <div> <A HREF="http://hnn.us/articles/129965.html" TARGET="_top" TITLE="http://hnn.us/articles/129965.html"><U>http://hnn.us/articles/129965.html</U></A></div> <div> 8-09-10</div> <bR> <div> By Carmine Gorga</div> <bR> <div> <I>Carmine Gorga is the President of Polis-tics Inc. and the author of “The Economic Process: An Instantaneous Non-Newtonian Picture” (University Press of America, 2002). This book has been reissued this year in an expanded edition. He holds a PhD in political science from the University of Naples.</I></div> <bR> <bR> <div> In the papers these days there are such headlines as this:  “Credit Pinch Drives Banks In Europe to Hoard Cash.”  Now that the epicenter of the crisis has shifted to Europe, we in America might have a more dispassionate view of the issues.  I would like for the reader to focus on this one word:  “Hoard.”</div> <bR> <div> From Moses to Locke, everyone knew about hoarding.  Ever since Adam Smith, nobody does.  Worse, since the days of Smith, economists are under formal obligation not to utter the word hoarding.  Their economic models do not, and indeed cannot, include hoarding.  Their models say that all wealth that is not consumed is saved—and saving equals investment. Therefore, there is no room for hoarding in their models.  Hence, economists have to maintain that hoarding does not exist.</div> <bR> <div> M. L. Burstein, one of the sharpest minds in economics of the last century, once called me the “Hoarding Maven.”  In fact, more than forty years of research and publication—twenty-seven of them assisted by the late Nobel laureate Franco Modigliani and twenty-three years assisted by Professor Burstein—have led me to a conclusion that is different from the one reached by most economists.</div> <bR> <div> Rather than jettisoning hoarding from our purview, we must jettison all those mainstream economic models that, as it is widely acknowledged, have left us unawares and contributed to lead us into the current crisis.  I have indeed replaced those models with a set of more realistic models that include hoarding in their framework of analysis.  These models can be found in The Economic Process, as well as in articles published in numerous scholarly journals and in the nineteenth volume of Progress in Economics Research, edited by Albert Tavidze.</div> <bR> <div> What is hoarding? As Burstein recognized, hoarded is all wealth that at the moment of observation has a zero-use rate.  Hence, banks can and do hoard cash.</div> <bR> <div> And while banks at times hoard cash, individual human beings, as well as all other businesses, at times hoard not only cash but also real wealth.</div> <bR> <div> When hoarding is put in relation to investment, as in the well-known Lorenz diagram below, one can make three fundamental observations:  The more hoarding, the less growth; the more hoarding, the more inflation; the more hoarding, the more poverty.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="08e873f0.png" border=0 width="647" height="575" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <bR> <div> More hoarding clearly equals less investment—hence less economic growth.  Again, the relationship between hoarding and poverty is of immediate comprehension:  more is accumulated by the few, less is available to the many.</div> <bR> <div> The explanation of why when there is more hoarding there is more inflation resides in this simple fact.  When one buys property and keeps it in a passive state, the money used to buy that wealth remains in circulation and creates an imbalance with the amount of wealth that is for sale in the market.  Hence, prices rise.  That is the seed of inflation.</div> <bR> <div> The difficult nature of hoarding is revealed by this simple fact.  At times, as at present, when financial and industrial corporations hoard cash, hoarding performs a deflationary function.  This is a peculiar function that, apart from few aberrant cases (and the general case of economies with insignificant financial institutions), occurs only at the bottom of the crisis and is quantitatively miniscule when put in relation to the value of the economic system over the entire business cycle.</div> <bR> <div> Rather than remaining on these fascinating issues, which are treated at some length in my book, I would like to stress the key conclusion that I had to reach on the basis of my work.  Dr. Michael Emmett Brady, one of the clearest minds in economics these days (full disclosure, I am the junior author of a paper we published together), points out in his review of my book that the phenomenon of hoarding is not new.  Hoarding is at least four thousand years old.  In fact, Professor Brady highlights, “Keynes states this on pp. 241-42 and 351-52 but does not emphasize it for his economist audience.  G[orga] emphasizes it and convincingly identifies it as the main problem” of “a destabilizing boom-bust business cycle over time.”</div> <bR> <div> The key conclusion of my work is this.  Do not try to fight hoarding head-on.  You will lose, because hoarding is rooted in an essential human characteristic:  the instinctive search for economic security.  Fight, instead, all those institutions that increase economic insecurity and compel human beings to hoard wealth in order to find some personal, individual sanity in a crazed world.</div> <bR> <div> The complexity of the issues is revealed by the circularity of events:  the more people hoard, the more destabilized the economic system becomes.  But the individual, alone, is left with no rational alternative.  It is society as a whole that creates insecurity, and society alone can break the vicious circle.</div> <bR> <div> How? Here’s a hint:  By running the economy to the tune of justice.</div> <bR> <div> To admit to the existence of hoarding and to include this phenomenon into macroeconomic models is the easy part.  After that the discourse shifts on to economic policy, which we must reserve for another time.</div> <bR> <div> ShareThis</div> <div> Comments (2)</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <bR> <bR> <div>  <A NAME="non_newtonian_economics"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>  <FONT SIZE="6" COLOR="#000000" FACE="Arial" >Non-Newtonian Economics</FONT></div> <bR> <div> FRIDAY, SEPTEMBER 10, 2010</div> <div> http://rheolworld.blogspot.com/search?q=Gorga</div> <bR> <div> A few weeks ago, I came across a book titled <A HREF="http://www.amazon.com/Economic-Process-Instantaneous-Non-Newtonian-Picture/dp/0761821562" TARGET="_top" TITLE="http://www.amazon.com/Economic-Process-I"><U>The Economic Process: An Instantaneous Non-Newtonian Picture by Carmine Gorga.</U></A>  I had not heard of Newton's use outside the field of mechanics, so I contacted the author and asked him if he could share a definition of non-Newtonian behavior in economics.  Here is his essay.</div> <bR> <bR> <div> <I>Concordian Economics: A non-Newtonian Construct</I> by Carmine Gorga, Ph.D.</div> <bR> <div> Concordian economics is a non-Newtonian construct because it does not respect the law of incompenetrability of bodies. As known since the theory was formulated by classical economists, economics is composed of three major elements: production (A), distribution (B), and consumption (C) of wealth. The meaning of these terms has varied over time.</div> <bR> <div> In Concordian economics, production means production of real, physical wealth as well as services; distribution means distribution of value of ownership of rights over real and monetary wealth; consumption means expenditure of monetary wealth. Consumption as destruction of wealth in real terms is absorbed into the notion of net production.</div> <bR> <div> As it can be seen, in addition to intangible services there are two terms in Concordian economics, money and ownership rights, which are not physical. They intermingle with the physical conception of real wealth. Hence, Concordian economics is a non-Newtonian construct.</div> <bR> <div> Generally, mainstream economics is not faced with this Newtonian issue of incompenetrability of bodies because the nature of such real wealth as tables and chairs is made homogeneous by transforming it into the corresponding monetary value of tables and chairs. Quite apart from necessarily using monetary values, Concordian economics resolves the issue of non-homogeneity of real wealth with the assistance of such intellectual tools as labor-units, energy-units, or value-units. The issue is important because, if the meter were as flexible a unit of measurement as the dollar, we would never have been able to reach the moon and return so safely and effectively as we did.</div> <bR> <div> Concordian economics, in particular, is non-Newtonian because it is non-linear. Mainstream economists believe that there is first the production of items of real wealth, then their distribution, and then their consumption. Mainstream economics, in other words, is linear. Concordian economics is non-linear, because it observes that the three events occur at once. This characteristic is made clear in the following figure:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="http://3.bp.blogspot.com/_rmag1xoEltQ/TIrSSGWudBI/AAAAAAAAAD4/5Gl2DQ-WkgA/s1600/Gorga_1.png" TARGET="_top" TITLE="http://3.bp.blogspot.com/_rmag1xoEltQ/TI"><U><IMG SRC="09040ee0.png" border=0 width="320" height="238" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></U></A></div> <bR> <div> Figure 1 is a depiction of the economic system at one moment in time. It is better read if one restricts the observation of the economic system as if it were composed of only one person, in this fashion: I detach the apple from the tree (I produce the apple); I declare that it is mine (I distribute its ownership rights to myself); and I spend the apple (I consume it) either by eating it or by hoarding it or by exchanging it for a fish.</div> <bR> <div> To obliterate the possibility of different instants, it is necessary to assume that I eat the apple while it is still on the tree. In general, the issue of time, which was solved in physics by Einstein with his conception of space-time, is solved in economics in a variety of ways. First, since economic theory is ahistorical, mainstream economics does not even consider the question of time. Second, since the demand/supply equation depicts synchronous events, time does not exist in mainstream economics.  Third, the question of time is solved by establishing a unit of time—by convention, a year—long enough to cancel any discrepancy between the moment of production and the moment of consumption. Concordian economics wholly adopts these conventions.</div> <bR> <div> Figure 1 is even better read when it is generalized in this fashion: the act of production is not completed until it is exchanged for an amount of money: this conception is especially necessary today when production occurs at the touch of a button and is limited mainly by the sale of the product in the market. Clearly, in a civilized society, for the exchange to occur, the producer must have ownership title to the goods and services produced and the consumer must have ownership title to the money spent.</div> <bR> <div> Hence Figure 1 depicts the transfer of goods and services from producers to consumers and the transfer of financial instruments from consumers to producers. Figure 1 catches these events at the moment of the exchange.</div> <div> Observed over time, the three elements of production, distribution, and consumption translate themselves into three trajectories. If there were a perfect correspondence among these phenomena, the three trajectories would overlap. Thus:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="http://3.bp.blogspot.com/_rmag1xoEltQ/TIrTGz9zPcI/AAAAAAAAAEI/3Yt62Sr1DQk/s1600/Gorga_2.png" TARGET="_top" TITLE="http://3.bp.blogspot.com/_rmag1xoEltQ/TI"><U><IMG SRC="09290290.png" border=0 width="400" height="297" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></U></A></div> <bR> <div> This is what mainstream economics analyzes. The three phenomena of economics, production, distribution, and consumption are kept in the following linear relationship: A ? B ? C, with the great variety of combinations and permutations in which these elements, jointly or separately, wholly or in part, can be combined and analyzed.</div> <bR> <div> Instead, as observed in Figure 1, Concordian economics sets these elements in the form of the following equivalence relation: A = B = C. Thus the three terms are strictly and organically related to each other. Concordian economics observes that the three economic phenomena tend to separate themselves from each other. Hence, the trajectory of the distribution of wealth is by common understanding found to be rather static over time: Thus, at first approximation, it can be represented by a straight line. The trajectory of the monetary wealth, because of the relative ease of creation of monetary instruments, tends to be faster and broader than the trajectory of the real wealth. Essentially, the three events can be represented along these lines:</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="http://4.bp.blogspot.com/_rmag1xoEltQ/TIrTdT_OkQI/AAAAAAAAAEQ/hOVyk2tOjy8/s1600/Gorga_3.png" TARGET="_top" TITLE="http://4.bp.blogspot.com/_rmag1xoEltQ/TI"><U><IMG SRC="09590060.png" border=0 width="400" height="262" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></U></A></div> <bR> <div> Figure 3 offers another indication that Concordian economics is non-Newtonian. The mathematics of Figure 3 is non-linear and the geometry is fractal. The mathematics of Concordian economics is available in a number of publications. The fractal geometry of Concordian economics is still largely in the cursor. The topic will have to be reserved for another time.</div> <bR> <bR> <div> Carmine Gorga, PhD, a former Fulbright Scholar, is president of The Somist Institute. He is the author of <I>The Economic Process: An Instantaneous Non-Newtonian Picture</I> (University Press of America, 2002 and 2010) and various other publications.</div> <bR> <div> POSTED BY ERIC F. BROWN AT 8:00 PM   </div> <div> LABELS: <A HREF="http://rheolworld.blogspot.com/search/label/Economics" TARGET="_top" TITLE="http://rheolworld.blogspot.com/search/la"><U>ECONOMICS</U></A>, <A HREF="http://rheolworld.blogspot.com/search/label/Non-Newtonian" TARGET="_top" TITLE="http://rheolworld.blogspot.com/search/la"><U>NON-NEWTONIAN</U></A></div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <bR> <div>  <A NAME="bold_new_directions_in_politics_and"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="5" COLOR="#000000" FACE="Arial" >Bold New Directions in Politics and Economics</FONT></div> <div> <I>The (Defunct) Human Economy Newsletter</I>, March 1991, 12 (1) 3-6, 12.</div> <bR> <div> by</div> <div> Carmine Gorga *</div> <bR> <div>  </div> <div> <B>Editors Corner:</B></div> <div> <FONT SIZE="2" COLOR="#000000" FACE="Arial" > </FONT>  This Newsletter is dedicated to the proposition that the economy exists for the benefit of humans rather than vice-versa. For that to be true it is necessary for the economy to be both humane and sustainable. We invite contributions to this effort.... We are also extremely grateful to Dr. Carmine Gorga for allowing us to print his essay on <I>Bold New Directions in Politics and Economics</I> which begins on the next page. We think that this essay is remarkable in breaking new gourd and would appreciate any feedback to it.</div> <div>    </div> <div> Editorial Staff: Mark Friedman, Steven Hickerson, Jason Kesler, E. Dale Peterson, Donald Renner, Richard Schiming, Robert Simonson, Gerald Alonzo Smith, Economics Department, Mankato State University.</div> <bR> <bR> <div> ABSTRACT</div> <bR> <div> Clearly the times call for bold new directions in politics and economics.  There is a crisis in our thought processes first and in our actions thereafter.  This paper contains the broad outline of a long-considered response to this long-standing crisis.  It is a three-pronged response:  In politics, we must go beyond both Individualism and Collectivism.  In economic policy, we must go beyond (a) prevailing practices of taxation on land and natural resources; (b) concentration of ownership of income and wealth; (c) top-down management of the money supply; and (d) certain forms of organization of industrial and financial assets.  In economic theory, we must go beyond the confines of Keynes' model of the economic system. <FONT SIZE="2" COLOR="#000000" FACE="Arial" > </FONT></div> <bR> <bR> <div> <B>Introduction</B></div> <div>                                  </div> <div> This paper is divided into three sections.  The first treats issues of political science.  The second, issues of economic policy.  The third, issues of economic theory.  A few concluding comments attempt to address more directly the concerns of the members of The Society for a Human Economy.</div> <bR> <div> The work outlined below is the result of over thirty years of research that, at its major junctures, has been carried forward with the assistance of some of the best minds of this century - notably, Professors Vittorio de Caprariis, Robert A. Mundell, M. L. Burstein, and Franco Modigliani. </div> <div>      </div> <div> The title of this paper is suggested not only by the motto of The Human Economy Newsletter, namely "New Directions in Economic Thought and Action," but also by a personal communication to this writer from Professor William J. Baumol.  Upon reviewing a paper entitled "The Dynamics of the Economic Process," Professor Baumol has written: "You are certainly striking out boldly in new directions and your work promises to yield new insights and results."  This is not a singular assessment.  Professor Michele Boldrin has remarked: "I find admirable your effort to combine insights from so varied and different areas of research into a new and fascinating picture."  This work is available as one of the Human Economy Papers and is listed in this Newsletter, Volume 11: Number 1 (March 1990).</div> <bR> <bR> <div> <B>Beyond Individualism and Collectivism</B></div> <div>                                  </div> <div> Both Individualism and Collectivism foster the "I vs.Thou" (I-T) pattern of thinking and action: one promotes the individual at the expense of society, the other promotes society at the expense of the individual.  Both systems are faulty because they are based on abstract entities.  The individual, as pinpointed by Professor Alasdair MacIntyre, is a creation of the last four or five hundred years of political theory.  It is an abstraction.  And a greater abstraction is society by itself.</div> <bR> <div> As society clearly does not exist without the individual, so the individual - the isolated, the lone individual - does not exist without society.  Does a fish live out of water?  Can an individual human being live without tradition, the gift of companionship, the hope of the future?  The reality is composed of an individual human being placed within the social context.  </div> <bR> <div> From the I-T model of political science we must pass to the I-R-T model, the I in relation with the Thou.  Synthetically, this model suggests that the social and political reality is enclosed in the Social Man, the Civilized Person.  (Should we reduce the expression "the Social Man" to Somism?  Or should we prefer Sopism for "the Social Person"?  Personalism will not do: legally, the person is a creation of the state; conceptually, the person - unless civilized - remains isolated from its context).  Analytically, in this model there are three entities to analyze: the I, the Thou, and the Relation linking the two.     </div> <bR> <div> Notwithstanding Descartes, whose formula "I think, therefore I am" had the unfortunate result of reducing the human being to a thinking machine, the I is composed of body, feelings, and mind.  These elements are like organs that operate, freely rather than compulsorily, within an organism.  They can go their own merry way toward a destructive end or they can be fused together into the dignity of the individual human being.  Through this spiritual integration man and woman, the animal, a meager companion for social and intellectual intercourse, is transformed into a potentially civilized person.  </div> <bR> <div> To realize this potential takes an act of volition enclosed in the concerted effort of all human virtues.  It is they that empower men and women, because, as St. Thomas Aquinas said, "virtue is the peak of power".</div> <bR> <div> Since it adds external strength to inner strength, most empowering of all is a procedural virtue that, as Fr. William Ferree, S. M., points out, has been defined only during this century by Pope Pius XI:  social justice.  Its definition is an attempt to return to the concrete Aristotelian conception of justice as justice in action, with the social dimension explicitly added to it.  Social justice is organizing for the discovery and implementation of the just: namely, the common good, the good of the I and the Thou.  In progression, with Paul Tillich, we can then say: "So we shall speak first of justice, love and power in human relations, then of power, justice and love in social institutions, then of love, power and justice in relation to the holy."</div> <div>     </div> <div> The mountain of social order can also be scaled through the path of solidarity: the commonality of interests is approached directly and the range of convergence of rights is left behind.  The path is less rough and threatening, and makes social organization a little easier to achieve.  The goal is the same.  As Pope John Paul II specifies, solidarity "is not a feeling of vague compassion or shallow distress at the misfortune of so many people, both near and far.  On the contrary, it is a firm and persevering determination to commit oneself to the common good; that is to say, to the good of all and of each individual because we are all really responsible for all."</div> <div>     </div> <div> Is the existence of the common good - both as end and means - a pure esoteric matter?  Is it a matter that can be easily dismissed with a grain of cynicism?  Yes, it can; but at one's own risk and peril.  As all other self-fulfilling prophecies, cynicism - no less than realism - gathers what it sows.  This conclusion is, quite surprisingly, reached by both the best religious tradition and the best economic theory, and is offered as a matter of fact as well as deep theory.  As fact, while Professor Milton Friedman speaks of international interconnections that produce a pencil, Pope John Paul II speaks of interdependence "sensed as a system determining relationships in the contemporary world in its economic, cultural, political and religious elements, and accepted as a moral category."  As theory, one field speaks of "general economic equilibrium," "competitive equilibrium, "social welfare"; the other speaks of the "common good."  Economic theory, in the rich tradition epitomized by Professors Kenneth J. Arrow and Gerard Debreu, proves the existence of a social optimum with the help of the logic and mysticism of mathematics; theology proves the existence of the common good with the help of the logic and mysticism of morality.  (Both disciplines list a set of specific conditions to be met for many independent decisions to create an optimum social order rather than chaos; and if those conditions are not respected, in the end, it is neither the fault of theology nor of economic theory.)  While the teleology of economic theory is profit maximization, the teleology of theology is dignity maximization.  The equilibrium of supply and demand creates the market; the equilibrium of rights and duties creates the just.  Both economic theory and theology finally agree that it is the just that creates social order, the only milieu in which the market thrives and men and women can fulfil their human and divine destiny.</div> <bR> <div> But how do we determine what is just?  Procedurally, in the peace of our soul we tentatively ascertain what is just; only then can we try to convince others of the validity of our definition - all the while being open to be convinced by others of the validity of their definition.  Thus we discover the just.  </div> <bR> <div> And we do something else as well.  It is at this precise moment of common agreement that we start getting organized for the implementation of the just; it is at this precise moment that we enter into a pact of solidarity with others, a pact of love, a pact of respect for each other's needs.  While following this procedure we not only empower the I, we also empower the Thou.  Thus we establish a relation of true equality between the two entities. This procedure for the discovery and implementation of the just creates the moral support on which political democracy can be built at every level of human association.</div> <bR> <div> Substantively, since the just calls for a defense of what belongs to us, the dictates of solidarity and social justice demand that we be very certain about the definition of the just.</div> <div>  </div> <div> Historically in Western culture the majority of existing "sacred and inviolable" rights, rights that can be protected in a court of law, have centered around the rights of property.  The radius of these rights is still largely determined by the Lockean definition of property as direct possession of real and financial property.  </div> <bR> <div> Three major developments have occurred since Locke's time:  taxation has become a widespread burden and correspondingly tax evasion an endemic phenomenon; the corporation has become the dominant envelope in which business is conducted; and much business is conducted through the use of credit, especially national credit.  Of these phenomena, national credit seems to deserve a word of explanation.  Looked at in the present, national credit is the power to create new money; looked at prospectively, it is the fountainhead of economic energy and vitality of the nation; looked at retrospectively, it represents the value of congealed toil of every citizen.</div> <bR> <div> These new realities have created new rights, some of which still lack definition.  Among these, the property rights that most need to be explored can generally be described as: 1) The right of every citizen to directly enforce the obligation that all other citizens pay their justly apportioned share of taxes, because if one does not pay taxes others have to pay them - the presupposition is that the tax burden is not lopsided;  2) The right of employees to share in the ownership of the products of the corporation, because wealth (which includes new capital) is created by the combination of labor and capital;  3) The right of every citizen to share in the benefits that the use of national credit can bestow, because all citizens contribute to the creation of the specific values embodied in national credit;  and, 4) The right of "stakeholders" - namely, bondholders, suppliers, customers, and employees - to the preservation of the integrity of the corporation against external capricious and arbitrary forces, because the corporation is an indirect creation of stakeholders; without stakeholders, the corporation collapses.</div> <div>   </div> <div> Since taxes unpaid by someone else affect my property, they might be defined as my negative property (debt).  Such a definition attempts to cover the reality that tax evasion does not deprive often fumbling government officials of the means to perpetrate additional mischief; these excuses are separate political issues; tax evasion, primarily and directly, defrauds other citizens of their property.  Since - as Pope Leo XIII was one of the first to recognize - one is barren without the other, new products might be defined as joint property of their creators, the owners of capital and labor.  Since everyone contributes to its creation, national credit might be defined as common property.  And, finally, since - as Max DePree, among others, has suggested - stakeholders have legitimate interests in the operation of the corporation, the corporation itself might be defined as complex property.  The corporation produces a bundle of benefits: shareholders have a direct and primary interest in these benefits; stakeholders have an indirect and residual interest in them.  The residual rights of stakeholders can be claimed, not against shareholders, but against offending members of the community at large.  As is traditional in the birth of new rights, the differential rights that issue from these definitions are likely to be measured and affirmed first in the political realm rather than a court of law.  </div> <bR> <div> It remains to analyze (a) why these specific rights are selected, (b) what are the limits within which these rights can be enforced, and (c) what are some of the likely effects of either their enforcement or non-enforcement.  These are questions of political economy that are treated next.</div> <bR> <bR> <div> <B>Four Conditions for Free Markets</B></div> <bR> <div> Because of the widely recognized failure of past attempts at regulation, there is a great demand today for the creation of free markets - both in the West and in the East.  But unregulated markets, as Professor Paul A. Samuelson has put it, create Charles Dickens capitalism.  How to escape this dilemma?</div> <bR> <div> The traditional escape route is to have recourse to the definition of the just.  Once a society reaches a fundamental agreement on what is just, or with Aristotle what is due (or, actively, what belongs) to each one of us, the foundation is laid for lasting and peaceable solutions to human problems.</div> <bR> <div> In this decade, we need to reach agreement that the four new property rights mentioned above are indeed just: 1) The right of a private citizen (not simply the government) that another pay his justly apportioned share of taxes;  2) The right of employees to share in the ownership of the products created jointly with capital, products that include new capital; 3) The right of every citizen to obtain access to the use of national credit; and, 4) The right of stakeholders to the preservation of the integrity of the corporation against external capricious and arbitrary forces.</div> <bR> <div> Once these differential property rights are agreed upon as defining most of the current particular "just," the specifics of the translation of these definitions into rights enforceable in a court of law will be easily obtained.</div> <div>      </div> <div> The reason for the selection of these four rights is that, as one goes beyond the rhetoric of current fiscal and monetary macroeconomic policies, one discovers that from the lack of affirmation of those rights stem four policies that have long been dominant in the West - no less than, mutatis mutandis, in the East: (1) Near tax-free status of land and natural resources; (2) Concentration of ownership of income and wealth; (3) Top-down management of money supply; and, (4) Concentration of organization and management of industrial and financial assets. </div> <bR> <div> These four policies little by little, surreptitiously, create Charles Dickens capitalism - or the Gulag.  This result occurs without malice or forethought.  But intentions are, literally, immaterial: they are otherworldly.  It is concrete actions that we are concerned about.  And here a subtle distinction needs to be kept firmly in mind:  Policies do not create actions; people do, people act.  They act, first of all, by accepting or rejecting, improving or corrupting the social fabric they inherit from previous generations.  What economic policies achieve, assisted by a myriad of other cultural factors, is to set limits to actions: limits to the amount of good as well as evil that human beings can accomplish.  Policies, as all other visible and invisible forms of organization of human effort, represent the framework within which human beings act, so much so that most of those who live outside it are by definition the heroes, the martyrs, or the saints.  </div> <bR> <div> With these caveats, it is important to realize that those four policies operate in concert and permit actions that turn to the detriment of everyone.  The poor most of all.  But do not the rich also suffer from inflation and deflation, pollution, exploitation, and conflict that are fostered by those policies? </div> <div>  </div> <div> And what of fear?  What of conflict across national borders?</div> <div>   </div> <div> Still more important is to become aware of the chain of causation that leads to the following dichotomy: enforce those rights, and you create and preserve free markets; do not enforce them, and you foster a phenomenon that used to be called monopoly and, more precisely, can be defined as hoarding of wealth (a) beyond one's needs, (b) to the sacrifice of the satisfaction of other peoples' needs, and (c) holding it in a non-productive state.  This last characteristic of hoarding is the most important from an economic point of view; has been missed by economic analysis; and is still missing from economic theory. </div> <bR> <div> The non-payment of taxes, in addition to shifting the financial burden onto other people, leads directly to hoarding of land and natural resources thanks to the dynamics of two factors:  through resulting higher asking prices, barriers to new entry are raised; and through lower maintenance costs, the protection of previous hoards is reinforced.  But hoarding is also fostered by the illegitimate appropriation of other peoples' (i.e., workers' and even, in some ways, capitalists') wealth: at one time more than another, many industrial products sit unused in factories as well as in private homes (i.e., are hoarded).  Much national credit is also either not used (i.e., is hoarded) or is misused to hoard real wealth.  Finally, many resources are hoarded during takeovers, mergers, and acquisitions: at one stage of the business cycle more than another, factories are boarded up, supplies are unnecessarily stockpiled, and managers and workers are laid off - and are thus, temporarily if not permanently, forced to hoard their skills and abilities. </div> <bR> <div> Four marginal changes, if gradually but relentlessly implemented, would transform negative effects into positive ones.  By a ten percent yearly increment over a decade: (1') Shift the burden of taxation from man-made improvements onto God-given land and natural resources; (2') Expand capital ownership not only through Employee Stock Ownership Plans (ESOPs) and cooperatives, but especially through a non-inflationary and non-deflationary macroeconomic national incomes policy - or, more specifically, shift the on-again off-again call for a "social contract" to the steady call for a legal contract; (3') Institute a system of bottom-up management of money creation (a) for capital expansion only, (b) at cost, and (c) to benefit all; and, (4') Leave corporations absolutely free to grow or decay through internal development, but starting a pilot project with some of the largest ones prohibit them from buying or being bought by other corporations; stop the procedure at the level of corporations doing only intrastate business or some other objectively defined level. Internal growth, yes; external acquisition, no.  We are concerned with methods of growth, not limits to internal growth.</div> <bR> <div> If these four policies are instituted, free markets are not only created but preserved.  Access to the ownership of land and natural resources is made freer for rich and for poor, for present and for future generations.  The right of access to public financial capital is preserved for all.  Private capital - both physical and financial - is protected from external piranhas.  Labor is gradually rewarded more through profits than through wages.  Labor unions benefit from these processes, if they aid in their development.</div> <bR> <div> <B>Hoarding in Economic Theory</B></div> <bR> <div> The prohibition against hoarding exists in every religion, from Judaism to Hinduism.  It became a firm and elaborate tenet of canonic law in the Catholic Church during the Middle Ages.  It is in vigor in Islamic law.  In each context, the prohibition against hoarding is supported by the best economic thinking prevalent in the specific culture.</div> <bR> <div> Yet hoarding has received scanty attention from Western economists during the last four to five hundred years.</div> <div>    </div> <div> The essential reason for this neglect is that, especially with the Reformation, hoarding came to be confused with a similar-looking, but completely different, phenomenon: "accumulation."  When wealth beyond the satisfaction of one's needs legally belonged to the poor, hoarding was morally prohibited; when the accumulation of wealth (rather than work) became a calling sanctified by God, the prohibition against hoarding was rendered ineffective.  Indeed, with Adam Smith, accumulation became identified with what we call investment and was justified as a means to increase the wealth and presumably the welfare of nations.  In addition, during the last fifty years - as D. H. Robertson feared - hoarding has to all intents and </div> <div> purposes been eliminated from the vocabulary of economists because the economic system is being analyzed through the lenses of a formal model which does not include hoarding as one of its component parts.  This is Keynes' model of the economic system.  Any elaboration of that model suffers from the same limitation.  </div> <bR> <div> This inability to take hoarding into account is one of the reasons why that model must be revised.  There are many other independent reasons that lead to the same conclusion.</div> <bR> <div> Once that model is revised, vast new vistas open up to economic analysis.  A fundamental restructure of Keynes' model leads to a system composed of three modules: real wealth, ownership rights over wealth, and monetary wealth.  This transformation is effected through two mental operations:  first, for analytical purposes, the world of real wealth is separated from the world of financial wealth; second, the world of ownership of wealth is re-inserted into the economic system - where it stood at the dawn of economic analysis.  This operation places again the world of morality, politics, and the law at the very core of the economic system - not as an external given, but as one of its internal, integral components.  At the same time, no discipline loses its autonomy.</div> <bR> <div> The three worlds of the real, the legal, and the monetary sub-systems provide a complementary and mutually enriching understanding of the economic reality.  In the new framework of analysis, there is one distinct mathematical model for each perspective from which the economic system can and ought to be studied.  The economic language is precise and unchangeable throughout the discourse, hence it can be safely translated into mathematical terms.  And the language, respecting throughout basic principles of logic, bridges the gap that exists today between technical economic language and common language.</div> <bR> <div> As the new framework integrates the work of various mental disciplines, so it closes the gap that exists within economics: the gap between macro and micro economics.  The new framework describes - in turn - the economic system of the individual person, the corporation, the city, the state, and the world.  The differences among these entities are reduced to differences of quantity, not quality.  As William A. Schirra stresses, "The quality of justice permeates the economic system for all."</div> <bR> <div> This organic description of the economic system as a whole is no longer static, but inherently dynamic.  In fact, the description of the dynamics of the three basic modules is greatly assisted by recent developments in nonlinear mathematics and fractal geometry.  The system as a whole can thus be studied as three solids moving - singly and jointly (one into the other) - in space.  </div> <bR> <div> And the entire construction is anchored to this reality.  Analysis reveals that the system is primarily driven not by government actions and investment decisions taken by groups of people but by individual private decisions concerning the type, the amount, and the timing of hoarding.  Personal responsibility thus becomes the touchstone of the entire economic reality.  </div> <bR> <div> More.  Since it is only goods hoarded that become scarce, it is evident that hoarding causes scarcity - and thus inefficiency.  Implicit in this analysis is an ultimate realization: moral actions are efficient actions.  The gap between morality and efficiency that has plagued our minds for four to five hundred years is closed.  Morality and efficiency go hand in hand.</div> <bR> <div> The validity of these statements can henceforth be measured through computer modeling and econometric analysis.</div> <bR> <div> In this paper we have covered an enormous amount of ground rather breathlessly.  It is now time to take a deep breath and start filling in the many gaps that need to be filled.  The collaboration of the reader is more indispensable than ever.</div> <bR> <bR> <div> <B>Concluding Comments</B></div> <bR> <div> How does this new framework of thought and action address the concerns of the members of The Society for a Human Economy?  It is obviously impossible to reduce the concerns of each and every member to a homogeneous formulation, but the common concern seems to range from the ability of natural resources to sustain our consumerist habits to the set of human relations that are thwarted by the prevailing methods of organizing human effort.</div> <bR> <div> After stating the obvious that no reader is looking for magic formulas and this writer is certainly not providing one, the new framework of thought - if carried out into daily practice - would meet many of those concerns because it is based on personal responsibility: responsibility toward oneself, other human beings, and the planet earth as the center of our universe.  (Since the universe seems to be infinite, each point in it stands at its center.)  The new framework is based on responsibility and the accompanying freedom provided by economic security.  Both characteristics will do wonders to protect our natural resources.</div> <bR> <div> If everyone pays his share of taxes on land and natural resources, these resources begin to be more appreciated for their intrinsic values and therefore they begin to be better used.  (Taxes should be raised upstream to avoid pollution, and not downstream as payment for pollution.)  Also, once these resources are no longer hoarded, more people are free to have access to them - and, provided all other measures called for above are implemented, they will have the financial and cultural means to use them wisely.  </div> <bR> <div> In addition, the resources to be opened up are those that radiate from the downtown of our metropolitan areas: fewer parking lots, fewer lots filled with weeds and rubbish, and fewer abandoned buildings - as well as less forcibly punctuated superdevelopment - at the very core of those areas.  Neither would the next band of land be overcrowded, nor would the band next to it be underdeveloped, i.e., hoarded by the few for the benefit of the few, hence necessitating a leapfrog over to the next band.  Nor would the wilderness that extends beyond be punctured by unsightly and costly developments.  Just think of the financial costs and the frayed nerves that are expended due to overstretched lines of commuting to work and pleasure, lines of communication, lines of police and fire protection, lines of sewer and garbage collection.  Are not these lines overstretched because many plots of land in between are hoarded expecting their price to become higher and higher - or, in recessions and depressions, to fall less steeply than other prices?</div> <bR> <div> To develop lands wisely from the core cities outward is to practice conservation.  That would be the ultimate effect of a progressively higher tax burden on land values, provided it never reached confiscatory levels.  And a similar effect would result from higher taxes on natural resources.  Would not all non-renewable energy sources be treated with greater respect if they were taxed for the benefit of all?  Indeed, by raising their development cost, would not the gap with the production cost of such renewable energy sources as solar cells become smaller?</div> <bR> <div> Surely consumerism is the malady of the age.  But to consider it the cause, rather than the effect, of our problems is misguided.  Consumer goods are mostly stolen away from their rightful owners, the people who directly or indirectly produce them.  That alone creates a guilty conscience that contributes to their destruction.  But there are many other causes that produce the same effect: if one is dissatisfied with one's inner world - namely, the world of work, the world of self-expression - then one searches for satisfaction in the external world.  Hence goods are sought after as an expression of one's power.  And then, if one acquires them on credit, one hates them before, during, and after the act of consumption as they become an expression of self-enslavement.  Thus not only are those goods destroyed at that stage, but more trees, more fauna, more landscapes are destroyed to generate income to pay for goods already destroyed.</div> <bR> <div> Switch the reality of work from a wage to a profit paradigm by enabling employees to become owners of corporations in which they work, and you put men and women in charge of their destiny; in charge of relations with fellow workers; in charge of waste.  </div> <bR> <div> Let everyone benefit from the blessings of capital formation through a switch from a private saving to a national credit paradigm, and you undermine the classic rationale for hard-heartedness and selfishness: "I got mine the hard way; get yours the same way (if you can)."  </div> <bR> <div> Let entrepreneurs develop corporations in the old-fashioned way rather than by steal and stealth, and all beneficiaries will feel secure in their income stream.  </div> <bR> <div> What can be expected as the combined result of these four marginal policy changes?  Perhaps one effect will be of overwhelming importance:  The aim of economic life will be the enhancement of one's dignity rather than one's cash balances.  Work for money will become again work for production of valuable goods and services.  From service exclusively to oneself and, often, to evil we will pass to service to oneself to others and to God.</div> <bR> <bR> <bR> <div> <I>* Dr. Gorga is a Fulbright scholar.  A lecturer and author of numerous publications in economic policy and fisheries development, he is president of Polis-tics Inc., an economic consulting firm in Gloucester, MA.  He is currently working on a book entitled "A CIVILIZATION RENEWAL: Through Personal Responsibility and Economic Security." </I></div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <div>  <A NAME="four_economic_rights"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>Four Economic Rights</div> <div> Social Renewal Through Economic Justice for All</div> <bR> <bR> <div> Carmine Gorga, Ph.D. </div> <bR> <bR> <div> To realize the importance of the four economic rights examined below, one has to place them in the context of the forces they have to oppose in order to assert themselves. The opponents of rights are not some vague and unidentifiable forces. The opponents of rights are the active forces of privilege.1 The essential differentiation between rights and privileges is this. Rights unite; privileges divide. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>A NATION DIVIDED BY PRIVILEGES</B></div> <bR> <div> The dynamics of privilege become apparent in nearly every morning newspaper. We know the headlines by rote: this group wants a tax reduction; that group wants an increase in services. The dynamics are all there. Privileges, since they are not due to us, are always acquired to the detriment of other people. Hence the recurring struggle of wills. No issue is ever settled. No one is ever secure about anything. </div> <bR> <div> Based upon such quicksand, there are never enough resources to satisfy the grab for privileges. </div> <bR> <div> Hence, it takes force to extract privileges. But once the privilege is obtained, its use fosters passivity: there is nothing to do but to enjoy the privilege until the next challenger comes around. By then the will and the strength of the user of privilege has generally been so enfeebled that surrender is near. Yet the newly dispossessed will rise again. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>A NATION UNITED BY RIGHTS</B></div> <bR> <div> Rights unite us all. They make us all equal.2 The magic of rights is this. Once a right is asserted in one particular case, it is asserted for all. (It is the extension of the application of rights that often is a horrendously slow process.) </div> <bR> <div> The opposing political will must be broken. The opposing will is more easily broken if the request is advanced in a reasonable fashion, hence the success of nonviolent political movements and if the request makes it absolutely clear that the privileged group is not going to be denied the exercise of the right that is proposed. The right must be universal. </div> <bR> <div> Once the opposing will is broken the right is exercised by all and it is exercised actively. As opposed to privileges it takes a continuous act of the will to exercise that right. The right then implies a duty. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>FOUR ECONOMIC RIGHTS</B></div> <bR> <div> As there are four factors of production, namely, land, financial capital, labor and physical capital, so there must be four specific rights of access to those factors otherwise, instead of being productive, as Pope John Paul II points out, we will be marginalized.3 Rooted in the natural law, these rights can be formulated as follows:</div> <div>  </div> <div> - the right to share in the bounties of nature, </div> <div> - the right to share in the bounties of national credit, </div> <div> - the right to own the fruits of one's creation, </div> <div> - the right to protect the fruits of one's creation. </div> <bR> <div> These four rights, once exercised in full, will renew the very roots of our culture and our civilization. They will work from within existing structures and might allow us to transform the provision of goods and services from the brutal exercise it has lately become into a very spiritual enterprise, as it inherently is.4 </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>THE RESOURCES OF THE NATION ARE POTENTIALLY INFINITE</B></div> <bR> <div> The resources of the nation are potentially infinite. The evidence that this statement is true is overwhelming.5 The issue therefore is not scarcity, but greed justified by social disorganization. No one knows today what is enough. Consequently one is compelled to accumulate more than one needs. When one does that, one deprives other people of their due because e at any one moment resources are finite. </div> <bR> <div> If the social organization is right, everyone knows what is enough. What is enough is what one needs today. If the social organization is right, one can assuredly implement the Gospel's injunction: "Look at the birds of the air... Consider the lilies of the field... O men of little faith..." </div> <bR> <div> The issue then is one of social organization. If the resources of the nation are potentially infinite, everyone has the right of access to them. They are a common good. </div> <bR> <div> But how can society enforce such a right? The issue is not only one of will but also one of reality. Some solutions work, some do not. Some solutions work in one society, at one time; some do not. 6 The solution that seems to be best applicable to the needs of the modern world lies in the use of taxes on land and natural resources. They have to be generally higher than they are today and taxes on buildings and other human activities have to be correspondingly lower. </div> <bR> <div> Owners who do not want to, or think they cannot afford to, pay justly and fairly apportioned taxes on land and natural resources will not be dispossessed; they will simply sell their property and enjoy the fruits of interest on the money obtained in exchange for the transfer of their right of ownership to more capable hands who will make, for instance, the weeds and rubbish filled lots, in too many downtown areas today, bloom. These taxes are effective because they tend to eliminate hoarding, thus opening access to unused resources that ought to be used. </div> <bR> <div> Let us briefly put the issue another way. We all have the duty to pay taxes on our property of land and natural resources. We all have this duty because most of the value of our land and natural resources comes first from God or Nature, if you will and from the community thereafter. A rock in Arizona is worth a pittance; a rock in Manhattan is worth lot. The difference lies in what the community brings to the rock: sewer lines and telephones lines, and on and on. </div> <bR> <div> Correspondingly, we all have a right in this matter. We all have the right to enforce the payment by all of a fair assessment of taxes on land and natural resources because, if one does not pay his fair share of such taxes, all others will have to make up the balance. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>THE RIGHT OF ACCESS TO NATIONAL CREDIT</B></div> <bR> <div> Either in a positive or negative way, we all contribute to the value of national credit. Therefore, national credit is a common good<I> par excellence</I>. It belongs to all of us. </div> <bR> <div> National credit is a precious resource. From certain points of view it is more precious than natural resources: misuse of natural resources reduces their availability and increases their price. Misuse of national credit reduces the availability and in creases the price of all goods and services. National credit is mostly an untapped resource: what central banks tap is mostly bank credit. Bank credit is created by the savings of a limited number of people; national credit is created by us all. </div> <bR> <div> The use of national credit constitutes one last frontier. We must not mishandle it as we have mishandled so many other frontiers in the past. Properly handled, the use of national credit will function like manna from heaven. It will fuel our creative engines to make us satisfy our immediate as well as our future needs. Properly used it will be just sufficient to our needs. We will always have enough of it. </div> <bR> <div> In-depth consideration of the potential use of national credit leads to the formulation of three essential criteria for its proper use: 1) national credit must be used only to issue loans that are necessary for the creation of new wealth; 2) it must be issued at cost; 3 ) it must be issued to the benefit of all. </div> <div> The rationale for the first criterion is best seen in the negative. National credit cannot be used to finance the purchase of consumer goods because these goods do not generate the income necessary to repay the loan. National credit cannot be used to finance the purchase of goods that are to be hoarded. National credit cannot be used to finance the purchase of government debt unless the debt is issued to create new wealth. </div> <bR> <div> The rationale for the second criterion is easily specified. Interest rates for credit to create new wealth must cover only the cost of administration of the loan instruments and insurance of default risks. </div> <bR> <div> The rationale for the third criterion is more complex. Some people are inept at creating wealth; some do not care about it. We must all pursue our destinies. And we must not become slaves of the creators of wealth in the process. The application of this criterion, rather than a limitation, presents us with a tremendous opportunity. It means that entrepreneurs have to share the ownership of the wealth they create with all those who help them create it: Employee Stock Ownership Plans (ESOPs) and cooperatives are some of the ideal legal instruments that serve to achieve this aim.7 </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>THE RIGHT TO OWN THE WEALTH ONE CREATES</B></div> <bR> <div> If men and women have an indisputable right to own common goods as land and national credit, how much stronger is the right to own the wealth one creates? That is the fundamental premise on which ESOPs and cooperatives rest. They are legal instruments that allow a fair apportionment of the right of ownership over the wealth that employees create in cooperation, of course, with the owners of capital. </div> <bR> <div> Employees are outside contractors. They offer their labor and receive wages. They have no right to the wealth created by the corporation wealth which includes consumer goods, goods to be hoarded and capital goods. </div> <bR> <div> ESOPs and cooperatives change all that. Following an established set of rules and regulations, they transform employees from contractors into stockholders. From outsiders employees become insiders. Employees then become much more efficient workers. Provided ESOPs and cooperatives are not simply window dressing, legal arrangements to cajole the taxman, but in fact do respect the whole person of the employee, they are mostly successful. ESOPs multiplied during the Eighties. </div> <bR> <div> The question is how can ESOPs and cooperatives be made tools of national policy? The answer lies in seeing them not as concessions from existing owners and managers to employees, but as means to give life to universal rights. Three procedures might speed up the tempo of the assertion of this right. </div> <bR> <div> First, when the use of national credit is called upon to assist in the creation of new wealth, the use of ESOPs and cooperatives must be made mandatory. There will still be no compulsion in this practice because those who did not want to extend the right of ownership to their employees would be free to recur to existing, although more expensive, credit channels. </div> <bR> <div> The second procedure for a speedy assertion of this right is to link any grant of public money to the expansion of ownership of the resulting wealth to all employees of corporations creating that wealth. </div> <bR> <div> The third procedure is to link the vicissitudes of inflation and deflation to the exercise of this right. We all more or less agree that during inflationary periods asking for higher wages adds to the flames of inflation just as during periods of deflation ion imposing lower wages adds to the ravages of deflation. These negative spirals must be broken. They are generally broken through the exercise of force or the (generally vain) promise of future advantages. How much more reasonable is it to prevent the problems by the use of fundamental rights? </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>THE RIGHT TO PROTECT WHAT ONE OWNS</B></div> <bR> <div> Included in the right of ownership of wealth is the right to protect it from outside incursions into its uses and enjoyment. As Pope Leo XIII maintained, the right of property is "sacred and inviolable."8 The consequences of this right have been mostly feared and resented by governments and reformers alike. But it is proper and unavoidable. All justification for that fear and resentment will be annihilated once the ownership of wealth becomes not a privilege reserved for the few but a common right for all. </div> <bR> <div> To this right corresponds a duty, the duty to respect other people's property. This set of rights and duties can assume a hundred different manifestations, from trivial to momentous. Perhaps the application that is of utmost importance today regards the buying corporations as if they were "things" and not entities deeply affecting the lives of the people within and without their direct area of influence. This practice produces uncountable horrors.</div> <div>  </div> <div> The practice of corporate aggrandizement has deep roots in human nature. An old example is how hermits became monks and monks created institutions too large for their own good. So new religious orders were created. And the process started anew again and again. We have had more than a century of intense experience to prove that this practice creates havoc in the economic realm. It must be stopped. </div> <bR> <div> Only if we put a stop to this practice, will we protect our civilization from the quick and the cunning. Thousands of years ago, we made a huge stride forward when we decided that the murder of another person was not a private affair. We will make a huge stride forward when we will realize that the buying and selling of corporations is akin to industrial murder. This practice cannot be tolerated. Captains of industry should not operate in a business environment in which the fruits of the labor of many can be gobbled up at the whim of any operator who, with the promise of quick results, gains command of untold financial resources. Our time horizon has to widen beyond the next accounting period; our horizon of concerns has to expand beyond the production of goods and services. What we affect, in the final analysis, is always the life of particular men and women. </div> <bR> <div> Since the practice of buying and selling corporations is so ingrained, we cannot hope to put an abrupt stop to it just as we cannot abruptly increase taxes on land and natural resources to the desired level.9 We must start by imposing this prohibition on a limited number of the largest corporations and gradually extend it to the smaller ones until it reaches a level of reasonableness that is satisfactory to everyone, including lawyers and investment bankers. But industrial murder must be stopped. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>AN ORGANIC POLICY</B></div> <bR> <div> These four rights form the backbone of an organic economic policy that will gradually produce self-reinforcing benefits. The dissolution of the power of privilege that ensues will, of course, require constant vigilance, but it will proceed by its own internal dynamics and thus will direct the whole gamut of problems affecting our world today on the way to a proper solution. There are many ways of demonstrating the validity of this position. The simplest is to expand upon the set of distinctions between rights and privileges outlined at the outset of this discussion. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>THE LARGER CONTEXT</B></div> <bR> <div> In the beginning an attempt was made to place this discussion within the historico-political context. These issues can also be studied from the sociological, teleological and theological viewpoint. It is on this vast ground that we will find the ultimate justification for the suggested policy. </div> <bR> <div> Privileges are based on envy, use greed as the engine to set the social dynamics in motion, are extracted through violence or the threat of violence and foster sloth. </div> <bR> <div> Rights are based on self-sufficiency, use self-reliance as the engine to set the social dynamics in motion, are exercised through mutual respect and foster the dignity of the person. </div> <bR> <div> What did God -- or Nature, or at the limit, our own will -- put us on this earth for? </div> <bR> <bR> <div> <B>Notes,</B><I>Gorga</I> </div> <bR> <div> 1. The early colonists and those who freely followed them in an ever widening procession from every corner of the world were propelled upon these shores by the same desire: to escape from he iron clasp of privilege. </div> <bR> <div> 2. To be equal does not mean to be identical. To be equal means that no one has privileges. To be equal means that everyone has the same rights. </div> <bR> <div> 3. See, e.g., Pope John Paul II, Encyclical <I>Centesimus Annus</I> (1991) 33. The Welfare State is blind to this reality. Hence, it goes after the symptoms of poverty and compounds the difficulties by trying to establish rights via entitlements. All that is wrong with this shortcut becomes evident only if it is realized that entitlements are not rights. They are privileges masquerading under the cloak of rights. </div> <div>  </div> <div> 4. Is not growing wheat a glorious spiritual exercise? Is not making bread a glorious spiritual exercise? Is not sharing information a glorious spiritual exercise? No. Michelangelo, Rembrandt and Van Gough were not the only human beings blessed with the ability to give so much to all of us. The old lady who sweeps the floor gives us just as much every day. Without her services we would either be compelled to sweep the floor ourselves -- God forbid -- and so deprive ourselves of the enjoyment of Michelangelo, Rembrandt and Van Gough. Or we would be living in a pile of dirt. </div> <bR> <div> 5. Not only is Einstein's formula for the conversion of mass into energy assuring us that a grain of sand does indeed contain all he energy that we will ever need. Not only is the sun's energy falling on a small patch of the Sahara desert capable of producing all the energy that we will ever need. Both Israel and Saudi Arabia, as the few positive headlines of this exasperating century shout, are making the desert bloom. Saudi Arabia has become a net exporter of wheat! </div> <bR> <div> 6. In ancient Israel, the solutions that gave access to natural resources to all were essentially two. For the short run, all the uncollected staples belonged to the poor. They had free access to them. For the long run, the institution of the Jubilee was supposed to take care of the fundamental issues: Ownership of the land was to be relinquished every 49 or 50 years and returned to the original owner. During the Middle Ages, the Catholic Church mostly enforced the rule that all "surplus" wealth <I>legally</I> belonged to the poor. Islamic banking institutions are still fighting against usury, in the face of enervating snickering from the international financial community. Modernity, the Age of Entitlements, has desperately and disastrously tried to enforce a different rule: redistribution of wealth. Some applications of this rule have assumed the form of "land reform"; as if that policy were not unfortunate enough, most have assumed the myriad forms of forced transfers. </div> <bR> <div> 7. For those who are outside the work force and are not yet independently wealthy, traditional and nontraditional channels of charity must be used to achieve the substance -- although not the form -- of economic justice. This is not to say that the form and substance of economic justice cannot eventually be united in nontraditional policies that will eliminate the need for charily altogether. </div> <bR> <div> 8. Pope Leo III, Encyclical <I>Rerum Novarum</I> (1891) 35. </div> <bR> <div> 9. The use of national credit and the expansion of ESOPs and cooperatives are inherently gradual processes, simply because the creation of new wealth is unavoidably a gradual process. </div> <bR> <bR> <div> ____________ </div> <div> <B>Carmine Gorga</B>, lecturer and author of numerous publications, is president of Polis-tics, Inc., a consulting firm in Gloucester, MA, and is currently working on a book entitled <I>A New Monetary Order: Based on Rights, not Privilege.</I></div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></div> <bR> <bR> <div>  <A NAME="toward_the_definition_of_economic_rights"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>Toward the Definition of Economic Rights</div> <bR> <div> by Carmine Gorga</div> <bR> <div> <I>Reprinted with permission from</I></div> <div> Journal of Markets and Morality</div> <bR> <div> Volume 2, Number 1 • Spring 1999  Pages 88-101</div> <bR> <bR> <div> <B>Introduction</B></div> <bR> <div> With the assistance of a rigorous analysis of a long sweep of history by Daniel Rush Finn (1), the central legal dilemma of our age can be identified as follows: We either redefine property rights or we define economic rights. This essay attempts to define economic rights.</div> <bR> <div> Currently, the terms economic rights, property rights, and entitlements are treated as nearly interchangeable synonyms. We will see that these entities are, in fact, connected to one another by many subtle links of timing sequence and by many overlapping intellectual conditions determining their respective identities. In the process, distinctions will emerge that separate these three entities from each other and firmly implant economic rights within the structure of the theory of justice.</div> <bR> <div> From a practical point of view, the judgment that economic rights are neither entitlements nor the same entity as property rights leads to a fundamental realization. Since no accepted definition of economic rights can be found in theory, there is no rationale for the exercise of economic rights in practice. There is observable evidence of access to economic resources, but, clearly, the fact of access is not the same as the right of access.</div> <bR> <div> The task of defining economic rights assumes particular importance because these rights occupy a pivotal position in an integrated system of social thought. They can be conceived not only as the focal point of economic policy and economic theory, but they can be construed as the keystone in the arch of economic justice. To anticipate the conclusion of this essay, only those who exercise economic rights can be said to participate in the economic process in full dignity and self-reliance.</div> <bR> <div> <B>Toward the Definition of Economic Rights</B></div> <bR> <div> To clarify issues concerning the definition of economic rights, it might be useful to begin with an overview of three factual distinctions between economic rights, property rights, and entitlements. These distinctions can be taken as facts at this stage of the discussion but they will be justified in the course of the argument. First, the content of these three entities is different. The object of property rights are marketable things, tangible or intangible things such as material goods and services. The object of entitlements are human needs, from food to shelter to health. The object of economic rights are economic needs. Second, the legal form of these three entities is different. Property rights are concrete legal titles over existing wealth; economic rights are abstract legal claims over future wealth; and entitlements are moral claims on wealth that legally belong to others. Finally, the quantity that they measure is variable. While both property rights and entitlements relate to existing wealth, and therefore a necessarily finite quantity, economic rights relate to future wealth, an unknown and elastic–if not a potentially infinite–quantity.</div> <bR> <div> Economic rights can be defined as follows: Economic rights are rights of access to resources–such as land, labor, physical, and financial capital–that are essential for the creation, legal appropriation, and market exchange of goods and services. Economic rights are self-evident. However, for their full recognition, economic rights require at least three conditions:  1. they require a knowledge of basic economic needs for a person to operate in the economic world;  2. they require a knowledge of their legal characteristics; and  3. they have to be fully integrated into the theory of justice. This essay attempts to articulate a framework that satisfies these three conditions.</div> <bR> <div> <B>Basic Economic Needs</B></div> <bR> <div> The basic economic needs of any human being extend over one or more functions that are related to the creation, legal appropriation, and market exchange of goods and services. These needs have traditionally been satisfied through access to labor and land, which also includes natural resources. In the modern world, one must include access to physical as well as financial capital among the prerequisites of an independent and productive economic life.</div> <bR> <div> There is no economic activity that does not require labor, land, and natural resources to be carried out. No poet or painter, let alone an industrialist, can perform any function without access to these resources. Furthermore, once money is seen as a means of exchange, it will be conceived to include all forms of wealth, whether physical or financial wealth. Then it can be seen how, even in a condition of barter, money is essential to carrying out any market function. And equally essential to carrying out any economic function today is access to physical capital, whether it is a pen, a computer, or a shovel. In previous times, poets may have subsisted on berries and may have been able to produce their own papyrus on which to scratch their poems. Today, we have restricted our own capabilities through the acquisition of specialized knowledge and so, in order to function properly in the economic sphere, we need access to physical capital that is generally owned by others. To put it restrictively, access to labor, land, natural resources, financial, and physical capital is essential to the performance of any economic function–whether it is production, legal appropriation, or market exchange of wealth. Indeed, access to these resources is essential to the very existence of human life.</div> <bR> <div> This is generally well-known. What is not known–and, if known, not readily granted–is the legal fact that only productive people acquire by right the title to marketable products and services, a title that is independent of other people’s will. And what is openly disputed is the claim that only productive people have the legal as well as the practical means to exchange goods and services in the market. The great tension that exists in the field of entitlements is the attempt to overthrow these basic legal and economic realities.</div> <bR> <div> In accordance with these complex practical and theoretical conditions, four economic rights can be isolated from other potential rights, which must be placed at the foundation of a modern economic policy that is concerned with the production, legal acquisition, and exchange of marketable goods and services. These four rights are formulated in correspondence with the factors of production of classical economic analysis; namely, land, labor, and capital–with capital being specified in both its financial and physical aspects. These rights belong to each human being, and can be expressed in these terms:</div> <bR> <div> • The right of access to land and natural resources</div> <bR> <div> • The right of access to national credit</div> <bR> <div> • The right to own the fruits of one’s labor</div> <bR> <div> • The right to protect one’s wealth</div> <bR> <div> This system of rights can be subdivided in a variety of ways. To be established singly and jointly, these rights have to be justified on many grounds. In some of my earlier work (2), readers can find the contours of the economic, political, and moral rationale for these rights. Our primary focus here has to do with the legal grounds of these rights.</div> <bR> <bR> <div> <B>Some Legal Characteristics of Economic Rights</B></div> <bR> <div> Economic rights are rights of access to resources that are essential for the creation, legal appropriation, and market exchange of goods and services. In order to obtain a more precise understanding of this definition, the legal characteristics of economic rights can be pinpointed as follows.</div> <bR> <bR> <div> <B>Economic Rights Distinct From Property Rights and Entitlements</B></div> <bR> <div> Economic rights can be clearly distinguished from property rights, once it has been acknowledged that economic rights are the necessary precondition for the creation and the legal establishment of property rights and entitlements. Property rights cannot be identified with economic rights. Property rights are the bundle of dominion rights over existing goods and services that are demanded for the fulfillment of human needs. Economic rights, on the other hand, are rights of access to resources that are needed to create future goods and services. This differentiation is transparent when economic resources are not owned by anyone at the time they are energized to serve in the production process. For instance, in the process of creating consumer goods, one can fish or hunt for animals that are still held in the commons, and the only legal tool that one needs is the right of access to those resources. Moreover, one can make use of a financial resource such as credit–an entity that manifests itself as the power to create money not exclusively by a government agency but by private parties as well. Indeed, by looking deeper into the subject it becomes evident that the power to create money belongs to the people exclusively, and the role of government agencies is confined to administering that function properly. The differentiation between economic rights and property rights holds even when resources are owned by someone else at the time they are acquired and energized to serve in the production process. The bundle of legal prerequisites involved in accessing those resources constitutes the set of economic rights. Thus, the process of creating new wealth, of legally acquiring ownership or transferring ownership of wealth, involves the exercise of economic rights. Ownership of specific items of wealth involves the exercise of property rights. Property rights are static; economic rights are dynamic. Property rights involve stocks of wealth; economic rights involve flows of wealth.</div> <bR> <div> Entitlements must be distinguished from economic rights. Entitlements transfer the possession of specific property (e.g., money or things) and property rights from one person to another–forcibly, if necessary, under penalty of retribution from an agency of the state. An example of this power is exercised by the Internal Revenue Service. Entitlements relate to existing wealth.</div> <bR> <div> Both property rights and entitlements have a clear market value and are social to the extent that if society did not exist, property rights not only would not exist but would not be necessary to human existence. Property rights and entitlements are social and alienable, while economic rights are innate and inalienable. Since economic rights are inextricably linked to the basic requirements of life, they accompany the very existence of life; and unless one wants to live the life of enslavement–a condition that is not legally permissible in a civilized society–they are also not alienable. Succinctly put, provided economic rights are in vigorous existence, the denial of an entitlement or a property right would not necessarily imply a denial of the right to life. With due qualifications, singly and jointly, the denial of the right of access to land and natural resources, the denial of the right of access to national credit, the denial of the right to enjoy the fruits of one’s labor, and the denial of the right to protect one’s property, essentially amounts to a denial of the rights to life and liberty, and certainly to the denial of civilized life and liberty.</div> <bR> <div> The major differences between economic rights, property rights, and entitlements can be summarized this way: Economic rights represent a legal claim on potential property rights; property rights represent a legal claim on wealth that is already in existence; and entitlements represent a moral claim on wealth that is legally owned by others.</div> <bR> <bR> <div> <B>The Differentiation Between Private Rights and Public (or Constitutional) Rights</B></div> <bR> <div> The proposed set of economic rights offers the interesting theoretical possibility of establishing the category of public rights within the theory of justice. For some reason, the category of public rights does not exist in any of the texts or the standard reference books of Anglo-Saxon legal literature. Therefore, it seems that in order to realize this possibility, we need to go back to Immanuel Kant’s Philosophy of Law (3), where the foundation for the distinction between public and private rights is clearly defined. However, it is important to realize that Kant left the category of public rights as an empty set. He concluded his analysis by stating that “… the Matter of Private Right is, in short, the very same in both”–namely, in the “sphere of private right” as in the “sphere of public right” (4).</div> <bR> <div> The acceptance of economic rights would give content to the category of public rights, and would help to differentiate between public and private rights within the field of economic justice. This differentiation would be useful not only in establishing continuity of thought with the range of political freedom where most public rights are fully recognized. The immediate usefulness of the category of public rights would consist in clearly distinguishing property rights from economic rights. Property rights would be categorized as private rights and economic rights as public rights. If the category of public rights were unacceptable for some reason, then economic rights could be classified as constitutional rights.</div> <bR> <bR> <div> <B>Another Difference Between Property Rights and Economic Rights</B></div> <bR> <div> If the distinction between private and public (or constitutional) rights is accepted, one can further clarify the essential differences that exist between property rights and economic rights. By confining property rights to the category of private rights and assigning economic rights to the category of public (or constitutional) rights, one could clearly see that property rights regarding a specific item of wealth belong to us exclusively on either a personal or an individual basis. Economic rights, instead, are those that belong to everyone on a universal basis.</div> <bR> <div> To eliminate a potential source of confusion, it is necessary to classify the right to ownership in general as an ancillary economic right and therefore as a public right–a right belonging to everyone. While the right of ownership over a specific piece of property would always be classified as a property right and therefore as a private right, economic rights, instead, would belong exclusively to the category of public (or constitutional) rights.</div> <bR> <div> These are not simply intellectual distinctions. They have a solid foundation in fact. While property rights restrict other peoples’ freedom, because they necessarily exclude people from using specific pieces of property, economic rights enlarge the range of freedom for everyone. Economic rights are similar to voting rights. Voting rights do not restrict the freedom of anyone; rather, they enlarge the range of freedom of everyone.</div> <bR> <bR> <div> <B>The Differentiation Between Rights in Posse and Rights in Esse</B></div> <bR> <div> Public (or constitutional) rights are potentialities; they are rights in posse. For example, the right to vote is a potential right and not the actual act of voting. Public (or constitutional) rights are recognized by the community on behalf of all its citizens. Private rights, on the other hand, are granted by the community to individual persons exclusively. Thus, economic rights are rights in posse and property rights are rights in esse.</div> <bR> <div> In these theoretical questions, the issue of the practical usefulness of economic rights is embedded. Succinctly stated, their usefulness rests on the fact that they represent a legal claim on future property rights. In other words, economic rights, as many other rights, represent legal potentialities. To distinguish them from other rights, these potentialities perform a specific function. They represent opportunities to create wealth. Thus, their exercise allows people to exist in the economic sphere with full dignity and a degree of interdependence. Since, by nature, economic rights are universal they represent a fair distribution of opportunities to create future wealth.</div> <bR> <bR> <div> <B>Rights and Responsibilities</B></div> <bR> <div> From Giuseppe Mazzini (5) to Oliver Wendell Holmes (6), it has been recognized that the very essence of rights is that they imply responsibilities. There are various reasons for the existence of an indissoluble link between these two entities. The first reason can be found in the very nature of rights observed in the full glory of social and communal relations. If rights are innate, they belong to all human beings universally. Therefore, since the community does not possess them, when it assigns them to each individual person–i.e., when their title is conferred by society–the community must request a quid pro quo as compensation for all other people. The quid is the responsibility. It is the assignment of responsibilities that, given community relationships, provides legal legitimacy to the assignment of rights.</div> <bR> <div> Then there is the issue of moral legitimacy. Society cannot give rights away without simultaneously assigning responsibilities. Responsibilities, so understood, confer moral justification for rights. One justification for this linkage can be found in the domain of political science. David E. Stephens, a moral theologian, once suggested the following to me in a letter: “If one has responsibilities but no corresponding rights, then one is bound by and a victim of necessity–in the form of some kind of tyranny. If one has rights and no corresponding responsibilities, then one is unaccountably free, a state of anarchy.” He went on to make an important philosophical argument: “Yet, in both cases the linkage between right and responsibility is inescapable: If one is bound by necessity, either one has a responsibility to conform to necessity or to suffer the alternative sanctions. If one is unaccountably free, then either one is self-accountable or self-destructive. Barring destruction of the party or parties in either state, some responsibility or some rights must coordinate with the state of necessity or freedom. Between these polar states, a full spectrum of proportionality of coordinated rights and responsibilities are to be found.”</div> <bR> <div> A society that wants to be civilized must link people together through a set of mutual rights and responsibilities. Human relationships then become legal because they are moral, and they are moral because they are legal. From one perspective, responsibilities are the quid pro quo that diminishes the reasons for society to ever take rights away from individual human beings, and thus binds society to the individual person. From the other side, responsibilities represent what is given back to society, and thus bind the individual person to society. In either case, responsibilities provide the moral justification for rights. If the right balance is found, the statesman builds not only upon a moral foundation but he also ensures stability for the future. Members of society will not desire to alter those relationships.</div> <bR> <bR> <div> <B>Corresponding Economic Responsibilities</B></div> <bR> <div> Responsibilities cannot be superimposed upon rights arbitrarily. Rather, they are an inherent part of them, and are time- and place-specific. If the rights are conceptual, then the responsibilities must be conceptual. Yet, as soon as the exercise of rights becomes concrete, their inherent obligations become legal obligations–obligations, that is, enforceable in a court of law.</div> <bR> <div> All too briefly, since the arguments belong mostly to the field of economic analysis and economic policy, the responsibilities that one might want to associate with the four economic rights enunciated above can be pinpointed as follows. In correspondence with the right of access to natural resources, there ought to be the duty to pay taxes for the use of those resources. The basic rationale for this duty is not only that natural resources are a common good and the good of all requires that they be equitably shared, but that the payment of taxes is a token compensation for the exclusion of others from the use of those resources. Furthermore, the rationale is that much–but by no means all–of the value of one’s property derives from communal efforts (e.g., the provision of water, sewer, and electric lines; schools, theaters, and museums). The rationale is also that by paying taxes on land and natural resources one eliminates the incentive to hoard those resources and thus, with full compensation, one makes the resources that are hoarded potentially part of the commonwealth through voluntary market exchanges. The alternative is clear: One can hold on to the land but one must pay taxes on those holdings. Taxes on land and natural resources cannot be construed as “takings.” Quite simply, they represent payment for the provision of public services received directly by the owner of the land. The extent to which taxes on land and natural resources should exceed the value of the public goods received can be ascribed to payment for the social and economic benefits of the absence of hoarding.</div> <bR> <div> In correspondence with the right of access to national credit there ought to be the duty to repay the loan. The exercise of this right should be subjected to the following restrictions: (1) Access should be limited to capital credit to create new wealth (consumer credit, credit for paper transactions, as well as credit for transfer of ownership titles would not qualify); (2) It should be issued to benefit all participants in the enterprise; and (3) It should be issued at cost. The rationale for the basic duty to repay the loan is that national credit is a common good. Failure to repay the loan causes the pool of common resources to be drained. Worse yet, due to inflationary effects, by not repaying the loan one debases the currency to the detriment of everyone–the abuser of the right included.</div> <bR> <div> Corresponding to the third right mentioned above, the right to own the fruits of one’s labor, there ought to be the duty to meet the obligations outlined in the performance of the work. Likewise, corresponding to the right to protect one’s wealth, there ought to be the duty to respect other people’s wealth.</div> <bR> <div> A brief note regarding the implementation of these duties should be appended here. As it can be seen from this list, the obligations are not obligations of the state. If the state does not have economic rights to apportion, it cannot assume economic obligations to fulfill. The obligations flow from individual human beings to other human beings. The state can only administer the policies that make for an easy fulfillment of those obligations.</div> <bR> <bR> <div> <B>Theory and Practice</B></div> <bR> <div> The natural mutuality of interests and concerns among human beings makes for an integration of rights and responsibilities. We have seen that this integration is such an essential part of the theory of economic rights one might conclude that the link forms an implicit contract. However, does this imply that the theory is always respected in practice? Since the law does not have a soul, since it does not have an essence of its own, there is no ultimate justification in the law for this linkage. The justifications we have found occur in the domain of morality, sociology, politics, and philosophy, but not in the law. The law is a tool, in fact, a neutral tool of society. In the end, the law can accomplish anything society wants it to accomplish. Hence, there is no legal justification for rights to be tied to responsibilities. Indeed, since rights are social entities, they are a two-edged sword. Society giveth; society can take away. Society can only grant privileges. Society cannot grant rights; it can only recognize them. But society can prevent their exercise.</div> <bR> <div> The link between theory and practice can be dissolved; yet if the link is a natural one, many problems will arise from its dissolution. Rather than the administration of universal rights, one shall find the granting of factional privileges. Rather than the protection of the laws, one shall find a favoritism imposed by force. Rather than freedom for all, one shall find libertinism for the few. Rather than social integration, one shall eventually find social disintegration. Liberty and stability exist only in a regimen of just laws. For moral, sociological, and political reasons it is advisable that rights be indissolubly tied to responsibilities. With such a burden lying on the propriety of the link between rights and responsibilities, one must make sure that the theory is indeed sound.</div> <bR> <bR> <div> <B>Economic Rights Within the Theory of Justice</B></div> <bR> <div> We will examine five tests of legal validity that the proposed economic rights must pass before they can be accepted as true public (or constitutional) rights. Thereafter, we will see whether they conform with established principles of economic justice. Finally, we will see what sort of place they might eventually occupy within the structure of the theory of justice.</div> <bR> <bR> <div> <B>Some Theoretical Perspectives</B></div> <bR> <div> For these rights and responsibilities to be accepted, they must pass a number of theoretical tests that belong to the legal understanding of justice. First, do the proposed rights and responsibilities yield the essential elements of “the original position” envisioned by Rawls? (7) Second, do they meet the requirements of the “reverse theory” enunciated by Nozick? (8) Recognizing that “particular rights over things fill the space of rights, leaving no room for general rights to be in a certain material condition,” Nozick postulates: “The reverse theory would place only such universally held general ‘rights to’ achieve goals or to be in a certain material condition into its substructure so as to determine all else; to my knowledge no serious attempt has been made to state this ‘reverse’ theory” (9).</div> <bR> <div> A third theoretical test of validity can be construed in relation to the Principle of Generic Consistency, which has been carefully designed and cogently argued for by Alan Gewirth (10). Will the above set of four rights and responsibilities pass this test? Gewirth’s principle to “Act in accord with the generic rights of your recipients as well as of yourself“(11) is an attempt to synthesize the logical requirements advanced by Rawls with those of Nozick.</div> <bR> <div> There are many other tests of validity. The next that might be considered is based on the conditions for the existence of a “system of rights” as specified by Rex Martin (12). Can those rights function as a system of rights? One final test comes to mind. Are the proposed rights and responsibilities properly “integrated within a robust vision of a very traditional Catholic concern, namely, the common good,” as Finn recommends? (13)</div> <bR> <bR> <div> <B>The Principles of Justice</B></div> <bR> <div> For the proposed economic rights and responsibilities eventually to become an integral part of the theory of justice they have to be expressions of sound legal and philosophical principles. The most important test that those four rights and responsibilities, singly and jointly, have to sustain is this: Are those rights built on the basis of solid principles? The essential principles submitted for scrutiny are:</div> <bR> <div> • Each specific right shall make us free (the intellectual, rationalist argument);</div> <bR> <div> • Each specific right shall be universal (the idealist as well as the utilitarian argument);</div> <bR> <div> • Each specific right shall be fair (the emotional, naturalistic, transcendentalist argument);</div> <bR> <div> • Each specific right shall be enforceable in a court of law (the positivist argument);</div> <bR> <div> • Each specific right shall create social order (the political and aesthetic argument).</div> <bR> <div> Only a few questions can be raised here to point toward the necessary analysis that must be done to determine the correspondence of those rights with the above principles:  1. Is each one of those rights intimately related to the question of truth–and hence to freedom in general–as well as to issues of economic freedom in particular?  2. Is each one of those rights an expression of universality and even of universal utilitarianism?  3. Is each one of those rights related to natural rights theory?  4. Can each right also be justified in terms of positivism?  5. Does each right have the potentiality to contribute to social as well as intellectual harmony?</div> <bR> <bR> <div> <B>A Place Within the Theory of Justice</B></div> <bR> <div> If the proposed rights and responsibilities pass the specific tests of legal validity mentioned above and if they pass the theoretical test of concordance with basic principles of philosophy, in order to become fully accepted, they have to occupy a specific place within the theory of justice. Is there such a place for them?</div> <bR> <div> A place for economic rights and responsibilities within the structure of the theory of justice will be found only if two requirements are met. First, one must adhere to the ancient division of this body of knowledge into two fields: political justice and economic justice. With regard to economic justice, we must add to it a new plank: participative justice.</div> <bR> <div> From Aristotle to the late Middle Ages, and within the Catholic tradition up to Monsignor Ryan’s work in the twentieth century, the theory of economic justice was thought to be composed of two major parts, distributive and commutative justice–with the latter presenting rules of justice that applied to the exchange of goods and services. The right to participate in the production of wealth must have seemed so natural, so innate in human beings, that no need was felt to specify it in writing. With the progressive closure of the commons, the full development of a monetary economy, and the propensity to cluster immense concentrations of wealth in a few hands, the economic conditions of the world have, indeed, changed. The right to be an active participant, rather than being relegated to the margin of economic life is a right that needs to be asserted.</div> <bR> <div> Implementation of the requirements of participative justice is imperative today. Taking the lead from the seminal economic policy analysis of Louis O. Kelso (14), this addition to the theory of economic justice can be justified from many points of view. Its moral rationale can be most clearly found in the social teaching of the Roman Catholic Church. In Centesimus Annus, for instance, Pope John Paul II calls for a “society of free work, of enterprise and of participation” (15). In the preceding paragraph he specifies: “Inseparable from that required ‘something’ (which is due to man because he is man) is the possibility to survive and at the same time to make an active contribution to the common good of humanity” (16).</div> <bR> <div> Some of the legal rationale for this addition is provided by Nozick with his principle of “justice in acquisition” (17). The economic rationale can be found in the revision of Keynes’ model first envisaged by this writer in the summer of 1965, and gradually developed ever since. This work yields the equivalence of production to distribution to consumption (18). In accordance with these results the test is as follows: Can the proposed system of rights be justified, through a series of iterations, by the requirements of participative, distributive, and commutative justice?</div> <bR> <div> All too briefly, without the exercise of the proposed four rights, people are not free to participate in the economic process. They are not put in a position of parity in relation to the apportionment of shares in the process of the distribution of wealth. If people do not participate in the production process or are at a disadvantage in the process of the distribution of wealth, then they are automatically at a disadvantage in the process of the exchange of wealth. It would be naive to see the latter set of needs as involving only problems of consumerism; one must enlarge the scope to encompass problems of monopoly and hoarding of wealth. Note Monsignor John A. Ryan’s major work, Distributive Justice: The Right and Wrong of Our Present Distribution of Wealth (19), where he builds on the solid tradition of the past but without ignoring the problems that are still with us today. For instance, this work contains a legal and economic analysis of the minimum wage that is far superior to anything existing in the current literature on the subject (20).</div> <bR> <div> In summary, the proposed four economic rights offer the opportunity to complete the structure of the theory of economic justice. The structure can be built upon three planks: participative justice, distributive justice, and commutative justice. But the three component parts of the structure do not operate sequentially. As in a physical structure, they operate synchronously, and the theory becomes a powerful engine of decision and analysis.</div> <bR> <bR> <div> <B>Conclusion</B></div> <bR> <div> There are many indications today that, while public struggles over the last few centuries were mostly concerned with issues of political justice, the current struggle is one of economic justice. Foundational to this struggle is the issue of defining economic rights. This article has sought to define these rights as rights of access to essential resources in the process of production, distribution, and the exchange of wealth. It is through access to those resources that one creates property and property rights. By regressing the search of the legal title of ownership to present wealth, one is led to the realization that this was the reality in the ancient past as it still is today.</div> <bR> <div> The practical thrust of this essay consists in transforming the fact of access to economic resources into the right of access to economic resources. Rich and poor alike–the rich to an obviously greater degree than the poor–live in a legal regimen that is one of privilege. They acquire access to economic resources as a fact–not as a right. This is the ultimate source of instability in the modern polity. The fact of access has to be transformed into a universal right. If rich and poor alike are to live under a regimen of laws, economic rights have to be defined and exercised universally.</div> <bR> <div> This article has sought to provide an understanding of basic economic needs that are met by those rights. It has also described an understanding of the legal characteristics of economic rights. Throughout we have suggested that the theory of economic justice should be seen as composed of participative justice, distributive justice, and commutative justice–three planks that have to be treated not as three sequential segments but as three synchronous parts whose requirements are either satisfied simultaneously or not at all (21).</div> <bR> <bR> <div> <B>Notes</B></div> <bR> <div> 1 Daniel Rush Finn, “Catholic Social Thought on Property: An Urgent Need for Extension and Renewal.” Paper presented at the conference on “The Legacy of Msgr. John A. Ryan,” University of Saint Thomas, 1995.</div> <bR> <div> 2 Carmine Gorga, “The Revised Keynes’ Model,” <I>Atlantic Economic Journal</I> 10 (September 1982): 52; “Bold New Directions in Politics and Economics,” <I>The Humane Economy Newsletter</I> 12 (March 1991): 3—6, 12; “Quality Assurance: Internal and External Financing Opportunities,” in <I>Quality Control and Quality Assurance for Seafood</I>, eds. Gilbert Sylvia, Ann L. Shriver, and Michael T. Morrisey (Corvallis, Oreg.: Oregon State University, 1994), 158—63; “Four Economic Rights: Social Renewal Through Economic Justice For All,” <I>Social Justice Review</I> 85 (January/February 1994): 3—6; Carmine Gorga and Norman G. Kurland, “The Productivity Standard: A True Golden Standard,” in <I>Every Worker An Owner: A Revolutionary Free Enterprise Challenge to Marxism</I>, ed. Dawn M. Kurland (Washington, D.C.: Center for Economic and Social Justice, 1987), 83—6; Carmine Gorga and Stuart B. Weeks, “Fisheries Renewal: A Renewal of the Soul of Business,” <I>The Catholic Social Science Review</I> 2 (1997): 145—62.</div> <bR> <div> 3 Immanuel Kant, “Philosophy of Law,” in <I>The Great Legal Philosophers: Selected Readings in Jurisprudence</I>, ed. Clarence Morris (Philadelphia: University of Pennsylvania Press, 1959).</div> <bR> <div> 4 Ibid., 252.</div> <bR> <div> 5 Giuseppe Mazzini, <I>The Duties of Man</I> (London: Chapman and Hall, 1862).</div> <bR> <div> 6 Oliver Wendell Holmes, “Uncollected Letters,” in <I>The Wisdom of the Supreme Court</I>, ed. Percival E. Jackson (Norman, Okla.: University of Oklahoma Press, 1962), 398.</div> <bR> <div> 7 John Rawls, <I>A Theory of Justice</I> (Cambridge, Mass.: Harvard University Press, 1971), 12, 72, 136, 538.</div> <bR> <div> 8 Robert Nozick, <I>Anarchy, State, and Utopia</I> (New York: Basic Books, 1974), 238.</div> <bR> <div> 9 Ibid.</div> <bR> <div> 10 Alan Gewirth, “Economic Justice: Concepts and Criteria,” in <I>Economic Justice: Private Rights and Public Responsibilities</I>, ed. Kenneth Kipnis and Diana T. Meyers (Totowa, N.J.: Rowman & Allanheld, 1985).</div> <bR> <div> 11 Ibid., 19.</div> <bR> <div> 12 Rex Martin, <I>Rawls and Rights </I>(Lawrence, Kans.: University of Kansas Press, 1985), 114—8, 129.</div> <bR> <div> 13 Finn, “Catholic Social Thought on Property.”</div> <bR> <div> 14 Louis O. Kelso and Mortimer Adler, <I>The Capitalist Manifesto</I> (New York: Random House, 1958), chap. 5; Louis O. Kelso and Patricia Hetter, <I>Two—Factor Theory: The Economics of Reality</I> (New York: Vintage Books, 1967), 10, 28, 32.</div> <bR> <div> 15 John Paul II, <I>Encyclical Letter Centesimus Annus</I> (May 15, 1991), no. 35.</div> <bR> <div> 16 Ibid., no. 34.</div> <bR> <div> 17 Nozick, <I>Anarchy, State, and Utopia</I>, 150ff., esp. 168.</div> <bR> <div> 18 Gorga, “The Revised Keynes’ Model.”</div> <bR> <div> 19 John A. Ryan, <I>Distributive Justice: The Right and Wrong of Our Present Distribution of Wealth</I> (New York: Macmillan and Company, 1942 [orig. 1916]).</div> <bR> <div> 20 Ibid., 249—302. The historic emphasis there is on the living wage.</div> <bR> <div> 21 I would like to acknowledge Professor Michael J. Naughton, who invited me to participate in the conference on “The Legacy of Msgr. John A. Ryan,” University of Saint Thomas, 1995, and Professor Robert G. Kennedy, who exhibited enormous patience with my unexpected delays in completing this article. I have benefited from the constructive criticism of Janis D. Stelluto, David E. Stephens, Stuart B. Weeks, and David S. Wise.</div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <bR> <bR> <div>  <A NAME="the_productivity_standard_a_true"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="5" COLOR="#000000" FACE="Arial" >The Productivity Standard: A True Golden Standard</FONT></div> <bR> <div> in<I> </I>Dawn M. Kurland (ed.), Every Worker An Owner<I>: A Revolutionary Free Enterprise Challenge to Marxism,</I> Washington, D.C.: Center for Economic and Social Justice, 1987, pp. 83-86.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div> by</div> <bR> <div> Carmine Gorga and Norman G. Kurland *</div> <div>                         </div> <bR> <div> * Dr. Gorga is President of Polis-tics Inc., Gloucester, MA 01930. Norman G. Kurland is president of the <FONT SIZE="4" COLOR="#333333" FACE="Verdana" >Center for Economic and Social Justice, Washington, DC.</FONT></div> <bR> <bR> <bR> <bR> <div> Fiscal policy is nearly all played out, and traditional monetary policy is effectively neutralized. It cannot be any tighter without causing a severe recession and it cannot be any looser without fanning again the flames of inflation. In the meantime interest rates remain stubbornly high.</div> <div>      </div> <div> The era of "fine tuning" has come to an end.</div> <bR> <div> The discussion is back to fundamentals, as evidenced by the alternative with which we are presented: either add some technical adjustments to the existing Paper Standard or restore the Gold Standard.</div> <div>      </div> <div> The Paper Standard promises us flexibility; the Gold Standard stability. Flexibility to deal with the great unknowns of the next few years; stability which comes from the confidence that the government is not free to debauch the currency: therefore, psychological stability first and stability of the money supply thereafter.  </div> <div>      </div> <div> The limitations of the Paper Standard are numerous; but the Gold Standard is not perfect either.  As Mr. Lewis E. Lehrman has frankly admitted, "The gold standard, being a human institution, is imperfect."</div> <div>      </div> <div> Yet, notwithstanding well-known weaknesses in both systems, positions are becoming so polarized as to add evidence to Professor Paul W. McCracken's statement that "there are so few helpful ideas around to deal with the most vexing problems of economic policy in the industrial world today."</div> <bR> <div> In order to break the impasse, we need a new set of ideas. Urgently, we especially need a standard that will give us both flexibility and stability. This possibility is technically and politically within our reach, provided we give serious thought to it. The institution capable of bringing about this historic compromise might be called the Productivity Standard, a standard which shares with the real bills doctrine historical roots and aspirations, but nothing else. The mechanics of the two are completely different.</div> <div>      </div> <div> The Productivity Standard can be carefully constructed restricting some and enlarging other key elements of the monetary system as it exists at present. The foundation of the new structure needs to be limited.  It needs to be restricted to all productive - or reproductive - wealth, "real" wealth from which a direct income stream is produced: active machinery, equipment, supplies and the like. (The Productivity Standard says what it means: it is not meant to cover inventories alone, as the real bills doctrine does; and in certain cases it would not cover inventories at all.)</div> <div>     </div> <div> Using all productive wealth as the foundation of the new standard is to follow the middle road.  It is to follow the Golden Mean between the extreme of the Gold Standard: gold alone; and the extreme of the Paper Standard: all wealth, as the basis upon which to tie the value of the currency.</div> <div>      </div> <div> Upon such a restricted foundation, the structure of the Productivity Standard can thereafter be built anew.  We would then obtain a true Golden Standard.  In this endeavor, we should be guided by three cardinal principles.  First, federal credit should be extended to discount only eligible industrial, commercial, and agricultural paper - for whatever length of time it requires to repay the loan, and not 3-month loans, as in the real bills doctrine.</div> <div>      </div> <div> The legislative power for these operations is already embodied in Paragraph 2, Section l3 of the Federal Reserve Act of l9l3. In the light of the Productivity Standard, however, this power has either not been used or it has been used improperly. In various recent or past "rescue" operations the "discount window" should have not been put into effect at all. In others, the discount factor should have been much lower.  </div> <div>     </div> <div> One reason this power has not been properly used is that by itself, economists say, the discount window does not insure the control of the money supply. What institution can ever do that by itself? A deeper reason can be found in the fact that the Federal Reserve System has not been given by the Congress - and by economists - clear directions on how to distinguish eligible paper from paper transactions involving the transfer of public and private securities, consumer credit, speculative credit and government credit.  Speculative loans in particular would have to be strictly defined as loans that cover transactions involving existing, nonproductive wealth which is scheduled to remain non-productive for the near future.  Hence, inventories that are not an integral, functional part of the operation would not be eligible for federal credit.  On the other hand, loans to cover the creation of new wealth, no matter how risky, cannot - from a strict economic point of view - be called speculative loans.  </div> <bR> <div> Once these issues of definition are settled we can either empower the Federal Reserve System to operate a discrimination between (loans for) productive and nonproductive resources or, perhaps preferably, we can create a new organization with such a power.  This organization might be called New Federal Credit (NFC) Agency.  "New" for "Not Elsewhere Warranted" federal credit, or simply federal credit for new productive activities that are carried out by new or established enterprises - enterprises involved in the creation of marketable goods and services.  Federal credit is by definition new credit. It ought to be extended only for new productive activities, if we ever want to strengthen the basis for an automatic control of the money supply.  It is in fact relatively easy to model, forecast and eventually achieve an automatic control over credit for productive activities; as the experience of recent years has amply demonstrated, it is instead impossible to regulate other forms of credit such as consumer credit and especially speculative credit.</div> <div>      </div> <div> Two points must be clarified. Federal credit does not imply borrowing from the taxpayer. It implies the creation of new money - new money that is automatically taken out of circulation as soon as the original loan is repaid, i.e., as soon as the money has performed its function. In addition, the creation of new money need not become part of the political process because the New Federal Credit Agency would have no power to initiate the allocation of credit.  It should simply and automatically satisfy the demand for credit after individual banks have approved the loan for the specified purposes. Thus, while still creating new money, the danger of fiat government money would be automatically eliminated.</div> <div>      </div> <div> The second crucial principle of the Productivity Standard is that federal credit should be extended at cost and not at an arbitrary rediscount factor, as in the real bills doctrine - a cost to the final borrower not exceeding perhaps a 2% or 3% interest rate, in addition to a variable insurance premium to cover default risks.  The insurance company, or companies, should be expected to be private, so that the new frontiers of capital formation insurance would be opened to this industry. </div> <div>     </div> <div> If the creation of new enterprises and the preservation of old ones is vital to the welfare of the nation, then it is counterproductive for the federal government to make a profit on such transactions.  Besides, federal credit ought to be extended at cost if we ever want to eliminate some of the exogenous causes of price inflation. Thus we would immediately bring down the most significant interest rates.</div> <div>      </div> <div> The third indispensable principle of the Productivity Standard is that if federal credit has to be extended at all, and if it will be extended at cost, then in theory it should be extended to all.  (The real bills doctrine never paid any attention to this crucial area.)  </div> <div>      </div> <div> In practice, not everyone will qualify or would want to qualify. Eligible industrial, commercial and agricultural paper - provided there is an automatic distribution of wealth - is indeed "self-liquidating."  It essentially represents sound enterprises with feasible plans which can reasonably be expected to repay the loan, for the most part, in three to seven years. Extending federal credit to all only means that the ownership of future wealth, the wealth produced with the use of national credit, must become as widespread as possible.</div> <div>      </div> <div> We have been so very clever in extending consumer credit nearly to all.  We can be equally inventive in extending capital credit.  In fact, even though we are at the very infancy of the field, there is already an array of financial mechanisms to achieve this aim.  Some of them are inscribed in the very tax code of the land.  The most important is the leveraged employee stock ownership plan or ESOP.  Through this and other potentially more effective mechanisms, the third essential pillar of the new system can immediately be made to sustain the Productivity Standard. </div> <div>      </div> <div> The use of these mechanisms would have to be made such an integral part of the system as to be mandatory, because the widespread ownership of future wealth, first, would properly have to belong to those who create it.  Second, the need for alternative policies aimed at redistribution of wealth would gradually be undercut, thus leaving owners of wealth in peace. Third, and more important, the widespread distribution of future wealth would begin to build not only a very sturdy constituency for the free market system but a very sturdy economy as well. Those who should object to such an imposition would be free to obtain credit on the open market, as against federal credit extended at cost.</div> <bR> <div> The thorough application of these three principles would give us the stability of the Gold Standard, because they would gradually transform the Paper Standard into a full-fledged Golden Standard - and would still preserve much of the flexibility of the Paper Standard.  </div> <div>      </div> <div> The transition envisaged here can be achieved without much trauma in the economic body because the Federal Reserve System would still continue to borrow and lend money.  Given its initial endowment of assets, it might even continue to buy and sell government obligations, thus contributing to the regulation of the money supply; but its ultimate source of funds would no longer be the national credit. Its sole source of funds would be banks and other financial institutions from which it would borrow and to which it would lend. The interest rate for these funds would be the going market rate. And these funds, conceivably at rates even higher than the current ones, would be primarily available for paper transactions, consumer loans  - including home mortgages - loans to the government whenever it incurs deficit spending, and speculative loans. These activities would obviously be discouraged by the high interest rates until everyone - government included - would be put on a balanced budget basis.  (These measures would be worth ten Constitutional Amendments to achieve a balanced federal budget.) </div> <div>      </div> <div> During the transition, and there is no reason to demand that the transition should not last forever, we would in essence have a two-tier - or, more accurately, a multi tier - interest rate structure. In accordance with the risk involved, there would be (lower) variable rates for loans covering productive activities as well as (higher) variable rates for all other activities. Both sets of rates would ultimately be determined by the market.  </div> <div>      </div> <div> Thus the Productivity Standard would give us great flexibility: it would automatically respond to various market conditions.  And it would give us stability as well, or at least as much stability as the market needs and wants.  The government would lose the power to arbitrarily create new money, but not the power to contribute to the control of the money supply.  Finally, society would regain the power that it so desperately needs now: the power over the federal discount rate through which alone it can hope to bring down the most significant interest rates, the interest rates that are the wellspring of economic progress.</div> <bR> <DIV ALIGN="LEFT"></DIV> <div>  <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></FONT></div> <bR> <bR> <div>  <A NAME="the_creators_of_poverty"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>The Creators of Poverty</div> <bR> <div> by Carmine Gorga</div> <bR> <div> <I>Gloucester Daily Times, </I><B>Symposium</B>, December 18, 1998, p. A10 </div> <bR> <bR> <bR> <div> I can hardly contain myself.  After years of studying the issue at a not-inconsiderable depth, I have found in an unsuspected source an insight that clears up the issue of the cause of poverty in a definitive and powerful way.  The source of this insight is neither a treatise in economics, nor a work in sociology, nor a tome in the theory of justice.  The source is a paper published in “Spiritual Life,” -- a periodical of Carmelite spirituality -- in the Fall of 1997.  The author is Suzanne Mayer.  The title is: "Songs of the City of God: Merton, Social Justice, And the Psalms."</div> <bR> <div> The author prefaces her essay with this quote from Thomas Merton's "Bread in the Wilderness": "The Psalms are the songs of (the) City of God.... Singing them, we become more fully incorporated into the mystery of God's action in human history."  Recalling that the Psalms are the "ancient prayers of Israel" ascending "like incense before the altar of God," she proposes to "explore 'the mystery of God's action in human history' through the vision the Psalms give of divine justice and through the covenant call to all humanity to enter into this process."</div> <bR> <div> These are some of the Psalms she quotes.  Ps. 10:2: "In arrogance the wicked hotly pursue the poor..."  Ps. 37:14: "The wicked draw the sword and bend their bows, to bring down the poor and the needy..." </div> <bR> <div> How do you read these Psalms?  I read them in this way:  Poverty is created, not by the rich, but by the wicked.  What a liberating thesis.  </div> <bR> <div> So often repeated, most of us have assumed it to be true.  We have assumed that poverty is caused by the rich.  Even I who, as those who have worked with me, ever listened to my words, or read any of my writings can attest, has never used one word against the rich, even I had never penetrated the issue as through this reading.  In fact, most of my efforts were unfocused and must have seemed quixotic to many just because I have always refused to point the finger at "the rich." </div> <bR> <div> Let us be honest.  We have all assumed that poverty exists because of the rich.  Indeed, have not many rich people themselves assumed that to be true?  Certainly, society as a whole in its organized political effort has trained all its guns in that direction -- and the reaction from the rich has, of course, been to resist that effort.  </div> <bR> <div> That most political discourse and action has for centuries been dominated by that assumption is not worth discussing at length.  Much more interesting is another question.  What is a fair assessment of the result of all that effort?  </div> <bR> <div> Do we not find that every now and then one faction wins a few painful battles, but that the war is constantly lost by all?  </div> <bR> <div> Are we not, generation after generation, faced with the same age-old problem of poverty?  There are times when we become so exhausted by this burden that we refuse even to discuss it any more.  But the problem remains stubbornly there.  And it gnarls our soul.  Not much joy, not much enjoyment of what we possess can be had, if we somehow keep in the back of our minds the suspicion that we have not done nearly enough to alleviate the pain and suffering of men and women who unwillingly live in poverty.  </div> <bR> <div> How can we tackle such an endemic condition?  Is the situation hopeless?  I believe that the first ray of light, and hope, can be grasped if we really try to learn about poverty, starting with splitting the problem into absolute and relative poverty.  This is an important distinction.  Relative poverty is the existential condition for which there will always be someone richer than others.  The feast is a movable feast, indeed.  That does not matter at all.  Not one iota.  What matters is that those who have less be not deprived of the conditions for a dignified and free life.  When poverty of material conditions impinges on our freedom and our dignity, then we are suffering from absolute poverty.  Then the quality of life of society as a whole is impoverished. Freedom and dignity are absolute qualities.  No one can be deprived of them or we are all deprived of them -- to say the least, we are all deprived of the joys of a guiltless life.</div> <bR> <div> What changes when we distinguish between relative and absolute poverty?  What changes when we make the wicked culpable for the existence of absolute poverty?  Everything changes -- and the problem becomes abruptly soluble.  Let us look only at a few effects on us, through the lenses of some of the effects on the political stump and the religious pulpit.</div> <bR> <div> Our political discourse changes.  Our eyes are no longer focused on the behavior of the rich and the behavior of the poor.  That polarization in our political life, with people taking sides between the two poles and making the other the enemy, vanishes.  We all know the hatred generated by the "undeserving poor."  How many pieces of legislation are passed on the strength of that hatred!  How many punitive agencies exist in the vain attempt at enforcing those laws!</div> <bR> <div> Though less spoken about, how much hatred is directed against "the undeserving rich"?  Is not most of our tax code written on the assumption that the rich have taken something away from others?  The wicked rich are most certainly engaged in those practices.  But are all the rich wicked?  And are there not poor people who are wicked?  Our political discourse is purged of many impurities, and our political action becomes much more pointed, if we keep those two basic distinctions in the back of our minds.  Our finger is pointed in only one direction, the proper direction. </div> <bR> <div> The religious pulpit and the political stump can finally become allies -- on an equal footing.  The split that has plagued society, it seems forever, is healed.  Ultimate goals remain different.  One is concerned more with the metaphysical life and the other more with the physical life, but the struggle, in this life, on this earth, becomes one and the same: resistance against wicked actions.</div> <bR> <div> Is it easy to identify the wicked?  No.  Absolutely not.  As distinguished from the rich and the poor who can be easily identified, the wicked cannot be easily identified by others.  But the wicked themselves know who they are.  (At moments of deepest insight, we know that we are all wicked, at least sporadically, at least in part.  In those moments we also know that some people do not know they are wicked: hence the need for moral and technical instruction, because without knowledge of good and evil, there is no "sin.")  </div> <bR> <div> The root to the solution of the problem of poverty is no longer found in punishment of the rich or punishment of the poor, or both.   The solution can be found only in that eternal prescription for happiness: love your neighbor; love your God; and if you love them both, you will eventually cease to be wicked and you will even love yourself.   </div> <bR> <div> Thus the schism within the very soul of the religious people as well as the soul of the political people and, ultimately, the soul of each citizen is healed.  The religious people can be concerned only with affairs of the moral life and the eternal life: they can eventually get out of "the social action."  The political people can be concerned only with providing a framework for the "good government," namely the just government, within which we can take care of all our earthly needs.  And we will all succeed.  The political people will no longer be dealing with wicked people in sheep's skin coming out of the synagogues, the churches, and the mosques.  The few -- always few -- vastly wicked people will no longer intermingle with the good people.  They will isolate themselves; they will ostracize themselves.  Only when self purged, will they come back.  Without insurmountable obstacles posed by the wicked, the majority of the people will satisfy all the needs that can and must be taken care of.  </div> <bR> <div> Poverty is a moral issue.  As such it can be solved.  But, then, just because poverty is a moral issue, do we not run against the hard fact that wickedness is an intrinsic part of human nature?  I was myself  under this impression until recently when, in a discussion with Father John Hughes of Fitchburg, MA, the issue was clarified for me.  I pushed him to admit the inevitability of wickedness.  But the goodness that is in him, resisted my push.  He still declared himself optimistic that the human race will eventually shunt wickedness aside.  It was then that it occurred to me.  Yes, the potential for being wicked will always be with us.  That is inherent in our human nature; otherwise we would not be free -- free to choose between good and evil.  But do we have to choose evil?  Do we have to destroy ourselves in the process?  Not at all.  Our struggle will be to resist wickedness.  Our millennium has committed more wicked acts than all other millenniums combined, perhaps.  We have had our fill.  We can now gain control of ourselves and mold ancient aspirations into a Movement Toward Goodness (MTG).  This is a challenging task indeed.  We need all our wits to succeed. </div> <bR> <bR> <div> <I>Between 1968 and 1973, Mr. Gorga was director of planning and economic development at Action Inc., the local agency conducting the "War on Poverty."  Currently, he is president of Polis-tics, Inc., a community development firm whose work can be sighted at www.polis-tics.com.</I></div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></div> <bR> <bR> <div> <I> <A NAME="fisheries_renewal"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A></I><I>Fisheries Renewal</I></div> <div> A Renewal of the Soul of Business</div> <bR> <div> <I>Reprinted with permission from</I></div> <div> <I>The Catholic Social Science Review</I>, Volume II (1997) 145-161. </div> <bR> <bR> <div> by Carmine Gorga, President of Polis-tics Inc., Gloucester, Massachusetts, </div> <div> and Stuart B. Weeks, Center for American Studies, Concord, Massachusetts </div> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <I>"Boats Buy Houses. Houses Do not Buy Boats."</I> </div> <div> Lena Novello, </div> <div> First President of the Gloucester Fishermen's Wives Association</div> <bR> <bR> <bR> <div> If you go down to the Gloucester waterfront today, you can plainly see that the seafood industry is in a state of disorganization and despair. You see few fishing boats hailing out to sea to fish for cod, haddock, and flounder, the mainstay of the fleet, because, with the aim of increasing their stocks in the long run, fishing for these species is being drastically curtailed by the Federal Government. You see seafood plants that, due to the decreased catch, have been forced to close their gates. Upon consideration, you will quickly realize that wharf space left idle for a number of years naturally invites aspirations in the soul of the service industries to fill it with condominiums, motels, and retail outlets. Very few will disagree that if these aspirations become a reality, the soul of Gloucester -- a 370 year old fishing port, the oldest fishing port in the United States -- will be inalterably changed. </div> <bR> <div> What will you see thirty years from now? Even though they are combined now and will undoubtedly continue to be combined in the future, we would suggest that for clarity of perception we contrast two distinct visions of reality: (1) A dispirited people, paid low wages, hurriedly going about <I>serving</I> tourists in motels and retail outlets; (2) Or proud people, paid a living wage, <I>working together</I> with other people in modern ships and plants, producing valuable products, from seafood to biochemical products. Reduced to its bare essentials, the issue is whether we ought to create institutions that foster dependence and control over other people's lives or institutions that foster interdependence among self-reliant people. </div> <bR> <div> Assuming the latter is our choice, how do we go about realizing this vision? Technically, the need is to find resources, natural and financial, in such quantity and of such quality as to allow this community to be in charge of its own destiny. The complexities of the situation stem from the intricacies and interrelationships among three topics that are indispensable for fisheries development: Conservation, Financing, and Organization. </div> <bR> <div> Beyond all technical features, the main point of this article is the realization that to have true renewal of the fisheries, as distinguished from one or another specific development project within the fisheries, we need to have a thorough renewal of our economic policies and practices. As the discussion progresses, it will become apparent that the obstacles to economic growth are within ourselves. We will see that the need to find natural and financial resources is ultimately transformed into the challenge, simply expressed, to become more virtuous as citizens and to create institutions that help rather than hinder us in the practice of all our virtues. In sort, we are challenged to become "fishers of men," before we symbolically, and fishermen in reality, can once again become fishers of fish. </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * * </div> <bR> <div> Let us explore the political environment first. You probably expect fishermen and fish processors to be the most prominent players in fisheries development today. And they are. But if they open their hearts to you, they will reveal that at the bottom of their trials lies the feeling that they are being led by strings that are not in their own hands. The strings, in fact, today are in the hands of environmentalists, whether or not armed with government regulations, and in the hands of national fiscal and monetary planners. This is a new political reality. </div> <bR> <div> Traditionally, fishermen and fish processors in this country would have relied on engineers and accountants to have their business plans approved by the local bank and accepted by the community at large. No longer. Today, they will not go far unless they find ways to embrace the essential concerns of environmentalists and to adapt to the goals of national monetary planners. It is a relatively new story, a story common to nearly all economic development projects; and a relatively well-known story. During the last thirty to forty years, often at risk and peril to their own safety and fortune, environmentalists have saved us from environmental disaster, and financiers have saved us in trying moments from financial ruin. The environmental disasters that have been skirted are too well known to be recounted here. Who can forget Love Canal? How many such dangers have we avoided? The chief financial disaster that was averted as recently as the late 80s is the danger of galloping inflation. The decisive actions of the Federal Reserve System put a stop to that. In brief, environmentalists and financiers have gained their present place in the sun because there were excesses in the past: Forests were -- and still are -- destroyed; financial resources that perhaps ought to have been more sparingly used were -- and still are -- unnecessarily squandered. </div> <bR> <div> However, the pendulum now seems to have reached the end of its arc. A growing number of people no longer unquestionably accept the assumptions of environmentalists and financiers. Rather, they see those assumptions as creating, unwittingly perhaps, the <I>first set</I> of obstacles in the path of economic growth. The new concern, to be precise, is with environmental <I>alarmists</I> and <I>apologists</I> of the financial status quo. Largely because of opposition from these two groups, the country is littered with development projects that cannot take off. Right here in Gloucester, two major -- indeed pivotal -- projects have been blocked for years: A protein recovery plant and a fish farm out at sea. So many other projects hinge upon the existence of these two entities that both can now be considered as essential parts of a viable seafood industry infrastructure. </div> <bR> <div> This political reality is not without consequences. Environmental alarmists are in danger of making us a nation of impotents, powerless to create the structures that we need. They are reducing many of us to automatons capable only of uttering such expressions as: <I>No, No, Not In My Backyard (NIMBY)</I>. Apologists of the financial status quo are in danger of making us a nation of beggars, powerless to create the financial resources that we need. They are reducing us to automatons capable only of uttering such expressions as: <I>Give Me Grants, Give me services, Lower my tax Burden.</I> Does not the combined result of such actions produce a vacuum in our lives? Is not this vacuum necessarily filled with the growth of government intervention in human affairs beyond any tolerable bounds, and certainly beyond the imagination of the Founding Fathers? In short, are not these policies leading to social disintegration? Passivity reigns, until resignation prevails. In the meantime, anger accumulates. </div> <bR> <div> Before catastrophe befalls us, let us be clear about the nature of the concerns of financial apologists and environmental alarmists. Their thought processes, interestingly enough, appear to be tightly joined at three key nodes: One is their apparent disregard for vital lessons of history, the second is their intolerance for risk, the third is their notion of scarcity of resources. These are issues too large to be adequately treated here. For the moment, it is sufficient to ask three questions: How many financial and environmental catastrophes predicted in the past have, in fact, occurred? Is it ever possible to build a risk-free society? Is it true that there is a constant scarcity of natural and financial resources? </div> <bR> <div> We shall concentrate our attention on the last question. The reason is obvious. Who can get excited about economic growth, with its attendant grave questions of justice, if there are no physical resources? Who can get excited about "abstract" issues of justice, if there are no financial resources? </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> Is there scarcity of natural resources? To accomplish their goals, environmental extremists often use alarm to frighten us and, unwittingly, to render us powerless. Specifically, in the fisheries, they paint ghastly pictures concerning potential irremediable damage to the stocks of wild fish, even their total extinction. And, since traditional fish stocks are indeed depleted, they conclude that there is nothing we can do but shut the fisheries down. Currently, that is the aim of some of the most talked about policies: Closure of fishing grounds, boat buyback arrangements, limited-entry programs, individual transferable quotas (ITQs). All is sugar-coated with the promise of rather massive federal aid -- as if federal aid meant something other than a transfer of money from taxpayer pockets. Curtly expressed, this is a defeatist program.</div> <div>  </div> <div> Our effort is to show that there is plenty we can do, and indeed must do, to keep the fisheries alive and vibrant -- at <I>no</I> cost to the taxpayer. The solutions start by meeting head on a problem of definition, proceed along the path of understanding the dynamics of fish stocks, and branch out into questions of financing and organization. </div> <bR> <div> When we think of fish, we tend to think of individual species. But that, it turns out, is not a pragmatically viable definition. Fish do not exist as individual species separated from one another; rather they are part of the total marine biomass. And it is with the total marine biomass that we ought to be primarily concerned. To tackle the problems of any one species, in other words, we need a <I>multi-species management plan. </I></div> <bR> <div> Of course, there is plenty that we must do for each species of fish as well. First of all, we need reasonable conservation measures; then, depending on the specific species and the specific environment, we can think of reseeding the oceans with the assistance of hatcheries or removing obstacles in salmon runs. Yet, the pay-off lies in concentrating our efforts on the total biomass. </div> <bR> <div> Anecdotal information yields always the same result. In periods of crisis, there is not a fish to be had. But is this condition permanent? Is one entitled to extrapolate future trends from this type of "research?" Long historical -- as distinguished from anecdotal -- statistical series, mathematical models, and biological theories clearly show that in nature we are faced not with stasis, but with dynamics.1 The dynamics of fish stocks is uniquely grasped with the assistance of a Predator-Prey Model developed in 1925 by Lotka and Volterra, respectively a mathematician and a biologist. Through this model, they explained the ebbs and flows of the sardine fishery in the Adriatic sea. The model is sketched, in simplified fashion, in Figure 1. The simplification consists in the elimination of the cycles in which both predators and prey either fall or rise together. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> A Simplified Fish Predator-Prey Model </div> <div> <IMG SRC="09bfb7c0.png" border=0 width="507" height="380" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> Figure 1</div> <bR> <bR> <div> When overfishing of traditional species occurs, this model leads to the question: Who does the overfishing? Could it be that natural predators -- rather than, more than, fishermen -- do the overfishing? Whatever the specific answer to this question, it is evident that, while at present such traditional species as cod and haddock are depleted, the ocean is teeming with their natural predators: Dogfish, menhaden, mackerel, herring. We ought to focus our attention on these species. Once we do that, we switch our frame of reference from the relative scarcity of any one species to a framework of plenty -- or at least to the framework of "The Feast of the Enough." Within this mental framework, we say good riddance to powerlessness. Good riddance to retrenchment. Good riddance to the miasma of boat buyback programs, through which, as Ed Lima, the executive director of the Cape Ann Fishermen's Cooperative Association, says, "The owners go to Florida, and the crew goes to hell." If de-industrialization is not working within the rest of society, why would it work in the fisheries? </div> <bR> <div> Powerlessness can be replaced with activity and with self-reliance.2 Under the leadership of Angela Sanfilippo, the current president of the Gloucester Fishermen's Wives Association, we will develop a 2020 Vision, a Vision for the year 2020 for the Port of Gloucester and gradually we will cooperate with the rest of New England. Then we will resolve the issue of sustainability for each species. Once the "maximum sustainable yield" is set and accepted by all participants in the process of fisheries management, we will focus on the marketability of abundant underutilized species. </div> <bR> <div> There is much that can be done in the way of systematic effort to bring these species to market. New ways of advertising for them and preparing them for the table will be developed. School lunch programs will help introduce fresh underutilized species into the diet, and so will army lunch programs. But what else can be done to speed up the necessarily slow tempo of their market penetration? What else if not their indirect utilization? The indirect utilization of these renewable resources will be the result of two factors. One is technology; the other is financial resources. We will not insist on the technological issues, except to remark that our scientists and engineers are exposing us to an embarrassment of riches. We have many choices. Underutilized species can be transformed into such marketable products as surimi, fish oils, fish flour, fish food pellets, leather, biochemicals, and on and on. The bottleneck is not in the inventiveness of our scientists but in the obstacles unwittingly placed in the implementation of those ideas by over diligent environmentalists. By prolonging the process for obtaining all necessary permits, these environmentalists have a major impact on financing. Some projects, in periods of escalating costs, are dangerously delayed; others become so uncertain that start-up financial resources vanish. </div> <bR> <div> Given the implementation of the two pivotal projects we have singled out earlier, namely a protein recovery plant and a fish farm out at sea, it is easy to sketch the overall picture. Underutilized species are reduced to fish food pellets which are fed to salmon raised in fish farms. Underutilized species are thus brought to market <I>via salmon</I>. The entire fish is utilized by producing biochemical by-products. No waste is tolerated.</div> <div>  </div> <div> We have never advocated nor are we advocating here a protein recovery plant or a fish farm <I>at any cost</I>. These and any other endeavor have to be environmentally sound. But the standard ought to be science, not ideology; knowledge, not hearsay; present possibilities, not memory of technologies that failed in the past. The old fish dehydration plant, for instance, was so malodorous at times as to be not only a public nuisance (many nostrils still remember those choice summer nights); it was even a health hazard. Its existence was tolerated for too long; eventually, it was shut down. It should have been shut down much earlier. </div> <bR> <div> The point is that the pendulum has swung far on the other side. Environmentalism has to be taken into due consideration, but it cannot be made so dominant as to be the exclusive concern. We need to reach a new sense of balance. Two of the most important considerations to enter this balance can be easily pointed out. <I>First</I>, since fish is a quasi-vital food, the demand for fish is destined to grow. Seafood will either be produced nationally or it will be imported. Fish, in fact, has consistently been one of the top ten on the list of imported items for the last few decades. <I>Second</I>, the harsh reality is that, in August 1994, the unemployment rate in Gloucester was 10.5%. In August, mind you, not January, about 1,500 people were in vain searching for work. Multiplying this figure by an average number of dependents, the harsh reality is that 4,500 people were in rather tough straits. How is our community going to satisfy those needs? How are we going to create 1,500 jobs? Where are the opportunities for Gloucester, if not within the broad range of maritime industries? Which other activity has the same potential for growth? Are not tourism and the service industries in our city, ultimately the two most talked about alternatives to the renewal of the fisheries, dependent upon the attraction of the fishing fleet? For sure, change is inevitable. But change for the worse ought not to be easily grasped. </div> <bR> <div> If tourism and the service industry win the day, the traditional character of Gloucester is lost. "In the middle of the night," says Josephine Russo, a fishing captain's wife who, still relying on a thread of hope, recently joined with other women to form the Cape Ann Fishermen's Cooperative Association, "you used to wake up your men and prod them to go to work. Today, there is no future in fishing. What will my son do?"</div> <div>  </div> <div> The essence of the many issues involved here is pithily expressed by Lena Novello, the first president of the Gloucester Fishermen's Wives Association. She proudly quotes her father saying that <I>"Boats build houses. Houses do not build boats."</I> This quote can be rephrased in many different ways: <I>Boats produce income with which to buy houses, houses do not produce income with which to buy boats; or, capital goods pay for consumer goods, consumer goods do not pay for capital goods; or, save first, spend later; or, produce first, consume later; or, work now, play later.</I> The essence of the issues can also be put in these terms: Do we want to be a nation of producers or a nation of consumers? Do we want to utilize our resources fully, or do we want to exploit other people's resources? How long will other people have patience with us? </div> <bR> <div> At a point, the soul of America will be lost. The process of de-industrialization can go just so far. If the work ethic goes, the attempt will be made to replace it with empire building, with the exploitation of other people -- both within the United States and abroad. Then the American dream recoils into a nightmare. Alexis de Tocqueville, the famous French observer of our society during the last century, expressed this vision quite precisely and eloquently. He said: <I>"America is great, because America is good. And if America ever ceases to be good, she will cease to be great." </I></div> <bR> <div> The issues are that important. They clearly affect more than one fishing community. Indeed, they affect the status of economic growth as a whole -- in this country as well as in many other countries of the world. These are not abstract issues. They affect the quality of community life. They affect the life of each one of us.3 </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> Is there scarcity of financial resources? Where are the financial resources to create schools in which consumers are educated by the industry as to the essential characteristics of each species of fish, how to treat that fish from store to skillet, how to best prepare for the table each portion of each species of fish, and schools in turn to educate the industry as to consumer preferences, consumer limits of patience with the requirements of each species of fish as well as consumer financial preferences? Where are the financial resources to retrofit existing vessels so they are able to catch underutilized species? (While groundfish, as the word implies, is caught at the bottom of the ocean, most underutilized species are caught in the middle of the water column.) Where are the financial resources to create hatcheries, to build fish ponds and fish farms, to build protein recovery plants, to introduce new technologies in existing processing plants, to build entirely new plants for the creation of biochemical products, to build laboratories in which alternative futures are tested? Are not financial resources scarce? This is a nation that is supposed to save little (and, certainly less than Japan, for instance). </div> <bR> <div> Let us pause for a moment to consider some of the consequences of this widespread notion. The notion of the scarcity of money has made a beggar not only of the general public but even of a great many captains of industry. Is not the corporate agenda today increasingly occupied by the constant search for grants, subsidies, and tax deductions?  </div> <bR> <div> The habit of searching for grants, subsidies, and tax deductions pits us one against the other. And engulfs us in a bottomless abyss. Grants, subsidies, and tax deductions have never been and never will be sufficient to meet our needs. East Coast fishermen are in the process of receiving $4.5 million in grants from the Federal Government; but they have already presented formal requests totalling $54 million. Pity us all: The administrators of the grants, the grantees, and those who will be losers at the grantsmanship game. A thought process that starts with scarcity is unavoidably led through a tortuous route back to scarcity. In the meantime, taxpayers, who by definition have scarce resources, are forced to foot the bill left behind by the pursuit of grants, subsidies, and tax deductions. Are these not the forces that lead to disintegration within our communities? Are these the proper principles with which to organize society? </div> <bR> <div> The financial reality is diametrically opposed to what is generally believed. Just as there is no scarcity of natural resources, so there is no scarcity of money. Those who believe in the scarcity of money see only one source of money. In fact, there are two. Financial resources exist not only with savers, but also with the ultimate (modern) creators of those resources: The Central Banks; here in the United States, the Federal Reserve System. Figure 2 suggests that entrepreneurs -- to obtain their <I>loans</I>; <I>loans</I>, not grants; <I>loans</I>, not subsidies; <I>loans</I>, not tax deductions -- have the choice to ask their banks to go, not laterally to private investors for their savings, but vertically to the Federal Reserve System for newly created money. Government agencies with taxing power also ought to use this avenue to satisfy their financing needs in the process of creating and modernizing our crumbling public works infrastructure. </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <IMG SRC="09cfb7c0.png" border=0 width="507" height="380" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <div> Figure 2</div> <bR> <bR> <div> Technically, this proposal calls for the use of the Discount Window as the first, rather than last, resort. This proposal is in keeping with the original spirit of the Federal Reserve Act, a spirit expressed especially in Section 13 of the Act of 1913, a spirit uniquely infused into it by the then Senator John W. Weeks, who, as a member of the Senate Banking and Currency Committee, was responsible for over four hundred amendments to the original bill. That spirit was not destined to bear full fruit because it was guided by a flawed economic theory, the Real Bills Doctrine. Yet, an echo of that spirit still resounds in today's policies that permit the use of the Discount Window as a means of "last resort." The Discount Window is used for overnight loans to banks and for exceptional rescue mission. In times of crisis, its gates are flung wide open to avoid financial panics. The question is: Why wait for strictures and panics to make full use of this resource? If the Discount Window can produce so much good in abnormal conditions, how much more good would it produce were it used everyday under <I>normal</I> conditions? Of course, as specified below, proper guidelines would have to be followed.</div> <div>  </div> <div> The flawed Real Bills Doctrine was allowed to die, to be replaced by two equally flawed theories, the Gold Standard and the Fiat Standard, according to which money is created either on the basis of the amount of gold in the nation or on the basis of a fiat, an autonomous decision of the central bank. The authors, and other people across the country, are advocating the adoption of a different standard, the Productivity Standard. This standard assumes that the money supply is created on the basis of national credit, that national credit is uniquely related to the productive capacity of the country, and that national credit has to be administered by a central bank, like our Federal Reserve System. From these propositions it follows that people, provided they use it responsibly, have an unquestionable right of access to national credit.</div> <div>  </div> <div> Procedurally, this doctrine inspires a monetary policy in which We, the People, decide how much, when, and why we need to use the specified amount of national credit. Provided the request is legitimate, the Fed and the financial system as a whole simply validate those decisions. Then "papers," namely all necessary documentation -- just as in today's system -- are presented to the Fed via the financial system, and money comes down to individual entrepreneurs, corporations, and government agencies with taxing power. </div> <bR> <div> Substantively, the essential provisos of this doctrine are that newly created money be issued: (a) at cost; (b) to benefit all citizens through individual ownership, ESOPs, or cooperatives; and (c) only to create <I>real</I> wealth -- <I>not to cover operating costs nor to purchase consumer goods, goods to be hoarded, or financial paper of any sort. </I>Without exploring all the techniques that ought to be deployed, with the strict adherence to these basic requirements, it becomes self-evident that, if real wealth is created, the Federal Reserve System can literally create as much money as necessary without sowing the seeds of inflation at the same time. If this policy is followed, it is also self-evident that there are and there will always be enough financial resources to match real wealth with real needs. Real needs have to be distinguished from fanciful desires; real needs are those that try to make full and wise use of existing resources. </div> <bR> <div> Where is the scarcity of financial resources, then? There is no scarcity of financial resources. This is not to deny the institutional limits of the past or those of the present. This lament is real; but only as a consequence of the bewitching power of negativism to become a self-fulfilling prophecy. Assuming that the financial resources of the nation are scarce, apologists of the financial status quo quite naturally conclude that it is better for the few to appropriate the largest possible share of those resources. "The devil take the hindmost," it used to be said. Woe to the rest of society! Financial apologists maintain that the money newly created by the Fed ought to be exclusively put at the disposal of the owners of existing savings. Open Market Operations are ideally suited to this type of monetary policy. </div> <bR> <div> Financial apologists also have a <I>prima facie</I> justification for their claims. They say that, in case of default, savers alone have the resources to repay the loan out of their savings. In most cases, this is entirely true. In fact, this objection cannot be overcome by recalling the infinite subtleties of financial shenanigans. This objection must be met on its own ground; it must be covered from a substantive point of view. The resolution of this issue is this: There is not one specific way in which the newly created money can be borrowed by people who have no previous savings, and still the Federal Reserve System is given all the necessary assurances for the repayment of the loans; there are five such potential solutions. They are as follows: </div> <bR> <div> Solution # One. As a stopgap and a means of pointing the way toward permanent solutions, the first approach is to use the money that comes down the pike in the form of grants from Federal and State governments as <I>premium payments</I> to insure the loans. </div> <bR> <div> Solution # Two. The second solution is the use of ESOPs -- and, as we will suggest in a moment, SuperESOPs. This is a generally successful financing technique that achieves many goals, including that of using the assets of existing corporations to let employees -- by definition, mostly people without savings -- attain access to capital credit and repay the loans out of future profits. Apart from a full understanding of its rationale, the ESOP Movement is a "revolution" that has already largely taken place in the United States. More than ten million people are benefiting to one extent or another from the blessings of this financial technique. </div> <bR> <div> Solution # Three. The third solution is the traditional, old-fashioned one. Let private investors pay for those premiums. And let them gain the benefits of ownership afterwards. Here the "revolution" is all to come. While we make <I>consumer</I> credit abundantly available to nearly everyone, <I>capital</I> credit is kept under strict wraps. And yet, while consumer credit enslaves, capital credit makes us free. Recall Lena Novello's statement of the economic relationship between boats and houses. As Louis O. Kelso, the father of ESOPs, long but not always consistently advocated, to make capital credit available to the many,<I> private</I> insurance must cover the risks of default. This is a whole new field of enterprise that will become a reality as soon as our financial wizards open their imagination to it. </div> <bR> <div> Solution # Four. The fourth solution is to have a community-wide subscription to raise the funds -- for eventual profits -- needed to insure those loans. Is this approach a "revolution on top of a revolution"? Not necessarily. Community-wide appeals have a long tradition, especially in periods of crisis such as the one currently enveloping the fishing industry; but the details of implementation of this fourth solution are undoubtedly daunting. Computers will help. </div> <bR> <div> Solution # Five. Let private charity and foundations fill the gap. If private charity is looking for ways to restrict its field of concern and power, no better opportunity might ever come along. The goal is -- and ought to be -- to restrict the field of charity and enlarge that of justice. </div> <bR> <div> To summarize the benefits of the use of the discount window as a means of first resort for access to national credit: </div> <bR> <div> There are always enough financial resources to fund the process of creation of real wealth; </div> <bR> <div> The money can be issued at cost; and, </div> <bR> <div> The ownership of this money is directly or indirectly apportioned to benefit all the people.</div> <div>  </div> <div> Are not all the inhabitants of a country creating, through their own sweat and tears, the specific value embodied in its national credit? It is not the loan, by and of itself, that creates new wealth. Rather, it is human labor that ultimately creates real wealth and makes the repayment of the loan possible. Should access to national credit, therefore, be reserved to the few? Or should it be granted to all inhabitants of a country as an essential economic right? </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> The natural resources are there. The financial resources are there. Are these convictions putting us in danger of going overboard and letting us fall into a presumed Age of Plenty? Between the scourge of scarcity and the corruption of abundance, enough is a feast. This issue deserves a moment of our attention. It is the ambitious subtext of this article to convert the reader to a mentality in which, in Stuart's felicitous phrase, "Enough is A Feast." Between abundance and scarcity there is the golden mean of sufficiency. </div> <bR> <div> We fully realize that this vision is so different from our usual horizons as to require a sea change in us and in our environment. It takes a real effort of the imagination. After all, are we not supposed, obsessively, always to want <I>more</I>? This is the conclusion effectively reached by Paul Margulies, founder of <I>Anthroposophy Working</I>, while observing the dynamics of Rocco's desires. Rocco is the gangster in the movie "Key Largo" who, in response to Bogart's challenge, <I>"I know what you want. You want more,"</I> blurts out: <I>"Yeah, that's it, I want more." </I></div> <bR> <div> In the scramble to divide either the fruits of scarcity or those of abundance, some acquire more than they need and others do not have enough. <I>Enough</I>. Is not that what we are really after? Do we not hope to have always enough of whatever we want, whatever we need? When there is enough, wants and needs become one. Of course, we are and we must remain the ones to define how much is enough for us; yet, this is not absurd individualism. By ourselves, we will never be able to achieve much. We need to join forces with others. We even need to institutionalize our beliefs. We need to create appropriate institutions to help us practice all our virtues. We need to create institutions that become intermediaries between us and the state: Institutions that enter into combat with our own worst individual instincts as well as the worst instincts of society as a whole. </div> <bR> <div> Instead, are not too many existing institutions helping the modern world to go fast forward into social disorganization? The peculiar forms of this disintegration might be totally different from one country to another, but the general trend is evident. In the North as well as in the South, in the East as well as in the West, we bemoan some aspects of contemporary life. The very roots of each one of our ancient civilizations are being threatened by forces that no longer operate from the outside in. They operate from inside our very soul.</div> <div>  </div> <div> How to stem this tide? We submit that the key tool is Organization. </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> We need to create new institutions in conformity with a new principle, a principle that we like to call Functional Integration. This is a form of organization that attempts to obtain the complementary benefits of vertical or horizontal integration as well as those of total independence. The Functional Integration (FI) Model attempts to gather activities together that are already related in accordance to their function. This is a new form of organization that is designed to lead to <I>social harmony and civic responsibility</I>. After all, do we not all share a common goal? Simply put, is not this goal the achievement of a civilized society? </div> <bR> <div> Figure 3 suggests the forms this type of integration might assume within the seafood industry. Let us conceive of all participants in the seafood industry as owning in common all the hardware: From fishing boats to seafood processing plants; from institutes for the industry to educate the consumer, and be educated by the consumer, to laboratories for the research and development of all possible means of utilization of renewable marine resources; from trucks to stores. The hardware would be under the stewardship of a group of people organized into a SuperESOP, whose Board of Directors is elected by all the owners. The owners exercise all the rights and enjoy all the privileges of owners, as the stockholders of democratic organizations do and ought to do. The SuperESOP would attend to the financing and maintenance requirements of the hardware, and independent teams of entrepreneurs would be making that hardware operational, by leasing it -- from whom? from themselves. If each team organizes itself with the assistance of individual ESOPs, so much the better. The essential point is that the independence of each team is fully preserved <I>by concentrating the operation of functions, rather than concentrating control over people.</I> </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> Functional Integration Within the Seafood Industry </div> <bR> <bR> <div> <IMG SRC="09dfb7c0.png" border=0 width="507" height="380" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <bR> <div> Figure 3 </div> <bR> <div> The nearest equivalent to this type of social integration is a shopping mall that would be owned by all owners and employees of stores operating within the mall. This is in contrast to the conventional structure in which the malls are owned and operated by independent concerns, in which instance stores simply rent space within the mall, pay rent, and are provided with all the services that are needed in common. In this case, quite rightly, all capital gains (or losses) that accrue from the operation of the mall belong to the owners of the mall. In the FI Model, capital gains or losses accrue to owners of the hardware; and whatever profits accrue from the rental of the hardware belong only to the teams that rent the hardware. Beyond the legitimate concerns of health, safety, and public welfare, the state, or the public in general, has no say on any of the operations of the FI Model. </div> <bR> <div> This structure might not be born full blown. It might be necessary to assemble it piece by piece. And there might be two or more SuperESOPs for each port. But, clearly, the more trust, the more cohesion, the more benefits. If, through a SuperESOP, the participants in the industry own as much of the hardware as possible, many things can be done more efficiently. At a bare minimum: </div> <bR> <div> The SuperESOP can enforce the requirements of quality assurance to the consumer: This assurance can be provided only if the various elements of the industry collaborate with each other. Today this collaboration occurs quite rarely, and when it does it is mostly due to chance: One processor here, two fishermen there; </div> <bR> <div> The SuperESOP can enforce efficiency standards for the utilization of each and every piece of hardware undreamed of by individual entrepreneurs. Unnecessary duplication of equipment and even operations would cease. For instance, boats might be treated like airplanes, they would not be waiting for the crew to rest before they would be turned around to go fishing again. And the boats might not need to be the same as those of today. They might be smaller, faster, more efficiently operated and equipped; </div> <bR> <div> The SuperESOP can reach efficiency standards in purchasing supplies and equipment, borrowing money, and attending to all other financing requirements of a modern business -- including purchasing insurance -- that individual entrepreneurs cannot obtain; </div> <bR> <div> The SuperESOP can set up maintenance schedules of all machinery and equipment in a way that individual entrepreneurs cannot achieve; </div> <bR> <div> The SuperESOP can create and administer a first rate information system regarding marketing and biological data with the aim of rationalizing the capture and raising of each species as well as the timing of landings of fish, thus ensuring that temporary gluts -- with their depressing effects on pricing -- would no longer occur; </div> <bR> <div> The SuperESOP can nurture first rate research and development laboratories. Special attention could be given especially to development, thus easing the process of technology transfer from the laboratory to the industry; </div> <bR> <div> The SuperESOP can foster specialization of activities that small, independent, individual entrepreneurs cannot achieve. A boat owner, a fish farmer, or a seafood processor today has to be at least an expert in finances, engineering, and real estate. What do these operations have to do with catching fish, raising it, or processing it? With a SuperESOP, the boat owner, fish farmer, and the seafood processor would simply organize a team of people and devote all their time and expertise to catching the fish, raising it, and processing it. And all teams would preserve their independence at the same time. Whatever money the team that leases boats or fish farms or stores makes is its own money, its own reward.</div> <div>  </div> <div> This model of social and economic integration can be applied to any set of industrial or commercial enterprises. To name one specific example, one day it might be possible to organize along these lines commercial establishments on Main Street of any city or town in the United States. The first such SuperESOP might even be called "Main Street USA".</div> <div>  </div> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> So far, we have dealt with largely mundane issues. Can we now elevate the discussion a notch or two? Let us think about the issues in the broadest possible terms for a moment. At the core, the issues dealt with here are not technical issues at all. They are issues of economic justice. And issues of liberty. Issues of liberty and justice for all. </div> <bR> <div> We have been repeating these words for a few centuries now. And some might say that they have led to the excesses of the French Revolution and the Red Revolution. In the United States, those excesses are parodied in the excesses of the "Age of Entitlements." The way to avoid all such excesses is not to leave the content of the expression "liberty and justice for all" to the imagination, but to define it precisely. The economic content of that expression can be defined by these four rights: 1. <I>The right of access to land and natural resources</I>; 2. <I>The right of access to national credit</I>; 3. <I>The right to own the fruits of one's labor</I>; and, 4. <I>The right to protect the blessings of one's wealth. </I></div> <bR> <div> And then these rights have to be anchored to the reality outside us as well as to the reality inside us. As believers, we reserve the right to speak of God, but we fully accept the wish of others who might want to speak of Nature or Chance. For us, the most fundamental proposition to consider is this: <I>To think that God would not provide for all his children is blasphemy.</I> For others who might prefer to speak in secular terms, we would like to submit the following equivalent reasoning: To think that Nature or Chance would not provide for all their children is contrary to the factual propositions that Nature is bountiful and Chance is infinite. </div> <bR> <div> Leaving the reality outside us well alone, we can now attempt to relate our discussion to the reality inside us, by asking: In practical terms, what is the sin that all of us who share the biases of environmental extremists and financial apologists commit? We submit that, to the extent we share those biases, to that extent we sin against all virtues. We sin against the four cardinal virtues, because we lack <I>prudence, justice, temperance</I>, and <I>fortitude</I>. We sin against the three intellectual virtues, because we lack <I>wisdom, science</I>, and <I>understanding</I>. We sin against the three theological virtues, because we lack <I>hope, faith</I>, and, last but most, <I>charity</I>. </div> <bR> <div> Yes, if we want the renewal of our fisheries and the renewal of our entire practice of economic growth, we must be quite serious about the practice of our virtues. Our virtues, as St. Thomas Aquinas said, are "the peak of power." </div> <bR> <DIV ALIGN="LEFT"></DIV> <div> * * *</div> <bR> <div> Let us turn our sights once again to more worldly issues, and consider the experiential condition. Were those who adhere to extreme forms of environmentalism and financial apologetics reaching their most cherished goals, we would have reason to pause. But the proof of the pudding is empirical indeed. To the extent that we are infected with the strain of environmental extremism and financial apologetics, to that extent we consistently end up defeating our own purposes. If legitimate demands for goods and employment are not fulfilled, greater needs are created and their satisfaction is eventually shifted down the slippery slope of welfare and third-party payors, industrial grants and subsidies, tax reductions and tax evasion. There, waste reigns. As in all self-fulfilling prophecies, scarcity is thus attained. The detailed chain of events that leads to this conclusion can be much refined; but the gross effects are all too evident. Look at the physical landscape. Are we saving the rain forest? Have we saved the downtown of our cities? Are we preserving the integrity of the suburbs? Look at the financial landscape. Do we ever achieve the goal of a stable value of money? We seem to be going from one financial upheaval to another. And we never seem able to taste the sweetness of economic serenity. </div> <bR> <div> That is the ultimate reason why, while appreciating their good reasons, we cannot join the ranks of environmental extremists and financial apologists. Despite their good intentions, they are unwittingly helping to destroy what they love most: Precisely the <I>natural</I> world -- a world in which there is room for everything and everyone -- a world in which there is <I>enough</I> of everything for everyone. </div> <bR> <div> If the results achieved by following the biases of environmental extremism and financial apologetics are unsatisfactory, ought we not to strive to reach a better balance between their concerns and those of society? In each specific case, let us define the work to be done, and let us do it. We began this century with the passage of important environmental <I>and</I> financial legislation. Was that not an attempt to embrace both realities? Was that not an attempt to realize America's promise to achieve a society in which the ancient ideals of truth, beauty, and goodness could blossom? Let us return to this challenge as the century concludes, and a new millennium arises on the horizon. </div> <bR> <bR> <div> -------------- </div> <DIV ALIGN="LEFT"></DIV> <div> <B>Notes</B></div> <bR> <div> 1. Data published after these pages were written confirm the validity of our analysis. The reader might be especially interested in these three statements from a recent Science report concerning the dynamics of 128 fish stocks. One: "Spring-spawning Icelandic herring constitute the only population we examined in which the fishery collapsed and remained <I>commercially</I> extinct" (italics added). Two: "In (the case of Pacific sardines and Georges Bank herring), no recovery was observed for decades, but now both stocks are appearing to increase." Three: "We conclude that the effects of overfishing are, at this point, still generally reversible." </div> <bR> <div> 2. Is not self-reliance one of the most characteristic traits of the early American character? Is not self-reliance Emerson's "central doctrine"? Ought we feel free to jettison such a trait so cavalierly today, just because we think we live in a post-industrial world? </div> <bR> <div> 3. How to express the unity of the issues in the most succinct way? Environmentalists like to take a leaf from Henry David Thoreau. But do they forget that Thoreau was not simply against environmental degradation but also against social injustice? </div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <B>Bibliography</B></div> <bR> <div> For more detailed statements on some of the issues treated in this article, see the following publications by C. Gorga: "The Productivity Standard: A True Golden Standard" (with Norman G. Kurland), <I>in </I>Dawn M. Kurland (ed.), <I>Every Worker an Owner: A Revolutionary Free Enterprise Challenge to Marxism</I>, Washington, D.C.: Center for Economic and Social Justice, 1987, pp. 83-86; , "Bold New Directions in Politics and Economics," <I>The Human Economy Newsletter</I>, March 1991, 12 (1) 3-6, 12; "Four Economic Rights: Social Renewal Through Economic Justice for All," <I>Social Justice Review</I>, January-February 1994, 85 (1-2) 3-6; "Quality Assurance: Internal and External Organizational Requirements," and "Quality Assurance: Internal and External Financing Opportunities," in Gilbert Sylvia, Ann L. Shriver, and Michael T. Morrissey (eds.), <I>Quality Control and Quality Assurance for Seafood</I>, (Corvallis, OR: Oregon State University, 1994), 109-114; 158-163; "Aquaculture, Marketing of Underutilized Species and Depletion of Species," in David S. Liao (ed.), <I>International Cooperation for Fisheries and Aquaculture Development: Proceedings of the 7th Biennial Conference of the International Institute of Fisheries Economics and Trade</I>, Vol. 2, (Keelung, Taiwan, R.O.C.: Institute of Fisheries Economics, National Taiwan Ocean University, 1995), 235-241. And, with Louis J. Ronsivalli, Quality Assurance of Seafood (New York: Van Nostrand Reinhold, 1988). </div> <bR> <div> On ESOPs and private insurance for capital credit, see Louis O. Kelso (with Mortimer J. Adler), <I>The Capitalist Manifesto</I> (New York: Random House, 1958); on CSOPs, see Louis O. Kelso (with Patricia Hetter Kelso), <I>Democracy and Economic  Power </I>(Cambridge, MA: Ballinger Publishing Company, 1986). </div> <bR> <div> Paul Margulies on the "Civilization of More," in "For the Love of Freedom Not For Fear of Communism," <I>Shoreline</I> November 1988, 3-5. </div> <div> R. A. Myers, N. J. Barrowman, J. A. Hutchings, A. A. Rosenberg, "Population Dynamics of Exploited Fish Stocks at Low Population Levels," <I>Science</I>, Vol. 269, No. 5227, 25 August 1995, 1106-1108. </div> <bR> <div> Lena Novello on her father's dictum, in a public speech at the Gloucester Fisheries Forum on September 16, 1994. </div> <bR> <div> Charles G. Washburn, <I>The Life of John W. Weeks</I> (Boston and New York: Houghton Mifflin Company, 1928). </div> <bR> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></div> <bR> <bR> <bR> <div>  <A NAME="bottom_up_monetary_policy"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>BOTTOM-UP MONETARY POLICY</div> <div> Papers</div> <div> There are two essential forms of monetary policy. </div> <bR> <div> One is the European form, the top-down monetary policy.</div> <div> The second is the American monetary policy.</div> <bR> <div> This is the bottom-up monetary policy.</div> <bR> <bR> <div> The first American to advocate for it formally was Benjamin Franklin, in a brilliant paper he wrote when he was barely a 23-year-old lad! He was simply defending a practice initiated by Massachusetts colonists in 1690. The American Revolution, it is now becoming clear again, was fought to preserve the power of the colonists to create the money they needed for industry</div> <div> and commerce against threatened infringement from the Bank of England. This power was inscribed in the very first article of the United States Constitution. The most vigorous attempt to exercise this power was made by the greatest of American presidents, Lincoln.</div> <bR> <div> This policy has never quite taken hold in academia because it seems to have no inner restraints, and it has indeed been put into practice many times without any established restraints. The limits within which this policy can be safely implemented are listed below; they were first more formally presented in the paper on the “golden standard” that is reproduced in this collection and that I wrote in collaboration with Norman Kurland.</div> <bR> <bR> <div> <I>The Definition of Money</I></div> <bR> <div> Economic theory has no definition of money. It distinguishes among the functions of money; but functions are not definitions. </div> <bR> <div> Money is a legal institution with economic effects. Money is a contract. It is a contract between the holder of whatever form money assumes and the rest of society. It is a mutual obligation.</div> <bR> <div> The most important obligation of society is to preserve the value of money.</div> <bR> <div> The most important obligation of the individual person is to create the economic value that money represents: real goods and services.</div> <bR> <bR> <div> <I>The Administration of Money</I></div> <bR> <div> Ever since time immemorial, it has been found useful to grant the administration of money to an official Monetary Authority, be it the King, the Central Bank, or a Federal Reserve System. It is the function of the monetary policy to determine the functions of the Monetary Authority. </div> <bR> <div> The most important determinations of monetary policy concern the modality of the creation of money; the flow of the money; and the quantity of money.</div> <bR> <bR> <div> <I>Two Forms of Money Creation</I></div> <bR> <div> Money can be created either as a debt or as an asset. When the Monetary Authority borrows money from the public and lends it to a government agency or a private institution, the MA puts money in circulation as debt. It basically lets the banks or other private institutions create the money. The MA creates money as an asset when it "discounts" a note from the public, a note that represents the value of (current and expected) real goods and services. The MA then does not borrow money; it lends money out. The MA then creates money as an asset.</div> <bR> <bR> <div> <I>Alternative Flows of Money</I></div> <bR> <div> <I>The flows of money are better followed through the following figure:</I></div> <bR> <DIV ALIGN="LEFT"></DIV> <div> <I><IMG SRC="09cfb7c0.png" border=0 width="507" height="380" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></I></div> <div>       Figure 1</div> <bR> <bR> <div> As it can be seen from this figure, the Central Bank either creates money or allows banks to create money. This fact is rooted in the very nature of money and credit. Money starts as an “I Owe You” (IOU) note between two people. When the IOU note is accepted by a third and a fourth party, the note becomes a “public” note; eventually, it becomes legal tender, i.e., a</div> <div> contract between the holder of the note and society as a whole. And with this transformation, it becomes necessary to go beyond the question of private trust between two parties into the issue of public trust. With this transformation, the nation acquires the <B>responsibility </B>to guarantee the value of the note and the <B>right </B>to create notes.</div> <bR> <div> The United States Constitution and the legislation that created the Federal Reserve System give entrepreneurs, corporations, and governments with taxing powers the right of access to national credit; the Discount Window was created for this purpose.</div> <bR> <div> In a Trickle-Down Monetary Policy, or the European conception of money, the Discount Window is used as a last resort. In a Bottom-Up Monetary Policy, or the American conception of money, the Discount Window is the preferred use to create money and put it into circulation.</div> <bR> <div> The advantages of a Bottom-Up Monetary Policy are numerous and extremely important. Money is created in perfect correspondence with the need of the nation to create real wealth (national credit, i.e., new money, is not created to purchase consumer goods or other financial instruments); money is created at cost (not at an arbitrarily changing interest rate); money is created to benefit those who create real wealth (not those who create financial wealth, paper wealth).</div> <bR> <bR> <div>                                                                                                                                                                                              CG July 23, 2008</div> <div>                                                                                                                                                                                              October 16, 2008</div> <bR> <bR> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></div> <bR> <bR> <bR> <div>  <A NAME="in_defense_of_alma_mater"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A>In defense of Alma Mater</div> <div> <IMG SRC="09fd4500.png" border=0 width="468" height="80" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> OPINION    <FONT SIZE="3" COLOR="#000000" FACE="Times New Roman" >My View            Tuesday, November 26, 1996                         A7</FONT></div> <bR> <bR> <div> By CARMINE GORGA</div> <bR> <bR> <div>    <I>Note: This is a Mr. Gorga's account of a conversation he (CG) had with his Alma Mater (AM). the University of Naples.</I></div> <bR> <bR> <div> AM: Aren't you going to defend me?</div> <bR> <div> CG: I don't have time for that sort of thing. That was a preposterous attack. Am I supposed to be a socialist because Naples got a socialist administration years after I left the city?  </div> <bR> <div> AM: The attack is, not against you, but against me. I am the one who is accused of fostering socialism. You <I>are in situ</I>. Are you going to defend me?</div> <bR> <div> CG: Well, I suppose you are right. But how do we go about it? Any suggestion?</div> <bR> <div> AM: Just the facts, son. Just the facts.</div> <bR> <div> CG: About 800 years worth of facts?</div> <bR> <div> AM: Well start with the teachings of one of my earliest and dearest sons, St. Thomas Aquinas (1225-1274). This is an easy case. With my Greek (Naples means New Polis) and Roman roots, in the warm splendor of the Southern sky, I taught him how to respect the truth and the past.</div> <bR> <div> CG: Yes, I know. He is the one who reconciled Aristotle with the Christian tradition. He is the one who made it easy for Dante to so powerfully visualize the effects of virtues and vices.</div> <bR> <div> AM: That is well known.  is not known is that St. Thomas was a staunch defender of private property. He justified the acquisition of private property on the basis of efficiency of procurement, stability of maintenance, and social order "if each one is contented with his own." This is far away from socialism. Isn't it?</div> <bR> <div> CG: Yes, Mother. But with all due respect, it seems to me you are skirting two issues. One is how well understood and respected has St. Thomas's thought been even within Catholic circles. The other is the issue of the use of property. Didn't St. Thomas suggest that an individual owner of "superfluous things" ought to be "ready to communicate them to others in their need"?</div> <bR> <div> AM: Yes. But you do not add that this is supposed to be a wholly voluntary decision on the part of the owner, and that the obligation is of a moral, not legal or political, character. What would you expect? What is proper? What is moral? What are riches for, if not for one's own needs and the needs of others? As to implementation, the issue is even more complex.</div> <bR> <div> CG: How?</div> <bR> <div> AM: People have to be free. Free to commit their own mistakes. Free to learn from their own mistakes. Only if there is liberty, there is morality.</div> <bR> <div> CG: As you say, this is a complex issue. Is there any easier way to put the issues clearly?</div> <bR> <div> AM: Yes, there is one fundamental way. That is if you mention the work of Giambattista Vico (1668-1744), one of my most favorite sons. Ah, if people had listened to his thought!</div> <bR> <div> CG: Yes. Yes. He is the one who built his thought not only on the ideal of liberty, realism, and truth, but especially on the fact that in history one does not find linear developments. Rather history proves that we proceed by the way of loops: "Corsi e ricorsi storici" is the way he put it.</div> <bR> <div> AM: If people had listened to him, people would have been immunized against thoughts brewed in the frigid mists of Northern climates. People would have been immunized against the "historical determinism" of Karl Marx as well as the linear descent into hell of Charles Darwin. No Communism, no dEvolution. [GDT changed it to Evolution.]</div> <bR> <bR> <div> CG:  Hard to imagine what the right set of ideas can do, one way or the other. But this is rather old history. Let me tell you of what I have read recently. A book by Robert H. Nelson has constructed a lineage from Marx and Darwin to Freud, Hitler, and Stalin.</div> <bR> <div> AM: So I hear. So I hear. The lineage I, instead, want to emphasize is that from St. Thomas to Vico to Croce.</div> <bR> <div> CG: Yes, of course. Benedetto Croce (1866-1952). "History is history of freedom." Did he not build his thought around this formula? Of course he did. But, once again, what you are telling me is a series of what ifs. A series of potentially different historical developments if people had listened to the teachings of your sons.</div> <bR> <div> AM: Oh, no! I am not talking of past history and of ifs and buts. I am talking of vital, current, live and living history.</div> <bR> <div> CG: Where, where?</div> <bR> <div> AM:  Right under your nose. Right in the United States. The Fathers of the United States Constitution did listen to the teachings of my people. They studied Rome, they studied Greece. They studied the Old and the New Testament. And they put it all together, just as St. Thomas had done. They studied the history of liberty, as Vico, and later Croce, did. Liberty! Liberty for all -- not libertinism for the few. And they established a framework in which you all live. A res publica; not a res privata. "A republic, if you can keep it."    </div> <bR> <div> CG: Yes, who said that is my only hero, an individualist -- if there ever was one -- with a spectacular sense of community, a sense of the polis: Benjamin Franklin.  </div> <bR> <bR> <div> <I>Carmine Gorga graduated from the University of Naples in 1959 with a doctorate in Political Science.  He is the president of Polis-tics Inc. Since 1970 he has lived and worked on Middle Street, where --  in the bosom of the Universalist Church -- religious Liberty was born. </I></div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>top</U></A></div> <bR> <bR> <div>  <A NAME="just_compensation"><IMG BORDER="0" SRC="1x1.gif" HEIGHT="1" ALIGN="bottom" WIDTH="1" HSPACE="0" VSPACE="0" ></A><FONT SIZE="5" COLOR="#000000" FACE="Arial" >Just compensation</FONT></div> <bR> <div> <IMG SRC="09fd4500.png" border=0 width="468" height="80" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div> OPINION     My view                        Wednesday, May 29, 1996         A8 </div> <bR> <bR> <div> BY CARMINE GORGA</div> <bR> <div> There are those who are concerned that in order to curb the excesses of exorbitant executive pay one must have government intervention. This is an expression of the poverty of the current political discourse, according to which one is supposed to be either a rugged individualist or a rabid socialist. Let me try to enrich the discourse by using a new word.</div> <bR> <div> There are not two forms of justice, and two methods of achieving it, but three.</div> <bR> <div> Winner take-all-justice is the first. Ultimately based on brute force of the rugged individual, this form of justice eventually leads to a Dickensian world of abject poverty and moral squalor.</div> <bR> <div> The second is fiat-by-government justice. Ultimately based on brute force-by-association of rogue individuals, it eventually leads to horrors of the Gulag Archipelago.</div> <bR> <div> The third form of justice is based on analysis, hard decisions, and civilized discourse. I like to call it Somist justice.</div> <bR> <div> Some of the details of Somist justice are these. Somist justice starts from an ideal of justice. Not abstract justice. But concrete, perfectible justice. Justice interpreted as the common good. Justice as determined by the Thou and the I. Not by the government, nor by the I or the Thou alone; but by the I and the Thou together.</div> <bR> <div> And since the I and Thou are not always equal, in today's world Somist justice fully recognizes the need for labor unions - labor unions, it adds, without their traditional excesses, furthermore, labor unions that work toward the recognition of the importance for workers to accept the rewards as well as the risks of ownership rather than shortsighted, highest possible compensation for their labors.</div> <div>      </div> <div> What do the I and the Thou who are in fair balance of forces do? They engage in conversation. They discover that $500 million compensation for Mr. Milkin does not come from the sky. It comes from wages that are below the living standard for thousands of workers.</div> <bR> <div> Nor should this be the only concern at the heart of their discussion. There should also be concern for invention, innovation, and the future. How many R&D projects are being scrapped because of the downward pressure applied by tapping into the wishing well of stratospheric executive compensation?</div> <bR> <div> As it can be seen, the discussion will concern itself with very concrete alternatives. At the heart for the discussion, however, one finds that the issue is one of moral fiber. When there are so many vital unmet needs, no executive should have the chutzpah to ask for exorbitant compensation; and no corporate board of directors should indulge in complacency and grant such a compensation.</div> <bR> <div> There is also and issue of self-interest. The gap created by lack of jobs, the gap created by wages below the living standard will not be filled exclusively by human sufferance. It will also be filled by direct or indirect contributions by the majority of us. So we have a stake in the decisions of corporate boards. So we have the economic right to ask corporate boards to analyze all the consequences of their actions. Today, they live in splendid, but dangerous isolation.</div> <bR> <div> Somist justice recognizes this broad reality and assumes that when people meet in a condition of fair parity* they discover something that is quite exhilarating. They discover what is just. And, when they see it, they will want to be just. There is no prodding them; and no stopping them. There is no force, no government intervention in letting the parties do what is right. </div> <bR> <div> Unrestrained executive compensation is an irresponsible flight of the imagination. It is a flight from reality. Moral restraint is a call to each one of us.</div> <bR> <div> <I>Dr. Gorga is a Gloucester resident. He is president of Polis-tics Inc. He believes he has been blessed with the opportunity to work toward the creation of a civilized world.</I></div> <bR> <bR> <div> <I>* </I>In the published form,  this word appeared as "parity."</div> <bR> <bR> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="id23_m.htm" TITLE="Papers"><U>TOP</U></A></div> <bR> <bR> <bR> </td> </tr></table></body>