Halting Of The Competitive Process In Disequilibrium.

If in any one period the competitive process comes to a halt it does not mean a failure of the process. Disequilibrium – the real world condition – is characterized by widespread ignorance, meaning that despite all the alertness that market participants have they still are unaware of all of the opportunities that exist. In this sense the competitive process is in a ‘potential’ state but as soon as the opportunities are perceived they will be pursued in a most competitive way.

 

 

 

 

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Savings And Investment Makes It Possible.

Practically speaking there are two types of productive endeavors in the economy. Either long processes that are more productive or short processes that are less productive. These have to be chosen from and it is savings and investment which makes it possible to choose the processes that take a long time.

 

 

 

 

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The First Stage Of Production After Discovery Is Ex Ante.

The producer, acting like an entrepreneur in a competitive environment, searches high and low for profit opportunities. The producer (as if it is easy) merely needs to know where to buy resources at a price worthwhile to produce, such that the product can be sold at an attainable price in the future! Once found the producers’ actions signal that a discovery was made.

The first stage of production just after this ‘discovery’ is ex ante; estimating, speculating, planning and investing. The second stage follows, which is the act of physical production signaling that a previously unperceived revenue possibility may indeed have been found. This is the ‘announcement’ made by beginning production.

 

As part of the production process there is what is called a derived demand for factors of production. Resource owners who find the payment offered by producers sufficiently attractive to make them willing to sell their resources do so. Wage earners fit into this category. Resource owners can also play the role of a capitalist if they are willing to sell their resources under an agreement which promises them revenue only at some time in the future.

 

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Two Quick Questions.

Q: What’s the definition of the divine economy?

A: The equilibrium power that operates is far beyond our comprehension.

Q: Bruce, can you please summarize the divine economy theory?

A: It is an extension of classical liberalism but it is built using my technical training in the Austrian School of economics and it originated from the model (shown here) that appeared to me in a dream in the autumn of 2004. Using logic and deduction the model was connected to the economic science that uses the subjectivist methodology and what began at the macro level extended to micro and then ethics and then justice.

 

 

 

 

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The Impetus Behind Production.

The impetus behind production is the consumer’s desire for better quality, more choices and lower prices. Of course, production is prior to consumption. Consumers have the power to change the course of production by changing their spending patterns. Prices for factors come backwards from consumption and all of these market prices tell the producers what to produce and in what quantity. Being alert in this competitive environment, it is the producer who serves as a ‘built-in’ entrepreneur.

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The Rich Drama Of Production.

It is towards consumer sovereignty, meeting their needs and wants, that producers must orient themselves. The firm enters the market with a price in mind but not knowing the true market price. Accordingly this producer has already committed to producing X units in this particular production cycle. This is the beginning of the drama that unfolds. In this opening act adjustments will need to be made. As the drama unfolds we encounter the unpredictable features of the market: uncertainty and changes taking place over time. It is an unending drama, richly human.

 

 

 

 

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Cartels And Monopolies Cannot Form In A Free Market.

Since firms face a more elastic demand curve than does an industry the equilibrium forces inherent in the market economy would tend to break any attempt to form a cartel. This is because: if a firm charges a lower price than the cartel price the result would be a significant change in the quantity demanded from the firm (drawing buyers industry-wide) and total revenue would increase for the firm. The increased total revenue is an irresistible incentive, enticing a firm to break the cartel.

 

 

 

 

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