Monday, January 13, 2014



Trade, or Commerce, or Buying and Selling, or Real Economics, which is what I teach, is all relevant matters of mankind regarding the purchase and sale of property. Said another way, it's the theory of trading property for profit. 

The entirety of trade, or commerce, or real economics ties up with two words — property and profit. Without profit from effort, anyone would lack buying power to buy anything else. Without property, no one can trade. 

At less than break even, anyone would stop trying to produce property. No one works at a loss.

In trade, or commerce, or real economics, there is but one law and one axiom, the Law of Prices and the Axiom of Profit. The Law of Prices holds the winning bids of purchase and sale in the face of what is on offer sets the price. The Axiom of Profit holds the sum of sales must at least equal the cost of production otherwise a producer goes to ruin.

Though most think of property as things possessed, property always has meant the right of ownership and never the thing owned. Only when property gets created, can trade arise between two persons. 

The name for property put to making stuff is called capital. The name for property put to purchase and sale for cash and credit is wealth. The name for property that can be sold to satisfy debts is asset. The name for property pledged against a debt is collateral.

Profit is the name of sales at prices set by winning bidders less the outlay spent to acquire property for those sales. Profit signals potential return to increasing capitalization to gain efficiency and thus higher profit, lest competitors come to the party with better capitalization.

Trade, or commerce, or real economics is about acquisition of rights to own stuff. No one can derive satisfaction until that one owns. All talk about pleasure, pain, satiation, utility and the like is irrelevant until acquisition.

A trade is a purchase and sale for cash or credit, which can be settled by cash. Today, because of the legal tender designation for cash, cash lets anyone settle contracts straightaway. 

Cash is printed, circulating bank credits. Cash consists of banknotes issued by a centralized authority. Cash represents deposits circulating in perpetuity. 

Anyone who possesses cash has bearer negotiability, also said as currency. Bearer negotiability means the right of ownership in a thing gets passed along with honest possession in every sale or every exchange. The property and the possession are inseparable.

Cash stands as a money substitute. Cash exists as a money substitute precisely because politicians have decreed legal tender status for cash. Gresham's Law reveals why cash has crowded out money.

Money is coined metal by weight and fineness. Each coin by weight gets a unique name called denomination.

Money does not exist anymore and hasn't for decades. In the days of money, money extinguished both cash and credit.

Today, Americans, Canadians, Australians, Europeans, Japanese, and all others have cash and token coins. Any token coin has denomination higher than the sum of street prices of the metals which constitute it.

In spite of shopworn fallacies, never was money "a medium of exchange" or "a store of value"Instruments of banking are the media of exchange. It is bankers who do the exchanging, today, buying cash and debt through discount and selling credit, transmuting property of lesser saleability into property with more saleability.

Without doubt, doing the work of money does not make something money. Credit does the work of money and no one would ever say credit is money.

Price is an objective ratio that expresses a rate of trade of an economic quantity for cash or credit denominated in cash. Value is an objective ratio of exchange in swap, which most know as barter. Price and value arise from the same concept, except one has cash as one economic quantity for another. Both are rates of trade, of exchange.

By objective, we mean that someone not a party to a trade can observe the swap. There isn't anything subjective about it. 

Prices get set by double auctions. In most job markets, inter-employer competition has employers engage in English auctions (highest bidder wins) for workers, while inter-worker competition has workers engage in Dutch auctions (lowest bidder wins) for jobs.

Where the winning bidders of employers and winning bidders of work seekers intersect, that is the clearing price, which, when it involves work, we call it a wage.

In credit-as-capital markets, inter-lender competition has lenders engage in Dutch auctions (lowest bidder wins) for borrowers, while inter-borrower competition has borrowers engage in English auctions (highest bidder wins) for jobs.

Where the winning bidders of lending and winning bidders of borrowing intersect, that is the clearing price, which, when it involves credit, we call it a interest.

Labor absent capital is living at bare subsistence. It is to capital that profit can arise owing to efficiency of surplus output. 

Both rent and interest to the capitalist are shares of profit paid in parts as a hedge against loss. 

Trade, or commerce, or real economics has correspondence with both practical and theoretical civil jurisprudence as well as accounting.

Occam's razor is on my side. 


Academia economics is wrong, thoroughly wrong. Neo-classical economics is fraught with fallacy. It's a sham. It doesn't matter if it is preaching from the Austrian School or the Keynesian School. Being logically consistent against wrong premises still leads to wrong conclusions. 

Everyone who lives in the real world knows this. If academic economics were correct, the political policies based upon it wouldn't lead to banking, and credit crises and high unemployment.

Academicians preach a false dogma surrounding scarcity and utility (usefulness), often calling economics the science of scarcity. 

Academicians cite examples to justify their false beliefs. They say that though useful, air is abundant and thus can't be an economic good. They say that though useful, water is abundant and thus can't be an economic good. They say that in the desert though, where it is scarce, water becomes an economic good. 

Yet, anyone who puts air into cans turns abundant air into potential wealth and thus an economic good. Anyone who puts water into bottles, turns abundant water into potential wealth and thus an economic good, whether in a desert or in a big city surrounded by aquifers. Putting air into cans and water into bottles creates property. 

And what of monopoly patents, seemingly which are useful and scarce to have the right to be exclusive producer? Many firms buy monopoly patent not to produce, making such not useful, but to exclude competitors from doing the same. 

The firm which buys monopoly patents gains property in those patents and restricts trade by control of property. Such action reveals that property, or right of ownership, is what counts.

Thus, neither scarcity nor utility gives rise to economic goods. It's property. Until one gains property, one can't do anything, including experience satisfaction.

Since neo-classical economics is predicated on scarcity and utility rather than property, academia economics begins with false premises. Thus, all conclusions arising from the alleged faux science must be rejected as false.

Neoclassical clowns preach that value arises from utility. Value is not a quality, that is, it is not an aspect of a thing residing absolutely within it. Nor does value arise from utility, nor the cost of production, nor any other claimed intrinsic quality, nor scarcity.

It's a specious claim that utility stands as the cause of value. Holding that utility makes the cause of value forces the belief in intrinsic, absolute value owing to some quality inherent in a thing. While the qualities of a thing remain the same, such a thing can be useful during some times and yet not during others. 

Contemporary economists believe that the amount of utility derived from consumption of a good declines with each additional unit; and thus, a person maximizes his utility when he distributes his income among various goods so that he obtains the same amount of satisfaction from the last unit of each good.

The idea of marginal utility is the pseudo-scientific claim that one derives 100% satisfaction from the first unit of a thing and less than 100% satisfaction from each subsequent unit.  It is from the foregoing that economists claim what gives rise to value and hence prices.

Academia economists would have the world believe that if someone sold a house for $400,000 but only spent $300,000 from the proceeds and never touched the $100,000, then the buyer overspent by that $100,000 and the seller should have sold for only $300,000. Yet, never in the real world would find the seller years later sending back to the buyer $100,000.

Marginalism is a crock, bunk, hokum. Utility does not impute value. Marginalism is pseudo-scientific psychology. Academician economists have assumed marginal utility as true without any proof, taking it as axiom and have built sandcastles of mischievous theory upon it. 

The bogus concept of marginal utility deals with satisfaction, and specifically with satiation. Marginal utility is pseudo-science satiation psychology never proven through the scientific method in psychology much less for economics. Academicians enter the realm of conjectural, pseudo-scientific psychology when they attribute motives and cognitive processes to prices. 

Cournot was right when he said: 

"... accessory ideas of utility, scarcity, and suitability to the needs and enjoyments of mankind ... are variable and by nature indeterminate, and consequently ill suited for the foundation of a scientific theory." 

There can not be a "Law of Supply and Demand" because exceptions need elasticity to explain why such exceptions exist. A law of science governs the relation of phenomena, of all facts. If exception must be made, there can't be a law. 

Academicians preach the fallacy that producers sit on supply, offering up supply only through an imaginary supply schedule. They spin an alike bogus story about a demand schedule.

Yet, in the real world, inventory gets to the shelves once produced and gets put on offer. It's winning bidders who set the price, regardless of cost of production. If some producers sell at loss, those producers either get forced into efficiency, reducing costs or those producers must exit. Winning bidders must bid higher to gain the remaining inventory of sellers who can at least break even on costs. 

While guys like Paul Krugman might understand academic economics, be expert even, they do not get trade, or commerce, or buying and selling, or real economics, you know, the actual economics that exists from manifest phenomena of the real world.

Krugman's brand of academia economics is built on all of the fallacies of Adam Smith, David Ricardo, Thomas Malthus, J.S. Mill and Jeremy Bentham, while rejecting the few lucid thoughts those foregoing had. And then their brand doubles down with more jokers like Stanley Jevons, Leon Walras, Francis Edgeworth, Alfred Marshall, all of whom accepted pseudo-scientific psychology never proven and totally unneeded. Jevons was so crazy that he claimed that sun spot activity created the cycles from boom to bust, from depression to prosperity.

Inauthentic, false, academia economics continues the parade of errors by adding erroneous thought of Throstein Veblen, Irving Fisher, John Maynard Keynes, John Kenneth Galbraith, Paul Sameulson, Kenneth Arrow, Robert Solow and Robert Mundell.

Economic theory espoused by all of the major universities suffers from significant flaws, even though there are kernels of truth is some thought here and there. Like all academicians, academic economists join a priesthood, receiving Ph.Ds, and became anointed to sermon on academic economics. Every Ph.D conferred in economics has been given to someone who has learned a false doctrine.

Even the Nobel Prize in Economics is little more than back slapping to the guy or gal who can remain logically consistent with the illogical house of cards that is academic economics.

Academic economics exists to justify political action of one kind or another, which means action against individuals and their respective property. Scarcity and utility are chimera faux concepts to justify political action of confiscation of output and redistribution to those of favored groups. Those who parrot the false belief that economics has anything to do with scarcity and utility have accepted rhetoric and have become indoctrinated.

 Every law crafted from economic theories of academia is a bad law. Every law that interferes with profits and impairs someone's property is a bad law. 

Full Disclosure

I earned a degree in economics from what was once a highly selective university. All my profs who taught me their false doctrine earned their Ph.Ds from Harvard, Yale, UC Berkeley and the like. 

For More

For those seeking a slightly more formal treatise, enjoy The Theory Of Trading Property For Profit.