Inflation, Unemployment and Capital Malformations

Bernard Schmitt, Xavier Bradley, Alvaro Cencini, Xavier Bradley, Alvaro Cencini

• Publisher: Routledge
• Year: 2021
• Topic: Economics
• eBook ISBN:
  9780429767067
• Subtopic: Economic History
• Index: Economics

The volume deals with the main problems faced by capitalist economies, inflation and unemployment, in a new and original way, and provides the theoretical foundations for quantum macroeconomic analysis. Its aim is to allow English-speaking economists and interested readers to have a direct access to the analysis provided by Schmitt in his 1984 book Inflation, chômage et malformations du capital.

Orthodox economics has failed to provide a consistent insight of the pathologies hindering our economies, and both the academic and the economic worlds are much in need for an alternative approach capable to explain the origins of these pathologies and how they can eventually be disposed of. Schmitt's volume provides a revolutionary explanation of the cause of today's economic disorder as well as an innovative solution allowing for the passage from disorder to order. Neoclassical and Keynesian theories of any type are essentially based on equilibrium analysis and this is why none of them has ever been able to provide a consistent macroeconomic analysis based on macroeconomic foundations. This is what Schmitt's book aims for: developing a new analysis built on identities rather than conditions of equilibrium, capable to explain the objective origins of inflation and unemployment.

In this volume, Schmitt introduces a new, revolutionary analysis centred on the concept of quantum time. The topics analysed by Schmitt cover the entire field of national macroeconomics, from production to capital accumulation, the leading role in this ground-breaking investigation being played by what he calls the theory of emissions. The ensuing macroeconomic theory is built on a set of laws derived from the monetary nature of our economic systems and defines the logical framework of inquiry into modern macroeconomics.

1 Production and time

Production is an action or a movement. Therefore, it would seem that production is a velocity, the space covered during one unit of time. But then what is the space covered by a production? If we answer that this space is the product, we formulate a proposition that has two opposite aspects:

• if it is true that a production is equal to the product by unit of time;
• it is absurd to consider as a given that the product is a space to be covered by production; this is because the product cannot exist before production.

The only available “tool” to fight and reduce contradictions is the use of logic. We shall try to apply it. We shall be very attentive because it is a difficult question.

We shall first separate production from the movements known to classical mechanics. Production is original, because it is a movement that creates a space “in front of itself”, whereas conventional movements are motions in a predefined space. We shall draw from this a fundamental conclusion: negated in the case of conventional movements, the Eleatic paradoxes remain true as soon as the movement, instead of being the motion of an object through a given space, has to create the space in the motion. The paradox cannot be resolved in continuous time. Thus, any scientist who would still locate production in a time considered as a continuum would leave political economy under the influence of a fundamental flaw (all the more damaging for no longer hidden); if production is an immobility (let us say it is immobile) through time, it will necessarily be so in space too: under these conditions, any production will be nil in perpetuity. Production is formally possible only if it is a positive motion in time.

Zeno’s paradoxes are dissolved as soon as the movement is defined or located in quantum time. We shall therefore show that production is not a motion through space but a motion through time; it is precisely because production “quantifies” time that it creates a space, namely the product. A positive movement through time, production is not a motion through a space but on the contrary the creation of a space. We shall induce from this that the product is a “quantized” time. In other words, the product has a known measure, the measure of the production’s length of time. It is clear that this measure varies with products and does not confer them any homogeneity. It is true that time is objective and that its measure prevails on everyone. Thus, a product that is identified to the quantum defined by one day of labour has the same time-dimension for every observer, the duration of one calendar day being the same for everybody. However, another product that has the same time-dimension bears no objective relation with the first, especially since the two productions may come from two different people. Consequently, the products do not belong to any common measuring space. To create that space, another operation is therefore necessary. Economics gave a name, a long time ago, to this common measure of different products: it is the numéraire.

In the concrete domestic economy, the product is formed in quantized time and simultaneously in numéraire. Thus, the product is a time-space and a number-space. Although the product is a two-dimensional space, these two are (non-simultaneous) alternatives: one of them, indifferently, is therefore a simple factor of proportionality, a constant which can be logically reduced to the number 1 in the series of natural numbers. Once the analysis has reached this result, it will have arrived at the fundamental conclusion, according to which production is defined in time considered as the set of whole numbers. It will be possible to reduce the product of any individual to a time-dimension equal to the indivisible number 1, only the numéraire-dimension will differentiate the various products in their common measuring space.

The theory will then be able to carry on with the study of monetary expenditures. Production brings about the numéraire-product because money is introduced into the production process. If money were not present within the act of production, the product would only be a time-space, and the domestic economy would produce only disparate and incommensurable goods. Money is the sine qua non condition for the existence of the numéraire. The numéraire-product is the product in money, the money-product.

I. Production is a motion that confirms the Eleactic paradoxes; any production is an “immobile motion” in continuous time

We may start treating this subject from its easiest angle. The fact that the individual or national production is necessarily nil in continuous time cannot escape anyone’s attention, provided this fact is given its most simple mathematical expression: if production were taking place in the continuum, the annulment of production-time would imply the annulment of production itself.

In a second phase, it is easy to show that production is an original movement, distinct from all types of motions known to classical mechanics: production is not a motion within its product, or along its product; it creates it.

It will then be interesting to go back to Zeno’s paradoxes, the current relevance of which is acknowledged by logicians. Any movement in a pre-determined space avoids the paradoxes; how could the movement not take place given that it runs in a space already “laid out”? The real difficulty is far more profound: the arrow would not move and the hare would not catch up with the tortoise if those moving bodies had to produce the space right before them. But, precisely, production is a movement of that type: it creates the product, it does not run through the product. The thought process is therefore caught between the two terms of an alternative:

• the moving “spot” follows a predetermined space and is immobile in time because it only follows time in its flow;
• the moving “spot” creates a space; in this case, it is inconceivable that it should be immobile in time.

In other words, motions in a space are necessarily nil in time; on the other hand, only positive movements in time can logically create a space. Economics will only start to apprehend production once it conceives it as a positive movement in time.

We shall show that production is a movement in time in that it quantifies continuous time.

Production is necessarily nil in continuous time

The most fundamental problems only enter the realm of conscience once it has become possible to solve them. If they were to surface before, they would halt the progress of science. That is why production is a movement the originality of which has never been discovered; without further inquiry, economists have equated it to a velocity. Is it not intuitively the case that the mathematical value of the product depends on two factors, the measure of production and the time of its application? If twice the amount of production is applied three times as much, is it not obvious that the product is multiplied by six? This is expressed with the following equation:

$$\$Product=production\cdot time$$

Whatever the (positive) measure of the production under scrutiny, the product is zero if that production is applied during a zero length of time. The nullity of the product results from the time-factor, which is nil, and not from production itself, “instantly” positive. This is because, if production were zero at each instant, the product could never be positive. The analogy with the motions of classical mechanics is striking: the speed of the moving body being known at each instant in time, the whole move is the product of the speed by the time of duration of the movement. It is clear that a constantly zero speed would not allow any movement, whatever the duration of that zero speed.

But this analogy is erroneous; it is completely so; classical mechanics does not give us even a proximate solution to our specific problem. We shall be persuaded of that by the distinction of two cases.

Case 1. Production is constantly positive during a finite time interval, as small as we wish.

Case 2. Production is constantly zero during a finite time interval, as small as we wish.

It is clear that case 2 gives us the result of classical mechanics: the product is constantly zero during the observed time interval. But case 1, the only interesting case, can only result in an infinite product in a finite interval, whereas the product of a finite speed by a finite time only gives a finite movement. We shall ascertain easily that the divergence comes from the fact that production is nullified at the same time as the product is, whereas speed is not nullified when the time of application tends towards zero.

To simplify the reasoning, lets us assume that production is not just constantly positive in the interval of time under consideration, but is also constant. We shall soon see that this assumption is in reality a logical requirement, because constancy does not have the same meaning depending on whether it is a production or a velocity in the realm of classical mechanics.

At first view, constancy of production must be represented as follows.

Blaise Pascal once said that we must reason correctly on incorrect graphs. We have therefore divided the rectangle in its two equal parts. In A and in B, production is the same. Production in period pa is equal to production in period pb. We deduce that the product of period (pa + pb) is twice as large as the product of period pa. This implies tautologically that production of period (pa + pb) is twice as large as production of period pa. This result is absurd since production is constant over the whole period under consideration, (pa + pb). Thus, in mechanics we would not say that the constant speed of the moving body is twice as high in the entire period as in its half pa or pb. The absurdity becomes more and more patent as the period is further subdivided.

Figure 1.1 Production as a constant function of time

Assume n the number of equal divisions. We face the following contradiction:

• in each division, production is equal to the production of the whole period (since production is constant);
• in the whole period, production is equal to n times the production of each division.

Finally, if we assume that n tends towards an infinitely high number, the production of the period tends also towards an infinitely high number although it is, by assumption, constantly equal to a finite given number. The reason for the contradiction is quite clear: the product of any period is equal to the production of this period, whereas in mechanics the displacement of a moving body is not equal to its speed during the interval of time under consideration.

The divergence is equally striking when we divide (instead of multiplying) the production by n. When n becomes very high, each elementary period becomes very small; at the limit, it is close to zero; production is then also almost zero: it follows that in an infinitely small period, pr...

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• Acknowledgements
• Foreword by Alvaro Cencini and Xavier Bradley
• Foreword by the author
• General introduction
• 1. Production and time
• 2. Expenditures and time
• 3. Production and expenditure constitute one unique event: the emission
• PART I: The functioning of the domestic economy: from wages to capital
• PART II: The dysfunction of the domestic economy: from capital to capitalism
• PART III: The remedies usually proposed, their inefficiency evaluated in the light of the theory of emissions
• PART IV: The solution is in the division of the activity of banks in three departments. Liberated from empty emissions, the domestic economy follows Say’s law: it ensures full employment
• PART V: General conclusion: the micro-macro distinction in economic analysis
• SYNOPSIS: of quantum macroeconomics
• Appendix
• Bibliography
• Index