STRUCTURAL ECONOMICS

 

The following is the original discussion paper from the Post Keynesian chat site.

The Other Side of Keynes:

A Structural Approach To Macroeconomic Analysis

A seminar presented on the

PKT(Post Keynesian Thought) discussion group which may be of use today.

Rev. Robert Peter (Bob) Williams B.A. (Economics and Psychology) M.Div.

http://archives.econ.utah.edu/archives/pkt/1996m06-d/msg00005.htm

Date: June 1996

THE OTHER SIDE OF KEYNES:

A Structural Approach To Macroeconomic Analysis

by

R.P. (Bob) Williams

For discussion only

"What is the sum of physical science? Compared

with the comprehensible universe and with

conceivable time, not to speak of infinity and

eternity, it is the observation of a mere point, the

experience of an instant. Are we warranted in

founding anything upon such data, except that which

we are obliged to found on them, the daily rules and

processes necessary for the natural life of man?"

Goldwin Smith

(in _The World's Best Orations_, 1899 p. 3476)

"The outstanding faults of the economic society in

which we live are its failure to provide full

employment and its arbitrary and inequitable

distribution of wealth and incomes."

John Maynard Keynes, The General Theory of Employment,

 Interest and Money Chapter 24 part I

Given the dual nature of Keynes' concern captured

in the quote above, one is surprised by the lack of

focus on the second part of Keynes' interest, this

other side of Keynes, the "arbitrary and inequitable

distribution of wealth and incomes".

One exception to this general disinterest in the

implications of the way income and wealth is

distributed is that shown by James S. Duesenberry in

his Relative Income Hypothesis. Although the

thrust of Duesberry's study was more concerned

with the baffling constancy of average consumption

over the long haul and equally puzzling phenomenon

of a decrease in the marginal rates at higher levels of

income, one insight of note was fashioned: "...the

percentages of his income that an individual spends

on consumption depends on his position in the

spectrum of income distribution."

James Duesenberry in Howard J. Sherman,

Macrodynamic Economics_, 1964, p. 51

Although Duesenberry's search in the area of income

distribution broke new ground in terms of the

validity for this forum for research, long standing

applications for policy in his work were not

forthcoming. Once instance of his methodology

assumed doubling of all incomes. The resultant

conclusion was that prices and interest rates and

other relevant measures would be accordingly

doubled and everyone would be in exactly the same

relative position as they were prior to the doubling

of income.

Two responses to this study come to mind. The first

is that this is not the way that aggregate income is

doubled, in one fell swoop. Incomes increase to the

point of being doubled at different rates.

The second thought is that there is a considerably

greater amount of money in the system and although

it may not have domestic implications, the relevance

to foreign exchange and investment may be different

than that of the economy prior to its money supply

being doubled.

However, the overall lack of effective analysis in this

area of economic investigation has not been due to

lack of interest or from a lack of knowledge of the

importance of understanding the nature and reasons

underlying a comprehensive study of the disparities

in the distribution of incomes and wealth. Rather it

has more than likely come from a lack of an

appropriate approach that would give difinitive

answers to questions regarding the disparities

involved in such a search.

It is hoped that the approach presented herein will

provide a useful analytic tool to examine the effects

of income and wealth disparities and, thereby open

the door to investigating the effects of varying

disparities on the setting, by appropriate agencies of

society, of economic goals and on removing existing

barriers to the successful completion of such goals.

In time the investigation into the distributions of

wealth and income may provide a rich harvest in

terms of understanding the dynamics and

relationships that comprise the economy.

Any new insights into the workings of the economy

based on an inquiry into the relative distribution of

the stock and flow of wealth and the attendant social

relationships that nurture economic activity based on

such distributions will be at least as relevant as much

of the past thought applied to economics.

Much of the past inquiry has centered on strategies

to bring about full employment and address the

emergent economic malaises of the day without a

concern for how the stock and flow of wealth and

income is distributed. Nor has it delineated the

relationship between how this distribution effects the

efficiency and functioning of an economy. These

areas have been ignored in the main in theory and

seldom if ever effectively utilized for purposes of

policy.

The thrust of this present proffer is to initiate

heightened interest into an investigation of the

STRUCTURE (relative percentage distributions),

CONTENT beliefs that shape the relative

percentage distributions) and PROCESS

(interaction between the various relative percentage

distributions with one another) of the economy

(generically speaking) vis a vis the distribution of the

stock and flow of wealth. For it is a belief of mine

that how the stock and flow of wealth is distributed

is the most significant participant in the force that

drives the economy. One trusts that this look at

economics is in keeping with John Maynard Keynes'

intuitive sense of its importance in his General

Theory of Employment, Interest and Money.

REFOCUSING ON A FUNDAMENTAL THEORY OF VALUE

Why Keynes did not focus more on the distribution

of the stock and flow of wealth is open to

speculation. None-the-less, from reading Keynes'

own words one may find some insight into his

outward observation of the need to do so and the

inner thoughts that necessarily hampered such a

search. One gets a sense of this from his

preoccupation with "real wages". Another way of

seeing this barrier is to look at his underlying Theory

of Value and the implications this holds for possible

avenues of exploration and avenues exempted from

the searcher, falling, outside the _a priori_ defined

purview of any such investigation by virtue of the _a

priori_ bounds put on any such study.

He was, in the most simplistic terms, presenting

himself and the world with a self defeating prophesy

of what is possible.

As he pursued "The ultimate object of our analysis

.... what determines the volume of employment." [GT

CH 8 sec I], Keynes made two comments of interest

to this discussion.

The 1ST was a conclusion from an earlier area of

concern; the determinants of the volume of

employment; being "... the point of intersection of

the aggregate supply function with the aggregate

demand function." [GT CH 8 sec I] This insistence

that the level of employment was dependant on a

functional relationship between supply and demand

on an aggregate scale will be addressed at a later

point in this discussion.

His 2ND point: [GT CH 8 sec I]

two distributions of a given aggregate

employment of N between different

employments might (owing to different

shapes of individual employment functions

-- ...) lead to different values of Yw. In

conceivable circumstances a special

allowance might have to be made for this

factor. But in general it is a good

approximation to regard Yw as uniquely

determined by N.

will now be considered.

SCHEDULE I

Three Distributions of the same amount of N

-------------------------------------------------------------

income |recipients| Y total | %YT | Yl x 2 | Yl x 1.1

level | & %N |(YT) | at Yl | Double | 110% |

at Yl |at Yl | at Yl C,E & F|

=A= | =B= | =C= | =D= | =E= | =F= |

-------------------------------------------------------------

10 1 10 0.4177 20 11

11 2 22 0.9190 22 24.2

12 3 36 1.5038 72 39.6

13 0 0 0 -

14 4 56 2.3392 112 61.6

15 0 0 -

16 5 80 3.3417 160 88

17 6 102 4.2607 204 112.2

18 0 0 -

19 7 133 5.5556 266 146.3

20 0 0 -

21 8 168 7.0175 336 184.8

22 9 198 8.2707 396 217.8

23 0 0 0 -

24 * 5 120 * 5.0125 * 240 132 *

24 * 5 120 * 5.0125 * 240 132 *

25 0 0 -

26 9 234 9.7744 468 257.4

27 8 216 9.0226 432 237.6

28 0 0 -

29 7 203 8.4795 406 223.3

30 0 0 0 -

31 6 186 7.7694 372 204.6

32 5 160 6.6834 320 176

33 0 0 -

34 4 136 5.6809 272 149.6

35 3 105 4.3860 210 115.5

36 2 72 3.0075 144 79.2

37 1 37 1.5455 74 40.7

-------------------------------------------------------------

Total 100 2394 100% 4788 2633.4

Deusenberry noticed. Any across the board

increment in incomes leaves the recipient in the same

position relatively speaking as he started from.

Yet the Aggregates are different.

An added dimension to this examination can be

gained in this discussion if, instead of adding a

percentage to each income level, each income level

were increased by an equal amount of the total

income. This diminishes the highest and lowest Yl's

(income levels) shares and increases the shares of

those nearest the middle therby reducing the range

of the distribution and hence reducing the disparities

between highest and lowest.

=====================================

n.b. * Yl 24 has been split to show the median level

of income (50%N above & 50%N below the split)

=====================================

If one does, in fact, look at (hypothetical)

distributions of the same amount of employed labour

(N) equaling 100 incomes, one notices that the

Aggregate Incomes are not the same. In

SCHEDULE I below, the Total Income of the three

distributions are 2394, 4788 and 2633.4

respectively. The distribution of N along the

income distribution range seems to be of

significance.

This is in spite of the fact that the three relative

percentage distributions (%YT at Yl) are exactly the

same. Speaking in a Relative Percentage way, all

three distributions are the same. The range over

which the three are dispersed is very different.

These are 37-10 or 27, 74 -20 or 54, and 40.7 - 11

or 29.7 respectively. The highest 1% of income

recipients in each receive 1.5455% of Aggregate

Income and the lowest 1% or income recipients

receive .04177% of Y total.

This is the same phenomenon that James

mean, thereby reducing inequality.

In some economies such equal transfer payments are

made, thereby reducing inequality. Then the tax

levies are made and being progressive tend to reduce

inequality to an even greater extent.

The discrepancy between Keynesian thesis and

perceived phenomena concerning two distributions

of the same N can be seen in the nominal totals. To

suggest that this is not significant is to ignore the

relationship between different economies all of which

are distributed.

Keynes' Psychological Law : "The psychology of the

community is such that when aggregate real income

is increased aggregate consumption is increased, but

not by so much as income." [GT CH 3 sec II]

(I have long sensed that this "psychological law" conforms to a Structural Imperative in which consumption will consist of the area under the Relative Percentage Income curve (R%Y) up to the intersection with the Normal curve and then remain below the normal curve from there on. 7 August 2012)

Although this "Psychological Law" maintains a

relationship exists between consumption and savings

on the one hand and level of Aggregate Income on

the other, the nature of that relationship is not

clearly delineated by Keynes. To maintain the

existence of a state of affairs without a convincing

explanation of the Reason or "Why" it exists leaves

the door open for further study. The "Psychology of

the Community" is not enough to adequately

explain the dynamics involved in a phenomenon that

does, indeed, exist and that Keynes and others have

seen and judged to be an important area of

investigation.

A DYNAMIC ASIDE (Part I)

Prior to delving into "Structural Analysis" a short

imaginary tangent is essential to put this type of

analysis in context by introducing a specific

conceptualization approach and by exhibiting a

dynamic in the economy that is alluded to as a

"Business Cycle".

***********************************

Imagine an economy in which there are no

inequalities in the distribution of incomes and

wealth. It can not be readily imagined. But an

approximation of what is "fair" or equitable can be

fashioned from statistics in which a normal curve is

considered as a close approximation of what is

"normal".

*************************************

Since each society has its own historically defined

and socially refined sense of fairness, or justice or

the moral or the ethical, such a notion, the notion of fairness, though universal, will have some variances across cultural lines. Yet there is a resonance in each society with the concept of fairness. This idea is more often than not, lost in the institutionalized rationalizations of the inequalities that lend a sense of stability to all societies.

In a market economy, any “unfairness” can easily be credited to the dynamics of the market mechanism. But this is an after the fact rationalization whence the establishment of the market economy has displaced any social structuring that included any other forms of economic decision making that included an ethical/moral component especially when the notion of fairness may have been contrary to the amoral market conclusion.

At best, there is an arbitrary component to any sense of fairness one may arrive at. Best, then, to follow Martin Luther’s exhortation to sin bravely if we are going to sin and we are going to sin.

Let us, therefore, imagine that a distribution of the

shape of a normal curve could be argued to be fair

or equitable. There is , however, a built in

discrepancy which produces an interesting

dynamic: a dialectical movement that does not

produce a synthesis nor is it the result of a thesis and

antithesis.

If incomes are normally distributed then those

receiving these incomes would be skewed to the left

due to the graduated income scale from lower to

higher income levels (Yl lowest - Yl highest). This

skewing could be argued to be unfair.

Grounds would exist for arguing for a more

normally distributed distribution of income recipients

which, if attained, would have the result of skewing

the incomes distribution to the right.

The process would then be reversed by those

arguing that they ought to be paying incomes that

are normally distributed. This dynamic between a

fair distribution of income recipients and a fair

distribution of incomes has the effect of an ebb and

flow of economic activity.

The dynamic in place would nort require that the

individual components be "rational". This state of

affairs is not necessary for the "economy as a whole"

to be "rational"; producing changes in the levels of

prices for both goods and services and for the

medium of exchange being used.

It should be noted that such changes take place

hourly as the distributions of Y and N change hourly

resulting from varying pay periods and time lags in

times of transfer of the medium of exchange from

one side to the other of the circular flow of income.

The ways that incomes ebb and flow between the

two saturation points of a normally distributed

distribution of incomes and a normally distributed

distribution of income recipients determine not only

output but also policy. These are determined

exogenously by the society's sense of values or

ethics. This is a non ending movement toward and

away from these two points in a dialectic movement

that gives no resulting synthesis. No thesis or

antithesis exists within the economic structure.

These can be found in society's striving to assert one

value or another, some of which oppose each other

some of which compliment and many simply

indifferent to the other.

This kind of dialectical process is aptly described in

the preeminent twentieth century Theologian Karl

Barth page on the internet. (http//www.loathian/barth.html)

The foundational values of a society are an essential

part of any economic discussion. "We the people ..."

is a good start to an effective political action but is

one of the strongest formulations of an economic

Theory of Value ever developed.

There are other such formulations that would be

more valid in a world wide ecologically concerned

economy such as that available on the internet as a

Global Ethic with Theologian Hans Kung.(http:/rain.org/~origin/gethic/kung.html).

So much for the tangent. The actual Structural

Approach is similar to the above didactic illustration

used only to explain one of the integral dynamics in

this approach to analysis.

Other dynamics can be seen only through the use of

a Relative Percentage (R%) application to the two

distributions to which we referred above; namely

the distribution of incomes (Y) and income

recipients (N).

In Keynes' schema, Real Wages (Yw ) measured in

labour units were used. Unfortunately, real wages

preclude the use of a graducated income scale which

differenciates between not the quality of labour but

the economic return and ignores totally the

important transfer payments received because of the

ethics of society rather than a return for production.

A STRUCTURAL APPROACH TO ECONOMIC ANALYSIS

We begin with wages measured in the unit of

currency used by whatever economy we are

investigating.

Let us consider three hypothetical distributions

(local jurisprudence precludes the use of a real

distribution) of the same amount of labour.

WEALTH AND INCOME

Posing of the question of the economic malaise in its

duality, 1) employment and 2) wealth and income

distribution, was not a mere coincidence. There is a

relationship between these two areas of concern.

Yet, while the relationship of the aggregate level of

employment has been acknowledged as a factor in

determining aggregate income levels, the way that

the incomes and the accumulated effects of past

incomes, namely wealth, has not been seen as a

major determinant of aggregate levels. Why not?

One more possible reason for this synoptic view may

have been the attachment of Post Keynesian

economists to the methodology and paradigm of

Classical Economics. The methodology adopted

and still in use, at least in economic textbooks I've

read, is to see the economy as a large market.

Hence, the use of the familiar C+G+I+(X-M) market

paradigm to depict "the Aggregate" or "economy as

a whole".

Whether or not this reliably captures the

"Aggregate" notion to which Keynes made reference

is debated below.

It was Karl Polanyi in his book _The Great

Transformation_ who convincingly argued that the

market was only one possible way for economic

transactions to occur. His suggestion that

redistribution and reciprocity were as valid as the

market as a Transaction Mode, leaves the usual

"Market" analogy wanting.

There are others that one might argue are also

significant Transaction Modes.

An inability, however, to quantify or to measure the

other Transaction Modes seems to have warranted

ignoring them. The Classical Macro Market

paradigm resisted challenge not because of its

usefulness but because of its monopoly position

arising from a lack of serious contenders to explain

the workings and travails of economics.

However, Keynes had spoken (written) that he

wanted to view the economy as a whole. One

seriously questions whether or not the C+I+G+(X-

M) market depiction (the graph with 45 degree line

and intersecting C+I+G+(X-M) )permits of such a

view.

An alternative that would still satisfy the quantitative

imperative would be to look at the distribution of

incomes in an economy. A conversion mechanism is

necessary to make the data useful in terms of

economic analysis. Integrated into this view are all

transactions that do not occur within the bounds of a

market as well as those that do.

Such an analysis would look like any other statistical

distribution with applications in macroeconomics.

A DYNAMIC ASIDE (part II)

This being a distribution of income recipients (N) at

levels of income (Yl). One must emphasize that this

does not just include labour related incomes.

Therefore, concerns about fictitious labour markets

are not to be addressed here. It seeks to show the

structure of an economy in a way that is useful for

examination. Each economy (and region of an

economy and sector and distinct portion of an

economy) has a unique structure from which

structural advantages can be gleaned in international

and domestic trade and commerce.

This may be one reason why economies working

with the same technology, resources, levels of

employment and other factors of economic activity

have dissimilar levels of employment, investment,

inflation. It also has implications on stagflation.

This is a "normal" rather than unusual or impossible

result of an "inequitable" distribution of incomes.

THE PROCESS OF STRUCTURAL ANALYSIS

From any distribution of incomes can be derived two complimentary distributions: one of incomes and one of income recipients.

This is step one.

A given distribution of income recipients distributed

along a range of income levels Y lowest (or Ya) to

Y highest (or Yz) in units of local currency. (use

your own data).

x

xxx

xxxxxxx

xxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Yl(level) lowest..........Yl(level)highest

figure 1: A Distribution of incomes

_STEP TWO_ in the process begins a conversion

transformation. This consists in developing two

relative percentage distributions from the above

hypothetical distribution (insert data for your own

real distribution).

Calculate the percentage of each (N) and (Y) at each

level of income.

The two distributions have the same "x" axis

(income level) and "y" axis (% of N or Y at the

income level).

The next step, _STEP THREE_, involves fitting

each of these two distributions to a normal or "bell"

curve.

Note that now they are both in percentages and can

be compared because of this. They can be

superimposed on one another with equal areas under

each curve.

Next, superimpose a normal or "bell" curves along

the same range of incomes. Again, the area under

the normal distribution will be equal to each of the

areas under the two relative percentage distributions

R%N and R%Y.

It would look like this:

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

..frequency in %

.. ^

.. NORMAL DISTRIBUTION

.. v

.. * o #

.. R%N * * o | o # # R%Y

.. * A * o | o # D #

.. * ooo *$ # ooo #

.. * oo B # | * C oo #

.. o o # | * o o

.. # # # # E | F * * * *

-----------------------------|----------------------------------

.. Yl(low) v Yl(high)

[The graph above was added to clarify the one made from charachters. 2 August 2012]

FIGURE 2: Relative percentage distributions of

Incomes (R%Y = #) and of

Income Recipients (R%N = *) superimposed

on (2) Normal Curves = o

The horizontal axis represent the income levels (Yl)

The vertical axis represents % ages at each Yl

$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

Now that we have a view of the economy "as a

whole", some interesting phenomena emerge from

this conversion mechanism. Adam Smith's

"Invisible Hand", Karl Marx's business cycle, or

Keynes' "Psychological Law"; could these be activity

resulting from income distribution which in tern

produce structural imperatives that have been

perceived as different phenomenon at different

times.

THE DYNAMIC INVOLVED

First, a comment must be made about the invisible

hand. Given that there are now two distributions

under consideration, there are two boundaries that

must be considered. These are that _EITHER_

Relative %age Incomes (Y) _OR_ Relative %age

Income Recipients (N) can be normally distributed.

If Relative percentage incomes (Y) are normally

distributed then Relative percentage Income

Recipients (N) will be skewed (to the left) and vise

versa.

Incomes will, over time, be distributed in a

movement between these two "saturation" points

(the normal distribution of either incomes or income

recipients). [wealth can be similarly treated and the

same conversion can be made on the production side

of the circular flow: different economies as well as

different sectors of the same economy can be

similarly compared e.g. both sides of the circular

flow].

This dialectical movement is the result of the normal

pressures in the economy. Unfortunately, it is

contrary to Keynes' speculation that two

distributions of the same N will give the same

Aggregate Income although one can take heart in

knowing that he was not talking about this kind of

analysis. The level of income on the "x" axis and

the degree to which the distribution is scattered

along the axis will determine the Aggregate level of

income.

Since there is a circular flow in the economy, there is

the added ability, for the sake of exactitude, to

determine the same kind of distribution with regard

to government, corporate, institutional and

businesses and do an analysis of the impact of their

incomes on the economy as well.

The implications for employment and growth

without inflation can be determined as well. If the

relative percentage Income (R%Y) is already at the

point of normal distribution, new incomes will have

to be added to the economy on the bottom half of

the distribution (or a saturation distribution

determined by the ethics/morals/beliefs/sense of

value of the community). Similarly with the

relative percentage Income Recipients (R%N).

Lester Thurow, in his book _Generating Inequality,

(Basic Books Inc., 1975, p. 156) shows

descriptively and graphically how the distribution of

income is shaped by race and gender among other

influences such as I.Q., ethnic/cultural background

and education (pp. 60, 69 & 126)

He also considers wealth effectively in chapter 1.

James Duesenberry's _Income, Saving and the

Theory of Consumer Behavior_ (Harvard

University Press, 1967 p. 60) addresses Simon

Kuznets' insights to income and wealth.

Yet, with considerations of the distribution of wealth

and incomes there does not seem to be a thought to

the effects on aggregate income directly determined

by wealth and income distribution.

In this present look at these two influences the

behaviour of individuals at different points on the

spectrum of income and wealth distributions is central.

In this attempt to consider the effects on

consumption of being at different points on the

income distribution or level of income, a normal or

"bell" curve has been superimposed on percentage

distributions of income and income recipients. This

normal distribution is significant in that stable

consumption in the economy will be below this

curve. On the lower 50% of the economy it will be

exceeded to the point (actually the area under the

curve) of the R%N distribution or sum of the

distribution to the mean of the distribution. Above

the 50% or mean level the area between the

R%Nand bell curves but below the R%Y curve will

be loaned to consumers.

The Labour Theory of Value does not readily fit into

this approach, because all incomes are under

consideration and not simply those of employed

labour. The ?real wage? mentioned in the _General

Theory_ based on nominal wages and price levels,

are not under consideration here. Present day

relative wages are the concern.

One concern that exists surrounding this discussion

is that it may be of more benefit to the economy ?as

a whole? to us transfer payments to offset unwanted

economic phenomena like inflation and inefficient

use of savings and investments.

Some of the relationships that seem to exist are

those between the different areas under the curves.

(Consumption will be to the level of the normal

curve up to 50% and then follow the R%N curve or

B,E, & F in figure 2). Things to look at;

SHEDULE 2: Relationship and implications

of areas under the curves of the three (four)

Relative Percentage Distributions

====================================

A- basically an index of poverty conditions &

potential for growth in the economy.

-------------------------------------------------------------

B: 1) effective demand in goods when

added to E & F

2) consumer level of demand for excess of

income from disproportional distribution at higher

levels

3) B : C producing the rate of inflation/deflation

-------------------------------------------------------------

C: 1) savings for consumption

2) excess of income over consumption

3) this area of savings will be loaned to lower

levels to supplement at an interest rate determined by

D and C.

-------------------------------------------------------------

D: 1) savings for investment

2) economy ambient interest rate determined in

relation to C. The ambient rate will contribute to

the determination of the degree of domestic

and foreign investment.

=====================================

MORE OPINIONS

There is no government policy, either fiscal or

monetary that does not effect the way that wealth

and income is relatively distributed. One's relative

percentage position is a clearer picture of one's real

position than is a simple relative position.

Although not discussed above, the distribution of

wealth determines consumption in that income will

be used to maintain a level of consumer durables

that is normal for whatever level of relative income

the family unit is at. New arrivals will increase

expenditures to bring their average stock of durables

up to the new level. Established families will

maintain what they have and increase their stock to

the higher levels compatible with their relative

position on the income distribution and their relative

level on a cross section of their income level of

wealth. In a sense, wealth is a substitute for income.

Ownership provides use without the need for a flow

of income whereas renting requires a constant flow.

According to Brian Burkitt in his Radical Political

Economy: an introduction to the alternate

economics (New York University Press, New

York & London, 1984, p. 91) "Maldistribution of

income creates further problems as worker's

consumption is limited by poverty, and capitalists'

consumption by the necessity to invest." Whether or

not one accepts all the Marxist approach is not at

issue. The insight into the importance of the

distribution of income is.

Conclusion. More research is needed into the

factors determining aggregate income and while

there may be debate about whether or not individual

consumers are rational, a more important question

to ask would be whether or not the "economy as a

whole" is rational.

The sense that is given by the Relative percentage

Distributions that comprise the economy is that the

Macroeconomy is very rational and that individual

components are followers of that rationality. There

are structural imperatives that are ignored at the

peril of economic disruption. One commitment that

economists have made is to determine the rules or,

as this discussion paper suggests, the imperatives.

Thank You.

Unfortunately since the original offering of this paper the structural imperitives therin presented were not heeded and since then economies around the world have been shaken by the consequences of out of balance economies. But it is not too late to impliment adjustments to counterbalance the economies that seem desperate at present. July 2012