Inflaton - Easier Problem
If all businesses are not-for-profit, something interesting happens. The total dollar value of what is produced by the economy can’t be higher than the total cost of labor, raw materials, and interest on loans used by businesses. This is because if revenues can’t exceed expenses, the total dollar value of what a business sells can’t exceed the total dollar value of what it buys. Businesses don’t cause an increase in the dollar value of economic production.
For example, consider a dry cleaning business. It has expenses to cover the costs of the space, equipment, labor and chemicals it uses. If it is a not-for-profit business, its revenues will not be higher than these expenses. The dollar value of what it sells will be no higher than the dollar value of what it used. If the business had not been in operation and someone else had bought the things it used, the value of everything produced in the economy would be unchanged.
So what determines the total dollar output of the economy? It is the value of things businesses buy that aren’t produced by other businesses. It’s the short list I gave earlier: labor, raw materials, and loans. There aren`t any other inputs that aren`t produced by businesses. Labor is supplied by us. Raw materials are supplied by the planet. Loans are ultimately supplied by us when we save money. The economy is a complex machine where we work over time to convert raw materials into the things that we need. If businesses don’t earn a profit, the dollar value of the economy’s output is the dollar value of these three types of inputs.
If businesses are not-for-profit organizations and the prices of labor, raw materials and loans can be contained, inflation cannot happen. The next step in controling inflation, then, is to figure out how to control the prices of labor, raw materials and loans.
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