Variable Point Economic Model
A model as it relates to capitalism, government intervention and use of a variable point model.
c = x1y1 + x2y2 + x3y3 +x4y4 +x5y5 + xnyn
x1y1 = a1b1 + anbn
x2y2 = a1b1 + anbn
x3y3 = a1b1 + anbn
x4y4 = a1b1 + anbn
x5y5 = a1b1 + anbn
xnyn = anbn
c = freemarkets1y1 + assets2y2 + supply/demand3y3 + limitedgovernment4y4 + VariableModel5y5 + xnyn
freemarkets1y1 = privatecontrol1b1 + markets2b2 + competition3b3 + equilibriumchange4y4 + anbn
assets2y2 = manufacturing1b1 + transportation2b2 + theexchange3b3 + anbn
supply/demand3y3 = marketoutput1b1 +marketneed2b2 +anbn
limitedgovernment4y4 = generalregulation1b1 + laborcost2b2 + profits3b3 + taxation4b4 + anbn
VariableModel5y5 = variable1b1 + variable2b2 + variable3b3 + anbn *
* Variables specific to a business
Questions and Statements |
Free market vs controlled market. The natural state of an economy's or businesses' equilibrium based on current circumstances. Fair competition locally and globally. Productivity vs inactivity. Flow of goods and exchange of currency vs stagnant. Natural inflation vs generated inflation. Increase in taxation vs natural taxation.
Conclusion |
The state of the economy or current equilibrium point of the economy determines the health of the economy relating to a multitude of variables. As one variable moves from the natural equilibrium current state the effects change the current economy. Government intervention moves the variables for the increased utility of a market or an opposite effect. Variables change moving the free market into a different equilibrium state as a result of a greater presence of intervention by the government. The argument for the most important variable to benefit or be a detriment to the economy is a multitude of variables. The goal is to place all of the variables together on a model and analyze the effects of increased role of government intervention. Excessive use of policy without analyzing the effects of each and every variable can be a detriment to the overall health of an economy and one of the determining factors of the current equilibrium point. The argument is for the movement of the known variables while finding additional missing or unknown variables to make an overall effect on the current state of the market or equilibrium of the market.
Real World Argument |
For profitability, our business is controlled by the analysis of all the variables known and unknown. The goal of changing the current equilibrium of our business is to move the variables in a state that changes the equilibrium for the betterment of profitability. Spending is one of most important variable to move our variables to change the equilibrium. This inevitably benefits the economy by increasing profitability of other companies. If the government is overly controlling or inhibiting one from moving a variable, the destiny of our profitability is affected, and one cannot move the variables in a positive direction. The government cannot excessively control a multitude of variables in a market due to the fact it will be detrimental.
If a company that relies on the variable of gold and the government overly regulated the mining of gold the effect will remove or reduce the company from the market. Allow me to model out my variables, find variables that I did not know existed to increase profit. A fair use of Laissez fair and Keynesian as a combination through analyzing each variable in a business is the argument, The Variable Point Economic Model.
Effective Variable in our Business |
The renovation variable (renovation1y1) is one of the most important variables for increased profitability allowing the business to move to an increased equilibrium for profitability. If the government controls this variable specifically, the business cannot move the current equilibrium to an increased profitability equilibrium. Today, the government is regulating many variables for companies which, for the most part, can be labeled as excessive.
The Bottom Line |
With all held constant, allow me to create a model and place all the know variables on the model. Permit me to find the unknown variables to add to the model so that I can increase profitability and change the current equilibrium to a new and better equilibrium for increased profitability. Do not control a significant amount of my variables so I cannot move my variables and change the current equilibrium.
An example of the government controlling profitability in an excess form |
The labor rate variable (laborrate1y1). If the government continues raising employee minimum wage the cost of operating a business increases and has a downward effect on profitability. However, employees are a vital part of a business, but the minimum wage increase must be counterbalanced. The government cannot excessively raise employee minimum wage.
This increased staffing agency cost in a business |
The labor cost in 2020 was $22 per hour, now roughly $40 per hour for a staffing agency staff. Then the increased labor cost is passed to the customer in increased pricing. Even though there will be a profit, there are now less customers. Keeping pricing less than market or market pricing leads to growth. Employees will make less in per hour wage, however there will be a need for employees to work more hours due to growth. As a result of working more hours the employees will earn more weekly at a lower wage than working less weekly at a higher wage.
The government needs to set a respectable minimum wage and the individual free market business control the labor hourly wage they pay employees. Why? If a competent, hardworking employee is not paid enough, they will just leave. To keep the employee, a free market business will need to pay the employee more. "Pay me more or I'm leaving", "You got it, we will pay you more." The opposing is "Pay me more or I'm leaving", "It has been a pleasure working with you all this time, good luck on all your future endeavors." The argument is that free market businesses, the market, determine pay over the regulated minimum wage.
IMF - Reading Source - What is Capitalism