Are There Laws of Production? Conclusions

Are There Laws of Production? ConclusionsUnder the conditions of a steady state economy there are no profits, economic growth, savings or investments. There are valid reasons for this. In both developing and steady state economies at any moment in time the total cost of all consumer products manufactured must equal the wages of all workers involved in production. For this reason in a steady state environment the total earnings and costs of manufacturers are constant and equal to one another. If manufacturers attempt to save in a steady state economy they will inevitably begin to suffer losses. Their costs which include the salaries of workers producing consumer and capital goods will exceed earnings by the value of savings. A reduction in earnings will immediately lead to a reduction in salaries, therefore it is extremely difficult to save under these conditions. And it does not make sense to do so under such conditions: enterprises do not have the option of taking credit, there are no profits and there is nothing to pay interest rates with. Even if all the money of the hired workers is used to purchase goods the enterprises will only be able to cover their expenses. A steady state economy is an economy in a state of economic crisis. There are no profits, investment, savings, interest rates or economic growth. This situation occurs when the economy reaches the limits of its production capacities, when all or almost all of the enterprises use their existing resources to the maximum effect. The only possibility of overcoming this situation is to implement innovations which will help to significantly increase the productivity of labour. Having paid the established market price for labour at the beginning of the production process, in the end the manufacturer receives a certain increase that occurs due to the implementation of innovation. Manufacture of goods increases and earnings become more expenses. In a developing economy there is profit which goes towards acquiring additional capital. Additional capital is needed for the efficient functioning of an enterprise.
The successful entrepreneur and the company as a whole receive double the benefits: production increases due both to the increase in the productivity of labour, as well as the additional capital. This is the reason why consumption is twice as high as investment and is 2/3 of the GDP. Figures of the exponents for labour and capital in the Cobb-Douglas function and consequently the share of labour and capital in the end product are 2/3 and 1/3 respectively. The laws of production that Douglas talked about do exist. In a closed economic system funds used to increase salaries and hire additional workers are twice as high as the funds invested in the purchase of additional capital. And this does not depend on which country, region or industry we are looking at. This is how it always has been and this is how it always will be and these, therefore, are the laws of production.