The Real Economy

A need for serious reflection ...

In 2002, Agence Presse Européenne (APE) initiated a five years review of leading British media and noted a significant decline in the quality of coverage of foreign affairs, globalization, economics, democracy, law and constitution. These tended to be divided into separate issues creating an image of unrelated processes and a somewhat chaotic and insecure view of society and the world in general. An intelligent readership, as members of the national electorate, mould their own preferences on social issues related to their personal and family interests. This occurs under the economic circumstances and the context of local, national and international affairs. There is a need to provide more relevant and useful news coverage of how social and economic issues are influenced by markets, globalization, treaties and law and how the impacts of such phenomena can be managed at the national level and within a constitutional context.

The content of the exchanges within the economics profession, between policy makers, politicians and the media in the United Kingdom is, however, dominated by just three economic policy approaches:

People's lives matter, they should not be prejudiced by policies purporting to be solutions to policy-induced disasters.

Keynesianism, Monetarism and Supply side economics (KMS).

During the last 40 years there have been significant developments in economic theory and policy propositions that promise to provide more effective economic solutions within a constitutional economic framework. This theory is known as the Real Incomes Approach to economics, also referred to as RIO-Real Incomes Objective. However, there has been no effective media coverage or effective economic debate on the significance of this approach. The Real Incomes development programme at SEEL, the Systems Engineering Economics Lab, has provided evidence to show that the three main policy approaches or KMS economics are equivalent because they are based on the Aggregate Demand Model (ADM) whereas the Real Incomes Approach is quite distinct and is based on the Production, Accessibility & Consumption (PAC) model of the economy.

Our grandiose and iniquitous economic experimentation with the lives of people, referred to as economic policy, needs to be substituted by something that provides a stable and sustainable legacy for future generations ...

The Real Incomes approach to economics is based on the pioneering work of the British economist Hector McNeill. McNeill is an economist and systems engineer and graduate of Cambridge University and with post-graduate degrees from Cambridge and Stanford Universities. He initiated this work in 1975, at the same time as supply side economics was emerging. Both of these approaches were essentially a response to the failure of Keynesianism and, the then proposed monetarism, to provide robust economic solutions to slumpflation. McNeill's main motivation was to identify policies that avoid the significant policy-imposed prejudice on social and economic constituents. His work initially demonstrated that KMS policies are, at best, "fair weather policies" incapable of avoiding and managing the impacts of failures in commodity and/or financial markets and that the past economic crises were, and the current crisis was, entirely predictable.

More recently he has completed analyses which convincingly undermine the logic of monetarism, disproving the validity of the Quantity Theory of Money and replacing this with a more transparent substitute, the Real Money Theory which can be used to trace money impacts. He has as a result also disproven the central bank "logic" applied to date in managing inflation. He has also provided a transparent model showing how montarism has been increasing income disparity, long before the 1% topic arose. More recently it has become apparent that RIO is a policy-based equivalent to Bitcoin in its aim to terminate the debasement of the currency. McNeill's work on this matter started in 1975 whereas the Bitcoin concept only emerged in 2008.

The persistent attempts by governments to apply flawed KMS policies only deepen the current challenges sustaining policy-induced prejudice on sections of the social and economic constituencies; policy-makers remain in denial in the face of the copious cumulating evidence that undermines the rationale of KMS theory and practice. The most fundamental flaw is that conventional macroeconomic theory and policy has no microeconomic foundations. As a result there is no coherence between macroeconomic and microeconomic objectives. The sheer complexity and diversity of the objectives, capabilities and conditions of each economic and social constituent cannot be accommodated by top down monopoly state interventions imposing changes in taxation, revenue expenditures, interest rates and money volumes or by making up revenue shortfalls with government debt. Such state interference imposed on markets cannot respond to the legitimate and diverse needs, but by default has repeatedly generated winners, losers and those in policy-neutral impact states. The existing system operates through inequitable impositions whose outcomes range from benefits for well-defined minorities but having no effect or unacceptably perverse impacts on a growing proportion of the constituency.

From the standpoint of the specific and individual legitimate preferences of the people of Britain, such macroeconomic policies are so arbitrary as to be offensive, haemorrhaging general support and undermining policy traction leading to inevitable policy failure.

From destructive to constructive policies

The Real Incomes approach is a macroeconomic approach founded on microeconomic principles. The approach aligns macroeconomic and microeconomic objectives in a single indicator, that of real incomes. The Real Incomes approach is unique in providing transparent business rules that contribute to the maximization of corporate returns and the automatic generation of macroeconomic benefits. In stark contrast, the KMS policy objectives, expressed in terms of inflation, growth, unemployment, interest rates, investment, exports, import substitution and exchange rates can find no tangible or practical means and no business rules whereby firms can benefit directly from policy objectives. This is because there is no recognizable or practical coherence between macroeconomic policy and corporate objectives. The Real Incomes Approach provides policy options that can align macroeconomic and microeconomic objectives providing a potent clarity on the role of technology and evolution in human technique in social and economic development.

Economic policies need to support people to achieve an adequate compensation for their efforts for each to satisfy their needs with a clear conscience ...

In contrast to KMS policies, Real Incomes policies deploy policy instruments that can be manipulated directly and effectively by management. This provides a direct participation for the social and economic constituencies in the success of policy outcomes contributing to the establishment of a more constitutional approach to economics. The Real Incomes approach provides a basic theory and policies that can enjoy popular acceptance, traction and bring about growth in real incomes.

Need for better media coverage of practical options

Because of the lack of coverage of this approach in UK media and the significant potential contribution of the Real Incomes approach to the resolution of economic crises, the APE Board decided, in 2007, to initiate a new online medium, "Real Incomes", as an Internet posting designed to present the current affairs of the United Kingdom from the standpoint of constitutional economics. This has the objective of explaining the ways and means the expression of the freely determined social and economic preferences of the people of the country can be met through improved democratic principles supporting public choice. In order to satisfy this objective "Real Incomes" will post notes geared to practical actions, such as private initiatives, local and national policies necessary to satisfy such preferences.

The domain name will be realincomes.org.uk.

There is a large accumulation of papers and reports resulting from the Real Incomes development programme, many of which have never been published. The selection of material from the archives as well as the preparation of new articles for the website is managed by Hector McNeill, see editorial.

Real Incomes is an initiative founded (2007) by: APE-Agence Presse Européenne and SEEL-Systems Engineering Economic Lab and is sponsored by The George Boole Foundation Limited (2010) and the Decision Analysis Initiative (2010-2015). Economic models, logic and conclusions reviewed by the Economic Performance Committee of the George Boole Foundation Ltd and economic analysis, models and simulations used are implemented and maintained by SEEL-Systems Engineering Economics Lab.

This Internet posting is independent of all political parties, factions and associated organizations and a policy of a right to reply is maintained for anyone wishing to comment on the veracity of data used, analytical methods or conclusions reached. For this purpose the most convenient form of communication is by email using hector.mcneill@realincomes.org.uk