It depends on whether you think of the picture as a picture of a healthy economy, or a picture of an unhealthy one. (Or as a schematic of the part of the model with which the paper is concerned - drawing the part of the setup which is the focus of a paper to a disproportionate scale/detail is fairly common.)
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
"Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
For that matter, there is another serious defect: There should be a political variable for "Profit levels" just as there is a political variable for "Private hourly compensation" - both of these go into the "Unit Costs."
And in my naivety, I thought that the rental price of capital (which is not, in the mature corporation, the same thing as the profit extraction variable) also had a direct influence on unit price in capital-intensive companies. At least if they have "efficient" balance sheets...
Is this model really being taught by the so-called experts? It's just a little - well - wrong, isn't it?
And while FIRE transactions are heavily involve in determining "rental prices of capital" ... in a model like the above, that's a functional model of price, so there's no actual FIRE sector representation ... their place is taken by falsified black box models acting as proxies. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
