3DN Economics of Integrated Production
Economics of Integrated Production
- I have run a spreadsheet (which I can e-mail to anyone interested User:David Braden) to try and show the relationship between Dollars and shares issued for labor in an integrated production system designed to provide goods and services to the workers. I just made up the numbers – so they should not be taken as actual – I'm just trying to show how the formula works:
- The spread sheet assumes that three people spend an hour:
- 1 making breakfast burritos (50 at $2.00)
- Material Cost ($0.25 X 50 = $12.50) + Overhead Cost ($0.01 X 50 = $0.50) = $13.00
- At $2.00 each retail value = $100.00 - Cash Costs ($13.00) = $87.00 profit before labor.
- Labor cost is 0.02 hours per Burrito = 1 share
- 1 doing laundry (10 loads at $5.00)
- Material Cost ($0.25 X 10 = $2.50) + Overhead Cost ($0.01 X 10 = $0.10) = $2.60
- At $5.00 per load retail value = $50.00 - Cash Costs ($2.60) = $47.40 profit before labor.
- Labor cost is 0.1 hours per load = 1 share
- 1 providing day care for four children (4 children at $4.35/hour each).
- Material Cost ($0) + Overhead Cost ($0.50 X 4 = $2.00) = $2.00
- At $4.35/hour/child retail value = $17.40 - Cash Costs ($2.00) = $15.40 profit before labor.
- Labor cost is 0.25 hours per child = 1 share
- Total retail value of what they produce is $167.40 at a cash cost of $17.60 for supplies and overhead, leaving $149.80 in profit before labor.
- If they each have a burrito, have a load of laundry done, and have a child in day care for that hour, they have received $11.35 in value and still own 1/3 of the reduced net profit of $112.69 – for a total earned of $48.91 each.
- 1 Burrito at $2.00 + 1 load of Laundry at $5.00 + 1 hour day care at $4.35 = $11.35 X 3 = $34.05 + Cost of Sales to Workers ($3.06) = $37.11.
- Total Production = $149.80 - Sales to Workers ($37.11) = $112.69.
- If a share was based on 1 hours semi-skilled labor, then the key would be in pricing goods and services in shares (independent of the price in dollars) in a way that maintained the value of shares and reflected the productivity of the workers.
- The other dynamics to consider are:
- the difference between use value and monetary value - where increased abundance reduces monetary value per unit - whereas, the right to partake of increased abundance, represented by the share, increases in value.
- pricing in shares can be thought of as internal transactions trading at cost - while dollar transactions trade at market value. The difference between the cash cost of the goods sold (including unredeemed shares for labor) and the market price recieved is available to reinvest in assets to increase production.
Explanation from Ned Uganda
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