Chapter 3  Production theory in enterprises, industries and national accounts 

Introduction: Production theory derived from the managed gross profit chart theory-

Ph.D. ( Engineering)   Hayashi,　Yuichiro 

June 8, 2009 

Introduction

   In §2, Part 1, the author described methods of making break-even charts and presented a break-even sales formula for an income statement under standard costing, placing the main concept of the managed gross profit created by him in the center. The theoretical treatment for the "net carryover manufacturing overhead applied in inventories", η in the 45-degree break-even chart was hardest to understand and seemed most scholastically significant in the section, because it provided grounds to disprove Solomons' theory. Readers therefore might think that the central aim of the author's invention is for the treatment of η. However, the author's emphasis is not on this but on the presentation of the managed gross profit chart in standard costing. He opened the door to utilizing the chart in standard costing in place of the marginal income graph in direct costing.

   Since the usage and the effectiveness of the managed gross profit chart were not presented in the section, readers might doubt the significance of the chart in practical business. The author created the managed gross profit chart theory 10 and a few years ago. From then on he has actually used the chart in real business management in his own company and disclosed the chart to company members. However, he could not reach a satisfactory utilization of the chart. The reason is that the author himself did not know secrets, for years, which were hidden in the managed gross profit chart. In the present depression in Japan, making his own enterprise's profit plan became even more important, therefore he had to further study the utilization of the gross profit chart.

   On the other hand, when the author tried to apply his break-even chart theory to national economic accounts, there emerged a never-before-seen chart in economics. This chart implied to contradict J.M.Keynes' investment multiplier effect chart. The author examined and compared both theories, and disproved mathematically J.M.Keynes' investment multiplier effect theory or the principle of effective demand in Chapter 1, Part 2.

   In this process, he knew that J.M.Keynes' investment multiplier effect formula was derived from the equilibrium theory which caused the formula's fallacy. It created a suspicion in his mind that there might be a mathematical defect with the logic in the equilibrium theory. Thus, he began to research Walras' general equilibrium theory, which was the foundation of the equilibrium theory. 

   The author considered that Keynes' logic in the principle of effective demand seemed more correct (excepting the multiplier effect formula) than Walras' general equilibrium theory for the cause of unemployment. However, for establishing Keynes' correctness, the author must disprove Walras' theory. Nobody has succeeded in disproving mathematically Walras' theory for more than 100 years as far as the author knows. However during these years, J.A. Shumpeter presented with intuitive conjecture the innovation theory that the economy dynamically shifts from a certain economic equilibrium state to another new equilibrium state. 

   Here the author presents 2 papers whose objectives are creating a production theory for use in an enterprise management and the analysis of national economies. He completely denies the production part in Walras' general equilibrium theory described in textbooks, but he agrees with Walras' exchange economy theory given the assumption of the existence of utility functions.

   Since the author completely denied Walras' production theory, it remains his work to point out which parts of the formulation are wrong. However, the author has many complex economics problems about which he intends to publish. On account of this, and the decline in available time due to both age and profession, pointing out Walras theory's erroneous parts may be done for some years later. If so, he might present some critical points in order to analyze wrong parts with only sentences to readers.  

§1　Profit Planning of an Enterprise Adopting Standard Costing : PDF

-A Support of J.M.Keynes' Involuntary Unemployment-

§2　Production Theory to Analyze Human Wisdom and Global Phenomena Operations : PDF

 -A Disproof of Walras' General Equilibrium Theory-

Publication 8  June, 2009. Slight corrections 18 Aug., 2009.　Corrections of Appendix, §1(PDF)  8/Aug./2010.