>"There are two problems with that: the most obvious is that differences in velocity at the first level is one of the main bases on which distribution differences are held to effect demand growth, so you are just assuming away the main issue."
Demand growth for what? CNC machines and tools, or LCD televisions? Making a capital investment in semiconductor fabs will affect production and inspection equipment demand, as well as driving down production costs for a wide variety of goods, whereas buying an LCD television will increase demand for TFT screens, backlights, and slightly increase demand for television production machinery. I am making an assumption because we have to. No one has ever make a comprehensive economy-wide microeconomic model that worked, and no one ever will; this is the essence of the calculation problem.
>"The second is even assuming away velocity differences at the first step, you also have to assume that velocity is the same in the different markets to which the rich and poor allocate funds: even if velocity were the same in the first case, this assumption would be invalid. (In both the first instances and later steps, this is even more true when you are considering growth of the domestic economy, where you aren't just concerned with velocity at each step, but also the propensity to spend within the domestic economy.)"
I agree that there is probably a difference between velocity of spending between rich and poor, but I'm not sure which one is faster (; please provide a link to such information if you have it). It seems likely that the poor spend more money on low cost foreign imports (stuff made in China) than rich people who are investing in very expensive specialty goods made in the West, so I think it likely that allocating more money to the rich is beneficial from a mercantilist point of view.
Demand growth for what? CNC machines and tools, or LCD televisions? Making a capital investment in semiconductor fabs will affect production and inspection equipment demand, as well as driving down production costs for a wide variety of goods, whereas buying an LCD television will increase demand for TFT screens, backlights, and slightly increase demand for television production machinery. I am making an assumption because we have to. No one has ever make a comprehensive economy-wide microeconomic model that worked, and no one ever will; this is the essence of the calculation problem.
>"The second is even assuming away velocity differences at the first step, you also have to assume that velocity is the same in the different markets to which the rich and poor allocate funds: even if velocity were the same in the first case, this assumption would be invalid. (In both the first instances and later steps, this is even more true when you are considering growth of the domestic economy, where you aren't just concerned with velocity at each step, but also the propensity to spend within the domestic economy.)"
I agree that there is probably a difference between velocity of spending between rich and poor, but I'm not sure which one is faster (; please provide a link to such information if you have it). It seems likely that the poor spend more money on low cost foreign imports (stuff made in China) than rich people who are investing in very expensive specialty goods made in the West, so I think it likely that allocating more money to the rich is beneficial from a mercantilist point of view.