On general economics (*)
I come to study the value law on classics economic. Value is showed in two forms, one objective in some theories represented as labor value and a subjective view explained as “subjective value theories”. Classic economy explains many economic facts with the labor value, but left out behavior of supply-demand curves. Subjective theories begin in plain air and have not initial values for their deep explanations.
Is it possible to formulate an economic theory like physic results that unify mater and energy, or accept wave particle dual reality?
Looking for an aproach to economics that represents the very complex question of commodities. One view that is different between century XVIII and XIX economic science and XX’s Science is reference system making part of system referenced, like relativity theory and Heissenberg principle.
Economics can advance in understanding reality if accept this fact. Friedman, Smith, Ricardo, and many don’t see the question of who quantify value of commodities.
Each people, each region, each productive segment, each profession has a reference system to determine how much value a commodities is.
Differences in reference systems augment when there are changes in culture, language, specific technology, technologic level and several others factors.
In first term to understand economics this difference must be accounted.
When a commodity is traded, each participant in transaction has a reference system to evaluate if the operation produces plus value or minus value for him in his reference system.
This reference system has character subjective.
Pachinko case is straight forward explainable by this subjective reference system in terms of each participator. At a side who promotes game obtains direct money benefits and in other each player have his particular benefit on game.
In financial case, big differences in reference systems in several countries, create a big plus value to be earned. This difference in the referral system between countries creates a huge capital gain. This gives rise to capital gain financial accumulations, originally in Italy with the Medici and Krugger, and then goes to the English aristocracy that appropriates higher relative amounts of profit.
In this case the financial class has its largest members linked to British colonial state.
Once formed this mass of financial capital, began to gravitate on society and by affinity is set in the housing market.
Subjective value is unnecessary and even problematic only when you haven’t different values for same commodity. This is a reality, more palpable in international commerce, for which exist two or more values for same commodities.
This has his origin in technology and innovation. When one people in China think in to use silk worm to obtain thread for weave, he did create the one thousand years more big commerce and wars for commerce to move world.
Historically, silk has a value different in each place where merchant arrive, each value depends on local production cost of same commodities, on local production cost of local near like commoditie or, in total unknown of silk origin, quantity that one person can to pay for it.
Local production cost in Edo in XVII century, was very different of valuation of Japan products in Europe for Holland merchants.
First thing is understand production cost is a local concept, Adam Smith noted than city products are selled in agricultural regions at very high prices than in his production origin.
Century XVII science is a coherent set, and is very difficult to accept new ideas. Science phisic was driven for very exact experiments and with great effort give jump to relativity. Economie is yet in XVIII siecle science.
While local production cost has a relation in labor duration with commodities production, this has moral connotations. You can to relation sweat with bread, but in extended commercial transactions there is too much bread to be gained without sweat.
Problematic character of subjective value depending on reference system associated to, is understandable if free-effort character of differences in prices caused for different reference systems are considered. When differences in prices have no dependency on production cost, a depredative behavior appears that is in no form correspondent with economic assumptions. This depredative behavior is associated with alcabalas, taxes and carries us to an field that is politic and, in principle, economists hate.
Marshall criticize Ricardo in these terms
” the growing belief that harm was done by Ricardo’s habit of laying disproportionate stress on the side of cost of production, when analysing the causes that determine exchange value.”
This only recognizes that a problem exist, but not yet Marshall see the different evaluation between buyer and seller of commoditie value. But Marshall and Ricardo an everyone till XIX siecle is traped in objective analisis of economy like Newton objective current paradigm.
In economic sense, production cost function determines supply, and in a local market production cost determines also demand (do not forget that demand is also commodities in same market). Local production cost determines reference system to assign value and prices to commodities and in a “local market” and local reference system is the only instrument to evaluate demand curve.
Local production cost curve is depending on algorithmic structure of technology applied and prime matter used. This is not a simple algebraic curve but a sequence of results in an algorithmic approach. This isn’t linear.
Demand-supply curve depending on different reference systems associated to determinate value, have not work or process work associated and can be represented by linear or simple curve representations. Like is good for Milton Freedman.
If supply curve exist this is drived for conditions of production, one good approach to this is presented for Charles Babbage (On Machinery and Industry 1830). This is related to production structure. Now, when a distance, in an ample sense, between producer and consumer exist, is possible to suppose demand and supply curves not determined for production costs or determined for how much you can you pay for it. Or anything that passes for consumer mind. This generates supply-demand thinking.
Most important than face to face transactions is knowing of production cost of commodity.
Relating to macroeconomic and Keynesian theory, when commodities are traded under different reference system of values, a plus value that not exist in buyer region reference system nor in seller region reference system appear as a gain, in money. This money is suppressed in one side and causes some commodities left unsold. In other side, exist as a money surplus, and give grow to finance system. This is the origin of financial bubbles and too many extraneous things what happen today in day.
(*) Discussion with Yoshinori Shiozawa in “Research Gate”