Thought experiment to calculate real value

Reading Nature’s Signals

We need better conceptual models for reading economic data

Perhaps the emergent phenomenon is that people are starting to see beyond economics.

I am not an egalitarian.
I believe that choice, and the unequal distributions that result from individuals exercising their free choices based upon their own sets of values and circumstances is a powerful thing.

I also believe that we need to maintain a certain base level – a societal minimum, that is sufficient for any individual to guarantee their own survival, and that everyone must have access to the potential for mobility – so that they can, by the exercise of choice, choose to move in whichever dimension, by taking appropriate action (which appropriateness includes consideration for the welfare of others).

Thus I see a place for economics, and for free markets.

However!

Money is not a measure of “real value” for any of us.

Money is a measure of exchange value or market value.
Exchange value has two major components, supply (how much of it is there) and demand (how much do we want it). Each of those two aspects can be broken down into a potentially infinite number of other factors.

“Real value” is a very personal thing for each of us, and is only partially related to market value.
For each of us, determining real value can be done via thought experiment, where we take the thing in question, and imagine ourselves in a situation where we have none of it. How important is it to us in that situation, that we get some of it?
If we do this experiment with oxygen within the air we breath, we very rapidly come to the conclusion that it is extremely important to us.
Thus oxygen has a very high real value, but a very low market value.
The reason for the difference lies in abundance.
Oxygen is naturally abundant.
We were born into a system containing abundant oxygen.
Anything abundant has zero exchange value – because everyone already has what they need.

I suspect that for most of us, the only thing of greater “real value” (as thus defined) is the integrity of our bodily systems.
Having oxygen isn’t much of an issue for us if our brain function has been disrupted by some form is disease or trauma (like brain cancer, or a 45 calibre slug).

That we exist in a world with abundant oxygen is a demonstration that things of high real value can exist in abundance, and that markets are not required for the production of all really valuable things.

I assert that it is possible to create systems that guarantee the abundant supply of all items essential to the survival and growth of every human being (food, water, housing, sanitation, education and transport); while acknowledging that doing so has no economic value (actually it has a negative economic value, as many people make a living from supplying those things at present).

I also assert that doing so would greatly enhance economic and social opportunity.

It seems to me that we could do many things differently.

To encourage investment in production by having a zero tax rate on income that was reinvested in production.
To balance that, if we taxed on sale of capital assets the difference between tax paid capital put in (inflation adjusted) and sale value; then we have a system that encourages productive investment, and encourages rapid growth through reinvestment.
People would be taxed in proportion to their expenditure, not their creativity.

We also need to devote a significant section of taxation towards supporting people in “blue sky” fields of research – and not just those who meet academic standards, but also some of those who do not easily work within academic constraints.

Lots of other things we could also do.

About Ted Howard NZ

Seems like I might be a cancer survivor. Thinking about the systemic incentives within the world we find ourselves in, and how we might adjust them to provide an environment that supports everyone (no exceptions) - see www.tedhowardnz.com/money
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