MEASURABLE VALUE -Origin of prices-

SSET 04 – MEASURABLE VALUE

― Origin of prices 


         Maybe humanity receives greater damage
of wrong theories that of any other scourge.

According to the new Subjective and Solidarity Economic Theory , the utility is the dimension of value ; dimension whose natural behavior responds is marginal decreasing[1] We present this behavior graphically by Menger’s “scissors”. On the opposite side of the graphical, Marshall’s “scissors” emerged from the theory of objective value, which cannot explain the origin of prices, a circumstance that destabilizes any economic theory that you want to build from it.

“SCISSORS”

            MENGER                                                                                MARSHALL

 

As we appreciate that the decreasing marginal utility curves ( Uq and U$) ― of two goods that are exchanged (q with left to right orientation and $ from right to left) ― [2] intersect at Point I, the exchanged quantities of both economic goods: qi and $i ― to the right or left of I will continue negotiating.

Thus, the new Subjective and Solidarity Economic Theory (SSETpresents the following elements for economic analysis:

General equation of the decreasing marginal utility of wealth: U(x) = qt /qx [3]

Whit qt represent the total stock of available wealth in a given time space. This equation (represented in the U curves of the previous graph), allows us to express the level of utility generated by unit x of an economic good, which will be lower than the one contributed by unit x-1.

Thus we have the algebraic expressions that give rise to the decreasing marginal utility curves of all manifestations of wealth, not currency ( q) and currency ($):

Uq = qt / qi

U$ = $t / $i

Use of the subscript i position us at the level of marginal utility of the goods at the time they are exchanged, an entity that concerns us in the study of the relationship between value (subjective) and price (objective).

As a result of the quantities exchanged, we obtain the technical coefficients we call prices Pq($) = $/qi and P$(q) = qi /$i. That is, the coordinate levels [qi andPq($)] of Marshall’s “scissors” arise from Point I of Menger’s “scissors”; then:

Prices are variable depending on the values.


Relative values
 [4]

The relative values between two economic goods are defined by their marginal utilities:

vq($) = Uq / U$

v$(q) = U$ / Uq

Measuring the value

Let us now calculate the relative values of both economic goods at the moment of the exchange:

vq($) = [qt / qi] $t / $i]

v$(q) = [$t / $i] qt / qi]

Of all the equations that are derived from relative values, [5] we would to highlight its relationship with prices:

vq($) = Pq($) *(qt / $t)

Pq($) = vq($) ($t / qt)

Relative values (“abstract”) are measurable through observable prices, then: [6]

VALUE IS MEASURABLE


Conclusions
 of the alternative to measure the value:

  • There is a theory of value, causal of the theory of prices.
  • There is no theory of prices without value theory.
  • The dimension of subjective value is the utility.
  • The adoption of a dimension of value, as in any science, allows us to compare the different manifestations of wealth. [7]
  • Utility behaves according to a decreasing marginal law.
  • The presence of a law of utility behavior makes it feasible to measure the value, while that is its dimension. In the “Menger table” lies the measurability of the value.
  • THEORETICAL causality is v → P and the factual causality is P → v.
  • Unobservable values are measured through prices (observable measurable).
  • There is a positive correlation between relative values and prices: ↑v ↔ ↑P.
  • Menger’s prices are Marshall’s data.
  • Supply and demand can explain human behavior before prices, NOT THEIR ORIGIN.
  • Price control alters the relative values (by reversing the logical causality of values to quantities by the amount of amounts to values), which always sets the market. [8]
  • There is no absolute price of the currency, this implies that it is not wealth, present in economic theories. [9]
  • The natural cross positive correlation of exchange [10] discredits currency policies and would imply (*) a positive correlation between inflation and unemployment.

(*) Instead of implies into the original text, which gave rise to doubts – once again thanks Manuel Polavieja.

Consequences

The preceding conclusions allow as infer the consequences that must come from economic institutions developed under the protection of the objective value theory (P → v):

  • Economics crises are necessary and recurrent (by implosion of relative values) ―fall and concentration of wealth (1930…, 2008,…).
  • Inefficient an economic inequality that inevitably result in institutional confusion of a political-economic-social nature.

The inability to understand the origin of the scientific fissure, between the overwhelming advances of the hard sciences (technology) versus the objectivist failure of economic science, is the origin of the prevailing political-economic-social confusion. [11] The way to reverse this order of things is to generate institutions based on the theory of subjective value.

Any parallel with reality is not coincidental .

Carlos A. Bondone


[1] Its development in Subjective and Solidarity Economic Theory (SSET) .

[2] The areas αq andα$, below their respective Uq and U$ up to the abscissa, represent the accumulated utility of wealth, at each level of q and $.


[3] Equation that is in line with the table of decreasing marginal utilities of Menger, and from which the harmonic series is derived which represents the diffusion of the sound of a string instrument.


[4] The two referred entities, general equation of the decreasing marginal utility of wealth and relative values, were introduced in the new Subjective and Solidarity Economic Theory .


[5] See table 5 at Subjective and Solidarity Economic Theory (SSET).


[6] In the Chapter VI – The Economic Calculation of Subjective and Solidarity Economic Theory , we have demonstrated the theoretical feasibility of calculating currency (monetary) wealth from relative values ―and its


[7] The dimension entity implies transitive character that allows comparing entities that participate in it.


[8] In later works we will demonstrate the unnatural correlation of exchange.


[9] Where we can fully appreciate the absolute character of the price of the currency is in the classic-neoclassical wealth distribution model (consumer behavior): Ua/Pa = Ub/Pb =…= U $/P$ . The denominator of each term is variable depending on its respective numerator.


[10] Defined in the new Subjective and Solidarity Economic Theory as the correlation that exists between the relative value of an economic good and the quantities of the other by which it is exchanged: ↑vx(y) ↔ yi.


[11] Neither rulers nor governed can understand the situation, the disorientation is total. That is why the governed cry out for: “no more politicians”. BUT the theoretical failure was the first responsible.

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