# THEORY OF ECONOMIC CALCULATION

We can say that: if economic calculation is mastered, economic theory is understood, or its inverse, mastering economic theory implies understanding economic calculation. I believe that this is the reason why the subject was always, from Menger, the epicenter of the Austrian School.

For this reason, this work deals with, and resolves, on these issues:

- Calculus: by definition it is the computation with mathematical operations.
*Numbers*, whose properties and relationships are studied by mathematics,*are abstract entities*, which is why they are suitable for*calculating non-abstract entities in each science*.- Once it has been identified that
**the non-abstract element of the economy is the wealth**(subjective value assigned to economic goods), it follows that economic calculation is the calculation of the wealth. Which is feasible after showing that**subjective value is measurable**because it constitutes the non-abstract element of the economy,**whose dimension is the utility**. From here, it only remains to identify the law that governs the behavior of the dimension to be measured in time, which is the law of wealth. - Through the
**law of wealth**we know that each unit has a different value from the others in a decreasing sense, thus, that of the last unit is the smallest, therefore it is the**unit of measure**of all, not the value of all. - In turn, the economic calculation of different manifestations of wealth is feasible by selecting the unit of measure of one of them as the universal calculation unit.
- Based on the resolved issues that we have listed, it is feasible to obtain an economic calculation that meets the essential premise of any observation: that the act of measure does not alter the measured.

Based on the foregoing, this work shows that:

- The fundamentals of economic calculation are the same for a barter economy as for a currency one. That is, there is no need for a special theory of currency, just as the theory of the economic unit of measure is independent of the theory of currency.
- Subjective values are measurable through money prices.
- Currency interest (that of the financial sphere) is always higher than wealth interest (economic unit of measure), which is why Keynesianism is theoretically and factually impossible.
- The evolution of wealth (
) of a set of economic goods (*w*), subjectively valued (*q*), is determined by*m**w = mq*^{2}. Yes, an equation similar to.*e = mc*^{2}

The foregoing is a brief synthesis of the content of this work, which constitutes the resolution to the problem that Carl Menger left posed at the end of the 19th century in these terms: ** calculation is the squaring of the economic circle**.

The solution was in the same foundations of Menger, **prices are determined exclusively by utility through relative values**, not by supply and demand. Then, **prices badly measure wealth**, insofar as it is assigned the same to all calculated units, in flagrant violation of the law of wealth (decreasing marginal value).

The conclusions of this work necessarily call for a rethinking of current economic institutions, which arose in light of the ** objective marginalism of Jevons (epistemological) and Walras**, in the belief that they were within the foundations of

**Menger’s**.

__subjective__marginalism