The Third Law -- Natural Price

The Third Law of Value states: There must be a balance in the creation and spread of value in an economy.

This mirrors the Zeroth Law of Thermodynamics that has the concept of thermal equilibrium. This concept does not exist in Economics because profit maximization prevents it. This is why modern economic systems have recurring crashes from the violation of this natural law of value. In contrast, supereconomic systems are crash-resistant because policymakers know that there exists a natural price and so the system is designed to stay near it.

The Natural Price is the average price that the producer or seller can actually sell his goods or services with ordinary profits for a given period of time. Ordinary profits is the minimum level of profits that the seller will accept yet continue his trade indefinitely. This is subjective (comes as a range) and so it is different from break-even which is objective and exact.

Natural Price: The Balance Between the 3 Classes

The natural price is achieved when the 3 Laws are balanced.

• The First Law represents the demanders or consumers
• The Second Law represents the suppliers or producers
• The Fourth Law represents the middle men, finance, commerce.

The Third Law comes before the Fourth Law because the merchants, middlemen, and finance are the most frequent causes of corruption of an economy. For example:

• the Roman Empire was notorious for debasing its coins
• the colonial governments gained great profits from selling native products without giving back to the colonies
• corporate owners gain by raising shareholder value without giving a corresponding increase in wages
• the globalization of food transfers power from the farmer to the trader, which accordingly has caused food inflation globally

The Usufruct Circular Economy as Alternative to Linear Economy

The profit maximization doctrine causes environmental destruction as it urges humans to make money without feeling for the consequences on the environment. Bhutan threw away this doctrine. As a result it has 70% forest cover and absorbs more carbon than it emits, preventing the main cause of global warming. But governments do not adopt the Bhutan model because it greatly hampers the pursuit of material utility and modern conveniences.

As a compromise to reduce the damage to the environment, many academics, institutions, and government agencies have embraced the circular economy concept. It aims to share, lease, reuse, repair, refurbish and recycle existing materials and products to reduce environmental impact.

We upgrade this into a usufruct economy from the Latin “usus et fructus” which means use and enjoyment of fruits. Usufruct is a legal right given to a person or party to temporarily use and derive benefit from someone else’s property.

All real property will be leasehold, whether agricultural, commercial, residential, or industrial. This will make the ownership of land dependent on certain conditions such as taking care of it, making it productive yet environmentally sustainable, and using it in line with state policy.

An analogy is the Earth as a ship, and each plot of land is cabin space or crew compartment. The passengers are free to upgrade or change their cabins depending on their changing needs upon approval from the captain. This allows all cabin space to be utilized efficiently while allowing each passenger to live properly.

This paradigm will make more sense after humans discover the technology to defy gravity, allowing easier space travel. By then, the human attachment to land will be drastically reduced. Conflicts for land will not make sense when the colonization of so many planets becomes possible.

For now, this idea is most useful for right-of-way issues and ancestral domain wherein private or tribal ownership of land goes against the projects of the state that is meant for the majority benefit. The imposition of conditions means that this is a non-liberal policy. Since those policies are voted on, then it is still democratic, but non-liberal. This is consistent with the regulated democracy that Socrates was advocating in The Republic.

A liberal country can still implement leasehold without imposing any conditions, making no effective changes to private property ownership. Rather, the change is only on changing the mentality from owning to leasing.

The Usufruct Economy applies to goods and services as after-sales support and responsibility. The manufacturers and service providers would pay into a state or NGO-run usufruct system (US).

• For consumer goods, the US will be tasked to collect the packaging and give them back to the manufacturer or recycler.
• For food, it will collect food waste for redistribution or composting.
• For services such as health insurance, the US could monitor the health of the policyholders and remind them of their risk factors. The US would base its decision to pay for treatments on medical data, and points-patterns instead of financial costs. This refers to the person’s life interest rate in Chapter 3 wherein an absolutely lazy person can be denied treatment both in Economics and Supereconomics.

Taxation in Kind and the Fourth Branch of Government

The system of grain-based valuation mentioned in the First Law will allow people to contribute their goods and services directly to maintain the Usufruct System (US), in addition to their monetary contributions. If the US is run by the government, then such contributions can be thought of as tax payments.

Allowing people to pay in kind to their society will greatly increase revenue for governance purposes. A well-run US will make government shutdowns and budget deficits obsolete.

To ensure that the US runs smoothly, Supereconomics proposes a fourth branch of government as the Resources Branch for both money and moneyless concerns. This will be tasked to implement and maintain the US in the national level. Currently, this takes the form of the Exchequer or Audit Commission and the Budget or Finance Ministry.

In the complete system:

• The Legislative branch defines the budget
• The Executive branch implements the budget
• The Resources branch assigns the actual resources and monitors the use of the budget by the Executive

The Resources branch can also veto the budget if it knows that there are no resources for certain projects. If the state were a family, then the Executive and Legislative are the father, while the Resources and Judicial are the mother.

The Resources Branch will also include semi-state owned corporations that operate in essential industries like public utilities, oil refining, metals processing, healthcare, transportation (including outer space), and grain distribution. These corporations provide the base of a modern economy and operate as not-for-profit, with their running costs defrayed by taxation, their capital managed by a sovereign wealth fund.

Violations of the Third Law

The violations of the Third Law lead to the following problems usually involving public policy and strategy:

• Hyperinflation
• Moral Hazard
• Low Tax Revenue
• Strategic Policy Mistakes