2 are better than 1

The 2 Kinds of Arbitrage: Primary and Secondary Icon

April 17, 2020

The social end result of the journey from nominal to real to natural value is therefore market value.

Step Value Example Incentive
1 Nominal Woman wants a cake
2 Real Man skilled in cakes bakes a cake Primary Arbitrage
3 Market Man sells the cake to the woman and others Secondary Arbitrage
4 Natural Support, Competition, or Regulations sustain cake-making

From Primary Arbitrage to Secondary Arbitrage

In the past, this was done through barter, giving more power to real value, the primary producers, and primary arbitrage. This led to specialization which manifested as the class or caste system in ancient India, Egypt, and China.

The invention of money sped up the exchange but shifted the power to market value, the merchant-retailers, and secondary arbitrage. To get even more revenue, the merchants advocated profit maximization which overshadowed real value and the natural price. Mercantilism and the Commercial system was born. Mercantilism became Economics and the Commercial system became e-commerce and commercial banking.

Thus, real value was neglected in favor of market value

Economics uses only secondary arbitrage which enriches only the retailers: speculators, brokers, stock markets, job agencies, outsourcers, and the financial system.

Pantrynomics, on the other hand, uses both primary and secondary arbitrage to enrich both the retailers and the artists, producers, farmers, workers, and freelancers themselves. Pantrynomics tries to discover the hidden value of everyone in order to increase their primary arbitrage and increase the real productivity and value in society.

This is done by having two ways of exchange:

  1. Points-based: this emphasizes primary arbitrage
  2. Money-based: this emphasizes secondary arbitrage

In the beginning, the points-based transactions will be tiny relative to the money-based ones. However in time, the points-based ones will grow until it balances the money-based transactions. Having two ways allow circulation to continue even if there is a crisis in one way.

Having two arbitrages ensures that a pantrynomy will be more dynamic than an economy. In fact, Smith predicted that people will work so hard in such a system that caps on revenue would have to be decreed to protect the people’s health:

Our soldiers are not the most industrious people. Yet when they are liberally paid by the piece, their officers were frequently obliged to stipulate that they should not be allowed to earn above a certain rate every day. Before this stipulation, soldiers frequently overworked and hurt their health by mutual emulation and the desire of greater gain.

This productive pantrynomic system will be essential in helping societies rise up from the ashes of the debt and decline from Covid, through the Invisible Hand of Human Dharma.