Superphysics
Exchangeable Value as Relativistic Pricing
3 minutes • 633 words
Table of contents
In our example in Chapter 3, Adam needed to buy a cake for his wife’s birthday. He himself did not want to eat cakes, and so it has no use-value to him.
Therefore, his mind assigned value to that cake because of the nature of:
- Adam’s love for his wife
- his wife’s birthday and the culture of giving cakes during birthdays
All these factors go into the value of the cake which Adam thinks of as the cake’s worth:
| Source | Value |
|---|---|
| Love for wife | Sentimental Value |
| Giving cakes or gifts on birthdays | Cultural Value |
| The usefulness of cakes to his wife | Use Value |
Adam then assigns the cake’s worth as the cake’s exchangeable value from his perspective.
Methods of Exchange
Adam can ask for the cake for free, or he can give something for it. Donations and grants were more common in the ancient times:
The disciple Yen-Yu applied for some grain on behalf of his mother.
Confucius: Give her 3 pecks.
He applied for more.
Confucius: Give her 8, then.
Yen-Yu gave his mother 50 times that amount.
If the baker demands an exchange, then he will assign his own exchangeable value for it.
- This value depends on whatever mini-values the seller gives it.
This leads to 2 exchangeable values for the cake:
- One from Adam’s perspective
- Another from baker’s perspective
In a society, the following exchanges can occur:
| Exchange | Description |
|---|---|
| Purchase | the acquisition of something by exchange. |
| Barter | a purchase done by exchanging goods or services. A barter transaction thus has 2 purchasers. |
| Buying | a purchase by offering money. The giver of the money is called the “buyer”. Since he receives goods and services, he is also called a purchaser. |
| Selling | the act of giving goods or services by getting money in return. The giver is called the “seller”, the getter is the “buyer”. |
| Commerce | a regular buying-selling activity* |
| Trading | a regular exchange activity |
| Barter Trading | a regular barter-exchange activity |
*We limit ‘commerce’ to money transactions in order to stay in line with the definitions of Adam Smith who saw the commercial system as being the same with the mercantile system which is based on gold and silver instead of raw produce.
If the exchange is facilitated only by money, then:
- Adam is called the buyer
- The baker is called the seller
If the baker’s valuation is:
- higher relative to Adam’s, then the exchange does not happen.
- lower relative to Adam’s, then the exchange happens easily.
Since our economic system priortizes the circulation of goods and services, then we have to know the nature of the relativity of prices.
For this, we use Cartesian Relativity. This is done by expanding one’s perspective from the local transaction into the whole of society.
Imagine a ship being carried out to sea.
- A person sitting at the stern might always remain in one place if we look at the ship, since he preserves the same location with respect to these.
- But if we look at the neighbouring shores, the same person will seem to be perpetually changing place.
- If the earth moves from west to east exactly as the ship moves from east to west, we again say that the person does not change his place. I assert that all points are movable in the universe. From this, I conclude that nothing has a permanent place unless it is fixed by our thought.
We will know the “real price” of the cake by knowing:
- all the prices of cakes in society
- all the prices of the cost of making cakes
- the demand of cakes through time
This real price is pegged to the grain index and is essential in price stability which in turn is essential in guaranteeing the minimum requirements.
