Effective Demand and Common Medium

The First Law of Value states:

Exchangeable value is based on relational desire.

This law is derived from:

• the Worker cycle in the Law of Social Cycles by Socrates
• the Third Law of Thermodynamics which says that absolute zero temperature is impossible to reach or maintain.

This law crosses over:

• to Bio Superphysics as everything being able to affect a person’s health in varying degrees.
• to Supersociology as everyone’s opinion or expression has a value to a society

In Supereconomics, this manifests as Nominal Price which is an effect of Effective Demand.

Effective Demand

Before anything is created, there must be a desire for that thing. When this desire becomes more or less constant or persistent then it becomes an effective demand.

The effective demand is the actual demand which is realizable. This is opposed to absolute demand which is latent and not realizable in the foreseeable future.

The most common effective demand is for food.

A caveman would simply hunt it.

The creation of society allows efficiency by creating:

• a class of hunters to get the food, such as deer, and
• a class of traders to purchase, store and trade the deer

Assume that each buyer assigned a different value to the deer

In this case, trade would still be bilateral barter and be very inefficient

If everyone just used his own valuation, then the meeting of minds would be much rarer.

For example, it would be very ineffective to look for someone interested in basketball from a crowd of people on the street.

But it would be easy to find such people in a basketball game or stadium.

• The street is an uncontrolled environment where everyone can be at. Here, the desire can be anything.
• The basketball stadium or gym is controlled environment where everyone is supposed to watch basketball. Here, the desire is entertainment, and the medium is basketball. The rules are imbued in the medium in order to satisfy the desire.

Likewise, use value can be anything. People can exchange based on use value, through barter. But getting value from it will be very ineffective.

The Common Medium of Exchange: Nominal Price as the Purchaser’s Valuation

To solve this, there has to be common medium that everyone can relate to.

This medium:

• creates the controlled environment where formal economic activity can take place
• represents the use value

This medium is based on relationality, which in Supereconomics is based on fellow-feeling.

The society agrees on what medium and measure to be used for exchange.

In the past, this medium depended on the natural resources available.

The following were the common instrument of commerce:

• salt in Abyssinia,
• shells in some parts of the coast of India,
• dried cod at Newfoundland,
• tobacco in Virginia,
• sugar in some of our West India colonies,
• hides or dressed leather in some other countries,
• I am told that to this day, workers in a village in Scotland can carry nails instead of money to the baker’s shop or the ale-house.

Adam Smith

The Wealth of Nations, Book 1, Chapter 4

The establishment of this common measure thus is the start of the 1st Law and of nominal price, and of organized economic activity