The Second Law of Value

The First Law of Value introduced Exchangeable Value which is seen as Nominal Price to the Buyer. The Second Law of Value introduces Real Price which is the Exchangeable Value to the Seller.

What is Real Value?

• Real value is the value of the effort, trouble, hardship, and sentimentalism that is put into the Item by its owner or seller. This leads to the Effort theory of value that we derived from Adam Smith, which is opposite of the Labor theory of value of Karl Marx
• Nominal value is the value of the Item to its buyer/s who may or may not have idea of its real value to its owner

The Second Law of Value states that value goes from areas with high value to areas with low value in order to spread out the value and remove the lack in society.

We simplify this to: value is created to remove the lack in society.

This mirrors the First Law of Thermodynamics, known as the law of conservation of energy*. That law states that energy cannot be destroyed. Instead, it merely changes forms.

It also leads to the concept of economic development just as the thermodynamics law leads to the concept of time*.

The instability is a sign of Nature’s inherent dynamism*. In Supereconomics, this manifests as the concept of Absolute Demand mentioned in the Part 1 and does not exist in Economics.

This demand manifests as the arbitrary motives such as profit, duty, conservation, benevolence, the force of capital, goal-in-life, etc. as part of the personal interest. This is different from Economics which enshrines only the profit motive as the selfish interest.

Without a society, only the First and Second Laws are needed. For example, if you are a hungry caveman, then you pick up fruits and berries to address your hunger.

• The hunger is your effective demand
• The labor of getting fruits is your real effort
• The fruit is your goods for consumption

In such a case, there is no need for a market price (Fourth Law) or a regulator (Second Law) to check if the fruits are safe for human consumption.

The Effort Theory of Value

In the cake example, let us assume that the cake was baked by Mr. Chef for 2 units of effort. To bake the same cake, it will take Mr. C, D, and E 4, 6, and 8 units of effort respectively. And so they each assign a real price of $4, $6, and $8 for the cake.

Thus, Mr. E is the worst at making cakes and so he values it the most at $8. Mr. Chef is the best at making cakes and so it costs peanuts to him at $2.

Assuming Mr. C, D, and E needs to buy a cake from Mr. Chef, who uses each sale from one cake as a capital to make the next cake (because his starting capital is only $2).

Newbie Entrepreneur: $10 Cakes

If Mr. Chef overvalues his effort and sells the first cake at $10, then he will not be able to sell it

Entitled Entreneur: $8 Cakes

If he sells it at $8, then he can make 4 more cakes [$8 revenue / $2 real value] tomorrow at $8 each. He knows only 2 people are left to buy cakes so he will make only 2. But Mr. C and D won’t be able to afford it and so the $4 loss cancels the $4 excess revenue

Socialist Entrepreneur: $2

If he sells it at $2, then he can only make 1 more tomorrow [$2 revenue / $2 real value] and so it would take him 3 days total to satsify all demand

Supereconomic Entrepreneur: $4

So through trial and error, he sets his market price to $4. In this way, his first sale will let him make two more, and all demand can be satisfied in 2 days. His net nominal revenue will be $4 in the end. This can be used to export cakes to other towns to keep Mr. Chef employed and making cakes for everyone.

Profit-Maximizing Entrepreneur: $6

The Supereconomic supply curve is very different from the profit maximizing one of Economics which will sell the cake at a higher price of $6. This will:

• create 3 cakes on the second day
• 1 will be sold, leaving 2 unsold yet Mr. C would not be able to afford any of it

This scenario leads to the same $4 net revenue, with one customer left unsatisfied.

Let’s Compare the End Results

Assuming the Chef learns this pattern and is able to not overproduce, then the ending revenues will be:

From here, we can see that:

• The profit maximizer systemically gets the most revenue (most labor of society) at the cost of creating 1 unit of poverty
• The Supereconomist has less revenue than the profit-maximizer, but does not create poverty
• The socialist also creates no poverty, but takes longer than the Supereconomist. Also, there is no left over revenue to improve cake-making or do exports

The Resulting Concepts from the Third Law

The resulting concepts from the Third Law of Value are:

• The invisible hand of dharma
• The Force of Capital
• Real Prices
• Economic Development
• Primary arbitrage
• Wholesale
• The Philosopher class or cycle