Efficiency Model: Supply and Demand Efficiency
Chapter 3 explained the different types of effort.
Chapter 4 explained that these efforts will likely be valued by the demand that allows the most primary arbitrage.
The best match real-time of effort and need, as supply and demand, is one of the goals of Supereconomics.
Inefficiencies can be grouped into 2:
- Demand Inefficiency
This is when nominal value is decreasing.
- Supply Inefficiency
This is when real value, as costs, is increasing.
This leads to the following table:
| Name | Nominal Value | Real Value | Meaning |
|---|---|---|---|
| Demand Efficiency | Increase | Stable | Demand is matched as precisely to Supply as Possible |
| Demand Inefficiency | Decrease | Stable | There is a mismatch between Demand and Supply |
| Supply Inefficiency | Stable | Increase | Costs decline |
| Supply Efficiency | Stable | Decrease | Costs increase |
Demand Efficiency and Inefficency
This happens when the demanders actually get what they need instead of getting something that they don’t.
For example, a young adult might want to buy first first gasoline powered car. But advertising and propaganda from electric vehicles persuades him to buy an electric vehicle instead.
He soon realizes the problems with electric vehicles like:
- limited range
- limited charging stations
- slow charging
His purchase makes him less productive had he bought a normal car.
Supply Efficiency and Inefficency
This happens when there is a match of suppliers to demanders from the supply side.
For example, there are 9 job applicants in your company. You are looking for someone who can stay long in the job.
| Applicant | Skill | Asking Salary | Willing to Stay Long? |
|---|---|---|---|
| A | Low | Low | Yes |
| B | Low | Medium | Yes |
| C | Low | High | Yes |
| D | Medium | Low | No |
| E | Medium | Medium | Yes |
| F | Medium | High | No |
| G | High | Low | Yes |
| H | High | Medium | Yes |
| I | High | High | No |
The best match for the job would be Person H.
- Supply Efficiency is in employing Person H as having the best match. Hiring him would be like winning a jackpot.
- Supply Inefficiency is in employing Person F as having the worst match. Hiring him would be a real loss.
The Inefficiencies of Economics
Our model is different from Economics which has 3 inefficiencies from market dis-equilibrium:
| Inefficiency | Defintion |
|---|---|
| Producer’s Surplus | The difference between how much of a good the producer is willing to supply versus how much he receives, or the gain the producer receives |
| Consumer’s Surplus | A situation when “the price that consumers pay for a product or service is less than the price they’re willing to pay,” or a bargain |
| Deadweight loss | A cost to society created by market inefficiency |
Ideally, there should be no producer’s gain nor consumer’s bargain. These are traditionally plotted as the red and blue areas in the chart below.
However, no one seems to have a name for the area on the right side of equilibrium. This is because while the demand curve is real, the supply curve is imaginary, merely representing the desire of suppliers.
Since the mind only gives names to real experiences, that area cannot get a name because it is not really experienced — an overpriced product that cannot be sold at that price simply is not sold, and is not plotted at all.
We classify the Inefficiencies of Economics under our supply and demand inefficiency model
| Inefficiency | Classification |
|---|---|
| Producer’s Surplus | Supply Efficiency |
| Consumer’s Surplus | Demand Efficiency |
| Deadweight loss | Supply and Demand Inefficiency |
The Proper Surpluses Plotted Realistically
To eliminate this unreal area, we will apply our efficiency model as the supereconomic supply and demand curves below:
This shows the following:
-
A new tax raises prices (blue dashed line) and has the same effect as a price ceiling in terms of loss (red area)
-
A new technology lower prices and create real material gains. It makes consumer bargains permanent, while spreading it to more people (orange area).
New production technologies decrease costs. These then either increases profits or allows more to be produced. The former creates a ‘producer’s surplus’ or gain. An example is the iPhone. The latter spreads the consumer’s surplus or bargain to more people. An example is the Android phone.
- A man-made environmental limit* checks overconsumption just as a man-made price ceiling discourages underconsumption. Such a limit might raise prices by preventing economies of scale. But such prices can be later reduced by technological advancement. From this view, we can say that an environmental limit is a win-win: it preserves nature, while advancing technology.
*Update Sept 2021: The man-made environmental limit is one of the key features of Supereconomic systems that sets it apart from economic systems. The latter does not put a check on profits, consumption and the subsequent exploitation. This makes the people lazy in finding solutions to scarcity. They keep on pushing for growth and will only look for solutions when the karma of their activities are in their face as global warming disasters such as supertyphoons, droughts, floods, and zoonotic viruses like Covid. In contrast, Superphysics pre-empts those problems by constraining profits and exploitation artificially beforehand. This forces minds to think of solutions and technologies to improve life despite those limits.
From this new curve, we can get more realistic information:
- The producer’s surplus is often larger than the consumer’s surplus because it takes time to oversupply the market.
- The real world producer’s surplus is never as high as it is thought to be, unless there is a monopoly
- The producer’s surplus usually happens first and is followed by a consumer’s surplus much later when oversupply is achieved
When an overpriced product cannot be sold, its price is slashed, creating a bargain or ‘consumer surplus’. Normally, bargains are not so high, ranging from 5% to 50%, while 70%-90% discounts are rare. But the supply curve in Economics seems to say that 90% discounts are natural if an overly mass-produced product can’t be sold (the big yellow area in the Economics curves).
Our curves also show slight moral similarities and differences with those of Economics. Whereas Economics sees producer’s and consumer’s surplus as bad, Superphysics sees consumer’s surplus as initially good since it is never bad to supply goods and services to all.
Consumption is the sole end and purpose of all production.. the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.
Adam Smith
Wealth of Nations Book 4
However, oversupply hurts the environment in the long run, and so we also see excessive consumer surplus and consumerism as bad. Therefore, while the goal of both Superphysics and Economics is balance, Superphysics ensures that supplies are delivered to everyone as they are needed, and not in excess, since it factors in the environment in its models through environmental limits* (unlike Economics). This real-time delivery and regulation system is then implemented by ISAIAH , which is our implementation of Socrates’ Guardians.
