@Indian Investor-II

I want to lead you to where I am seeing from, in the hope that you will concur with me.  (So that we can chat not any big deal).  I want to guide you through the mazes of conventional economics (here I feel the burden but you probably don’t) to the ROOT causes.  Lets push the inquiry to the ultimate bedrock.

First, the proposition: Value is a social relation.

In our courses on Value in Economics, we ingested this fundamental premise.  I remember answering a question on this in an Elphinstone College mid term. (The courses in MA(I) in Bombay University were: Value, Income and Distribution; Money; Math eco; Econometrics; the last two chosen optionals.)

So when we casually speak of value addition, what are we really talking about?  (This post is going to be more incoherent than the others, because it is thought in process.)

So: to restate: Value is, above all, a social relation.  The relationship between my income and somebody else’s.  Why do I get the option of consuming more (of all physical goods and services) than the cleaner who cleans my office?  Ostensibly, because I add more value.  But push it back.  Why do I add more value than the cleaning function?  Because I can do the work of the cleaner, but he can’t do my work.  He doesn’t know english, doesn’t count (add, subtract, multiply and divide) and can’t contribute utilities to OTHERS that they would be willing to recompense me for.

So this value concept, this valuation, is always by an aggregate of OTHERS who validate my contribution to their welfare.  Thus we have established: value is a social relation.  They in turn turn over some of the utilities they have spawned which I (gladly) consume (Music, books, literature, fine wine and furniture.)

When dealing with exchange, I would advise you to always focus on the real exchanges, not the money values exchanged.

This is because money values are determined by the relation of a fiat money supply to an aggregate of goods and services.  Chinese purchases of US treasuries is nothing but money lending from Chinese residents to US residents.  But what are the real correlates of these monetary exchanges?

As Agatha Christie titled her autobiography from a poem of Lewis Carroll’s: the fundamental question is: “Come, tell me how you live”


4 Responses to “@Indian Investor-II”

  1. Indian Investor Says:

    It’s amazing how much confusing propaganda is edited into the economics textbooks to hide the bare simple facts. It’s rather un debatable that economic value is a social construct. However, the textbook claim above that value is a social relation governed by interplays of individual capabilities and free-will contributions to the collective society through those capabilities, is pure balderdash.
    In actuality, economic value is determined through the large scale socio-political mechanisms of particular states, and the interplay amongst states that establishes a geopolitcal regime for that period. Between 1944 and 1971, the US dollar was widely used in practise to measure economic value and its counterpart in the Soviet Union was the ‘hard currency Ruble’, a form of commodity money. The store of gold at Fort Knox and the promise of converting dollars into gold at something like 35 dollars to an ounce through the Federal Reserve gold discount window – was the primary source of ‘economic value’ in what the US called ‘the free world’ during those years.
    After Richard Nixon’s famous August 15,1971 address, the Fed’s gold discount window was permanently shut down, and the dollar went into a free fall.
    It would be interesting to know what you think replaced the yellow gold as the world’s primary source of ‘economic value’ post the 1971-1973 recession?

  2. Indian Investor Says:

    Let me put the question another way: Suppose the Government of India were to go through St. Agnes Teresa letters to her eccelesiastical colleagues in the Vatican – letters in which she wondered why she there was so much misery and pain in Kolkata, despite God. And they decide that enough misery is much more than enough – so they will build innumerable highways, schools, etc – what would be the upper limit on such spending?
    What would be your solution to the simple question – why doesn’t the government simply print and spend huge amounts on public works – and solve the poverty problem forever?
    (I know the common answers to this in the economics theory propaganda and most of them are bogus, so I hope you’renot coming back with spending on public works causes inflation – because it obviously doesn’t. Or, hey, the Government is corrupt in India – all the governments are equally corrupt – there isn’t a first among equals there as far as I know)

  3. Indian Investor Says:

    Let’s refine the question even further. Suppose 20 people who can’t count, come together with some tools and materials – and work for 6 months – they can build a house. People with better skills can purchase that house, but on average – the people with better skills will need to pay a large fraction of their income over something like 25 years – to finally get full ownership of that house. A few bricks, some sand and steel – all of which can be produced easily in a very short period of time by people without scarce skills – plus a few months of hard manual labor = skilled labor for 8 years. Does this make any sense?

  4. Indian Investor Says:

    Your theory is that economic value is determined by what can people can contribute and produce – and the product is allocated amongst the contributors through the relative social values placed on their contribution. That is obviously not the case, is it? if that were true, people could have produced most of what need for life – such as houses, cars, etc – in around a year – and the rest of their years would be devoted to the arts, science and pastimes. That’s obviously not the way it works – is it?

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