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Great write up! Thanks!
How does your energy theory of value deal with high value and low energy services such as medical consultation? How does it deal with more efficient machines? A machine that created 1000 widgets and hour and requires 2 kilowatts to operate is clearly less valuable than a machine which produces the same number of widgets per hour and requires 1 kilowatt. I do think energy is a useful tool for examining economies in general. We can learn useful things by comparing night time light pollution in China with their stated GDP numbers. That doesn’t mean it is a good theoretical basis for a theory of value though. It’s better than labor, but still wrong, and still seems politically motivated. Marx wanted to do a socialist revolution, so he grounded value in labor and I think you may be doing something similar.
For your next book I suggest Human Action by von Mises. He has a similar discussion of theory of value, and I think this “subjective theory of value” makes the most sense of any I’ve heard. Before I read him I just called it the “market theory of value.” Basically he points out that there is no inherent value to a good, value is determined through a process of negotiation with the people around you. The only way to price something is to see what the market will pay for it.
Quite a few EToVs have been proposed. My main lens of seeing things is biophysical economics which takes a lot from EToV ideas (read this book review for an introduction) leading me to work with commodities.
The obvious solution is: The energy was spent training the physician before the service was rendered. You can do accounting directly with industrial inputs. The matching principle recognizes expenses when the revenue they generate, is earned. The physician simply charges for past energy investment (along with profit from carrying uncertainty/risk, temporary or structural distortions preventing rapid reskilling etc.) Depending on the framework e.g. strict GAAP, the physician exercised pricing power leveraging intellectual assets capitalized (years ago, when studying) blabla scheduled amortization.
Not very well, but the same book review describes related ideas about capital efficiency, relative yield etc.
Attention/throughput of energy expenditure is also important, which @crushedoranges alludes to with "capital being the infrastructure of which energy flows" but in Marx' framework, you could replace "labor" with anything including capital and rewrite my above paragraph simply talking about the capital costs of having supported and trained the doctor. Modern economics/finance struggles under Cobb-Douglas where everything is money to enable simpler math (but we can't always/directly transmute gold into oil and transmuting oil into food often takes time...) Cobb-Douglas is a production function used to handle input substitution (increasing capital reduces labor etc.) If the elasticity of substitution (conversion cost) is 0, you can't transmute. Leontief functions have fixed proportions, where you require 60 food and 20 gold to train a soldier; in ideal situations, the free market(place) does allow conversion, with further transaction costs. Normal economics has a closed loop (and helicopter money style hetereodox economists just see a... slide), but my school points out entropy via EROI etc. Nothing has a conversion cost of 0, non-substitutibility is just an impossibly high cost for instant conversion.
This also leads to super silly results. Leaving aside that it would still value the medical advice way below a flight if you do your amortization properly, it also means that different doctors advice would have different value and that difference would have nothing to do with how good they are but instead the fact that one took an elevator to class throughout medical school and the other had classes on lower floors.
I view your example of different doctors similarly to "efficient machines" which I said this doesn't deal with well.
Indeed! However, you're looking to disprove it by coming up with comical definitions instead of looking for useful and insightful definitions, this is the opposite of productive (mathematical) reasoning. It's akin to throwing away a hammer because it's bad at turning screws. Sure, some communists would probably argue this steak is worth more because you burned 20 barrels of crude to cook it, but that's obviously just waste. The actual energy used to do the thing - that's a more useful lens. In context, you'd recursively consider all the energy used to get through the bureaucratic and credentialing requirements, to be better than others vying for spots etc. and those failed people who invested but didn't make the cut, the energy they invested is also included in the end (otherwise the supply of physicians would be higher and the price lower etc.) It's more useful to search for situations and problems where this tool is useful, leads to insights etc. so you can take it out of your toolbox for them. I find it helpful for macroeconomics and valuing commodity companies, as a measure of competitive of advantage etc.
I’m a little confused about what you mean by the “actual” energy used to do a thing. Energy is either used for some purpose or it is not. To rephrase what I think you are saying, it sounds like you are refining the energy theory of value to say that things should be valued by the “minimal reasonable” amount of energy used to produce the thing. This seems like a good refinement to me because then you can’t mess with the value of a thing by just making it while sitting in the cab of your idling F350. Is that what you meant?
I still think this is off base, though it does make it harder to trivially produce counter examples. It just seems obvious to me that some lower energy things are much higher value than high energy things. Immaterial services are the most obvious example, but I’ve already talked about that with the doctor example. You say doctors are like more efficient machines, so maybe you agree with me here? Another good example would be high fashion items. Before the “minimal reasonable” refinement you could maybe argue that actually flying the models and designers to the show circuit makes them high energy products, but the “minimal reasonable” refinement rules that argument out.
I do think an energy theory of value gestures at something interesting, but it just seems unable to handle large swaths of the modern economy. Are you actually proposing it as a bedrock principle for an overarching economic theory, or are you just saying it is an interesting idea and an improvement over the labor theory of value. I would agree with the later.
I wrote multiple times that I don't or it doesn't work. I literally started with:
I also wrote:
How is that not clear? Why do you think I'm proposing the opposite of what I write?
Yes. You obviously don't value a car at $20 million USD because someone got scammed or overpaid on purpose to create a hypothetical. It's value not price. It's just changing units.
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Capital being the infrastructure of which energy flows makes a kind of sense - certainly science fiction has toyed with the idea of currency representing energy. Like Stellaris. But like all Marxist thought, it focuses too much on the commanding heights of heavy industry. It's not like you can dump gigajoules of energy to make software programming go any faster. At least, with our current level of technology.
But maybe that will change. Maybe LLM models and emergent AGIs will align Marxist theory with reality again - that you can brute force services by dumping measurable fractions of solar output into server farms. But if we're going to reach that postscarcity state, it will be through capitalism outmoding itself, not communism usurping it. Subjective value means that there will always be an economy of some sort, even as human beings are detached from material base needs as the engine for growth.
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