Sunday, March 12, 2023

Capitalism Converges on LTV & Absolute Money

Ironically, in an efficient capitalist economy, prices converge on the labour theory of value, as the limiting input on any good is, in the end, human labour. 

Give me any other input and I can show you how to make more of it using more human effort. 

Perhaps I can think of an exception: Malthusian economies get complicated because at some point the food required to run a human costs more human effort than it can run. Technically the above statement is still true, but the available land puts a hard upper limit on total human labour. Even so, labour can be spent on figuring out how to make farming more efficient...

The other complication is that humans aren't equal and thus the labour isn't fungible. However, generally higher-value labour also takes more training to fully realize, which mean the total invested time, including capital costs, tends to be much more similar than you might guess. In part this is because a properly industrial economy moves quite quickly and skills get stale, and thus the high-value worker has to spend more time developing new high-value skills.
In any case, you can usefully make a dollar:hours kind of ratio and determine an absolute price level in terms of hours of work. The more efficient the economy is, the more useful it is to price things directly in some sort of Platonic hour.

Of course this is politically impossible. It's really bad for pork barrel projects, as they are unforgeable cheap, yet command high prices.
Imagine paying a bribe: "It'll cost you 200 hours if you want it done." "Wait, you're spending 20 minutes, max, on this." Face status: egged.

If everything is priced in hours, you can almost trivially spot arbitrage opportunities. 

Of course central banks hate it especially. Imagine inflation priced in hours. "Okay an hour of your work is now worth 45 minutes." 

Pricing everything in hours instantly blows up all sorts of schemes. Even the slave can figure them out when you call a spade a spade that hard.

Egalitarians hate it the most, though. Communism contains the seeds of its own destruction even if you go all the way back to [read old books] communism...

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