In general, considering all of human history we can very roughly categorise the time a person spends into two:
- Working to provide the necessities of life – without which that person will die.
- Time after having provided for the necessities of life during which we can create “luxuries”.
A necessity of life, is something that without which we would die: air, water, food. However, being a necessity of life, they don’t have much other use other than to keep us alive. So having sated our need, their value falls dramatically and in most cases like water (flood), air (wind) or food (being fat), in great excess they have negative value.
In contrast, a luxury item is by definition unnecessary. If we do not have it, it has value, but it is something we would quickly sacrifice in order to have a necessity of life. But whereas the necessities of life tend to be mundane and of little value when in excess, luxuries often retain their value as we get more and more of them. For example the value of each gold ornament would be seen as having the same value, if two were held rather than one.
We can also divide our time between providing the necessities of life and the luxuries. However, because necessities are extremely valuable when in deficit and of little value when in excess, the value of time spent providing necessities and luxuries is not equivalent.
So how do we value 1 hour’s worth of time producing luxuries compared to an hour producing essentials?
In order to examine this I will propose two societies. Both catch fish, both have 10 hours of time available a day, both need nine fish to survive each day and in each, they have the means to produce shell necklaces that take an hour’s work to produce. However, in one society the time taken to catch fish is dramatically different from the other. In one society P (poor) the fish are caught at a rate of 1 an hour. In another R (rich) the time needed to catch fish is only 1 hour for 9 fish (the necessities of a day).
In the society P where a man needs to work one hour to catch a fish, a gift of a fish would mean the man need work one less hour. Thus, if a shell necklace takes an hour to make, then the value of a fish is worth one shell necklace. In the society R where a man need only work 6.67 minutes to catch a fish, a gift of 9 fish removes the necessity of working one hour, so that a shell necklace taking an hour to produce has the same value as nine fish. However, in the society where a day’s fish can be caught in an hour, there are nine hours each day free for luxuries. That means that instead of producing only one shell necklace a day, that society can produce 9 shell necklaces in a day. Thus, in a day, the R society can earn the equivalent of 9 x 9 = 81 fish.
As I mentioned above, the necessities of life are extremely valuable when we don’t have them, and have low value in excess, so they don’t have a fixed value, so any equivalence is going to be between luxury time or items. Here we have two equivalences in each separate society:
- R day’s available luxury = 9 R-hours = 9 R-necklace = 81 R-fish
- P day’s available luxury = 1 P-hour = 1 P-necklace = 1 P-fish
The question then, is can we equate the “value” of anything in these two different societies? There are three possibilities:
- That because 9 fish are needed per day, that they have the same value.
- That because shell necklaces take the same time to make in both societies, that they both have the same value
- That because there are only a set number of days a year (and let’s just say day’s in a lifetime) that the production time available in a year (after accounting for time for basic necessities) has the same value.
Equivalence of fish
(The wealth as related to the value of the necessities of life)
- 1 R-fish = 1 P-fish
- 1 R day’s available luxury = 81 x P day’s available luxury
- 1 R-hours = 9 P-hours
- 1 R-necklace = 9x P-necklace
Equivalence of work hours & Equivalence of necklaces
(The wealth that is available over a fixed time of working)
- 1 R-hours = 1 P-hours
- 1 R-necklace = 1 P-necklace
- 1 R day’s available luxury = 9 x P day’s available luxury
- 1 R-fish = 9 P-fish
Equivalence of Days
(The wealth that is available over a fixed length of life)
- R day’s available luxury = 1 P day’s available luxury
- 9 R-hours = 1 P-hours
- 9 R-necklace = 1x P-necklace
- 81 R-fish = 1 P-fish
Or turning around
- 1 P day’s available luxury = 1 R day’s available luxury
- 1 P-hours = 9 R-hours
- 1x P-necklace = 9 R-necklace
- 1 P-fish = 81 R-fish
The basis of my theory of “Enerconics” is that energy can be used as a unit of economic activity. In the above context, because our daily food intake is largely equivalent to energy, then this suggests that the value of fish should be a measure of economic activity.
However, the more common unit of economic “value” is give by consumer goods such as the shell necklace in the example. In the examples, the relative value of fish and shell necklaces vary by nine to one.
However, from an individual point of view, what we can achieve as a “lifetime’s work” is far more closely aligned to the equivalence of days. Now the R society in the example, has 81 x the fish and 9x the necklaces of the P society.
There is clearly a very high divergence on “value” depending on how that is defined. My inclination is that there is an equivalence of life, which means that neither conventional economics nor enerconics is giving real value.
One obvious change is that the “life-time wealth” of a person increases dramatically when the rate at which they can gather the necessities of life increases (from the value of 1 necklace to 9 per day and from 1 fish equivalent to 81). But, it also means that the value of fish dramatically decline (whether or not we see life as equivalent or work-time for luxuries as equivalent).
Thus, I think whilst the unit of energy (i.e. here fish) should still be seen as a way to measure economic activity, that this is not the same as “value”. The question is whether a necklace taking an hour to produce should be seen as having the same “value” throughout history, or whether a person’s lifetime should be equated as being of the same value. For practical reasons it is easier to measure people than equate consumer goods, so I would suggest equating life is the way forward. However, we naturally see consumer goods as capable of being bartered and therefore having “value”.
As such, whilst energy is a unit of enerconic activity (work), it seems easiest to equate an average day’s “luxury” time as being equivalent in “value” in all societies. Therefore as a result the “consumer value” of consumer goods (necklaces) changes and that the consumer value of both a life and the basics of life also change. I therefore have three changing relative scales:
- Lifetime value – relative to the value of a life
- Consumer value – relative to the time spent producing goods
- Energy value – the energy consumed in producing or doing something.
I will have to ponder this.
Embarrassingly after writing this, I realised that I had made a very schoolboy basic error on the way that GDP was calculated which is the total NET VALUE added rather than total economic activity. In other words, the way GDP is measured avoids the double counting which I had been using as an excuse to explain the apparently discrepancy of value in the approach I was using.
I had not found an explanation for the apparently discrepancy, but fortunately, the article was not a total loss, as it has suggested a way forward to valuing energy which I explore in The value of fish II