Posted by: cjenscook | 09/18/2009

Economics of Common Sense – Part 2

Following earlier musings Towards an Economics of Common Sense the recent exchange with Robin Smith, one of the protagonists of Systemic Fiscal Reform was worth recording here.

(Robin Smith) I think I’m getting a handle on your idea now. Location you mean is location value? The value the community creates in the land – It is therefore not a factor of production. It is a result of production

In what way does energy differ to land (land being everything outside of the body) (the energy your body uses to function being your property)

Skill = exertion = labour – agreed

But this objective knowledge. I still dont understand how this is a primary factor. One has to do work to create it. So it is not primary.

(Chris Cook) Firstly, Location is a Commons, and has a use value. To me, those who have an exclusive right of use of a Commons should compensate those that they exclude. You assume that all of this use value derives from community action, but that is not so IMHO. Apart from the value conferred by community investment, or community consent to development (eg planning permission) much of the use value is what I might call amenity value.

eg a waterside location; a rural location; a location on the 40th floor rather than on the first, and so on.

Secondly, and forgive me for completely ignoring classical definitions of Land, it is energy which is everything inside and outside the body, in either material form (static energy) or dynamic form (kinetic energy, heat energy, radiant energy and so on).

The forms of energy are related both by the classic relationships of Thermodynamics but also – more importantly – by the quantum relationships which lead to e= mc squared.

While the energy (material and dynamic) of our bodies is “ours” – in that we more or less have control over it – do not forget that Society invests in keeping it in good order. The privilege of good health and physical condition justifies a payment to Society, I would argue, from the fruits of use of our bodies.

Third, re knowledge, it is true that work/exertion is involved in recording and documenting it as some kind of data representation, but I would argue that it exists in our minds independently of the objectification process of being recorded. The painter sees the image in his mind before and during the process of committing it to canvas. Is that cognition of the image “work”? I don’t think it is.

I do not think that work, or exertion, is involved in the recognition of patterns of knowledge: I don’t think this recognition is a conscious process. As I have said before, I might wake up with an idea which might change the world, and “worth” incalculable sums in use value, but have done no “work” in doing so. The work comes in the effort and exertion of documenting and explaining the idea. As Henry George pointed out, it is through the addition of experience (typically involving exertion) that Knowledge develops into Skill.

The problem of course lies in adequate definitions. It always has done, and we have become prisoners of definitions, not least the evolution of “Factors of Production” which bear little relationship with reality, and are purely ideological.

As the physicist J A Wheeler put it “Reality is defined by the questions you put to it”. To me, it is self evident that Space/Time (ie 4D Location…a good example being airport landing slots) and Energy are factors of production.

Location is relative: Energy is absolute. Both are primary Factors of Production in that it is impossible for production to occur without them.

Knowledge, on the other hand consists of patterns on Reality which are recognised consciously or subconsciously by human beings, and remembered and/or recorded. Knowledge has always been there, and always will be there, and is in my view a third Factor of Production, in that production is impossible without it.


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