Jim Hlavac
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Economic Theory
| Economic Theory |
At it's most basic, the math that is inherent in economics is
simple. It comprises a few simple proposition of addition, subtraction,
multiplication and division. All the complexity rests upon these:
Every person wants to obtain the most value for the least amount
of effort.
A primitive person will grab the fruit from the lowest branches first
-- the amount of effort is less, and thus proportionately the value of a
particular piece of fruit is higher than the value of a fruit further up in
the tree. A modern person will take an easy job for $10 an hour over a
harder job for $10 an hour.
Every person wants to always get more benefit as a return on
whatever amount of effort he puts into a thing.
If a person puts an amount of effort, A, into a thing, he always
wants to get an amount, A + 1, out of it. This is "profit," and in every
transaction there is always "profit."
The value of a thing is only in the eyes of those who want to
possess it.
If a person puts an amount of effort, A, into a thing, and someone
only offers him a lesser amount, A - 1, then the value is not A, but A -
1.
A value can be defined as anything or any amount a person wants it
to be.
There are as many values for a thing as there are people who
consider what its value is. If there are ten people there are ten
values. One might be A, another A + 1, another A + 10 -- and so on. Or
the value might be B, a wholly different valuation, one that might not
even have been considered by the person who offers the item.
The effort put in a thing is always of two parts -- the materials and
the labor.
For each material there are two parts -- the materials used to get
this material, and the labor.
No materials can be created without labor.
Resources are those things which occur naturally, raw and
unformed, untouched by the hand of man. The labor of people creates
materials out of resources.
A piece of fruit on a tree is a resource. A piece of fruit plucked for
consumption is a material.
People who trade material for material both obtain profit. This is
because each person took a resource, and labored to create a material.
Each put the least amount of effort into the material and now want to
get the most amount of benefit he can. The value of the benefit
derived from the material is only in his eyes. He only trades when he
thinks that the benefit he will derive from possessing the new material
is greater than the effort he put into his own material. The two
people in the trade both believe that they got more benefit from the
trade. They don't begrudge the benefit to the other, they probably
aren't even aware of the other's benefit. He only thinks that he got
more benefit. So too the other person, he obtained more benefit
from the new material that he now has. The both made a "profit,"
because they both wound up with what they perceive is more benefit
than the effort they put into the thing with they traded away.
In every transaction there are two offers. The person who has a
thing offers it for trade. The person who wants what is offered makes
his own offer with what he has for trade. Both people are offering
what they produced for the least amount of effort and they both want
to get the most amount of benefit. When their two different values
arrive at the same point that is the "price" and the trade is made.
Both believe they made profit, they both believe they got more
material for less effort.
In every labor there is risk. For every effort there is a risk. Risk
can be determined by anybody. While the person laboring at a thing
assesses his own definition of the risk he faces, any other person can
make a determination of the risk the other person faces. Think of the
person who is gathering alligator eggs. He can assess his risk by
considering his knowledge of the habits and actions of alligators in
general, and perhaps he has certain skills and natural abilities that
mitigate against his idea of risk. However, anybody can see that there
is risk in gathering alligator eggs. Alligators are obviously dangerous.
simple. It comprises a few simple proposition of addition, subtraction,
multiplication and division. All the complexity rests upon these:
Every person wants to obtain the most value for the least amount
of effort.
A primitive person will grab the fruit from the lowest branches first
-- the amount of effort is less, and thus proportionately the value of a
particular piece of fruit is higher than the value of a fruit further up in
the tree. A modern person will take an easy job for $10 an hour over a
harder job for $10 an hour.
Every person wants to always get more benefit as a return on
whatever amount of effort he puts into a thing.
If a person puts an amount of effort, A, into a thing, he always
wants to get an amount, A + 1, out of it. This is "profit," and in every
transaction there is always "profit."
The value of a thing is only in the eyes of those who want to
possess it.
If a person puts an amount of effort, A, into a thing, and someone
only offers him a lesser amount, A - 1, then the value is not A, but A -
1.
A value can be defined as anything or any amount a person wants it
to be.
There are as many values for a thing as there are people who
consider what its value is. If there are ten people there are ten
values. One might be A, another A + 1, another A + 10 -- and so on. Or
the value might be B, a wholly different valuation, one that might not
even have been considered by the person who offers the item.
The effort put in a thing is always of two parts -- the materials and
the labor.
For each material there are two parts -- the materials used to get
this material, and the labor.
No materials can be created without labor.
Resources are those things which occur naturally, raw and
unformed, untouched by the hand of man. The labor of people creates
materials out of resources.
A piece of fruit on a tree is a resource. A piece of fruit plucked for
consumption is a material.
People who trade material for material both obtain profit. This is
because each person took a resource, and labored to create a material.
Each put the least amount of effort into the material and now want to
get the most amount of benefit he can. The value of the benefit
derived from the material is only in his eyes. He only trades when he
thinks that the benefit he will derive from possessing the new material
is greater than the effort he put into his own material. The two
people in the trade both believe that they got more benefit from the
trade. They don't begrudge the benefit to the other, they probably
aren't even aware of the other's benefit. He only thinks that he got
more benefit. So too the other person, he obtained more benefit
from the new material that he now has. The both made a "profit,"
because they both wound up with what they perceive is more benefit
than the effort they put into the thing with they traded away.
In every transaction there are two offers. The person who has a
thing offers it for trade. The person who wants what is offered makes
his own offer with what he has for trade. Both people are offering
what they produced for the least amount of effort and they both want
to get the most amount of benefit. When their two different values
arrive at the same point that is the "price" and the trade is made.
Both believe they made profit, they both believe they got more
material for less effort.
In every labor there is risk. For every effort there is a risk. Risk
can be determined by anybody. While the person laboring at a thing
assesses his own definition of the risk he faces, any other person can
make a determination of the risk the other person faces. Think of the
person who is gathering alligator eggs. He can assess his risk by
considering his knowledge of the habits and actions of alligators in
general, and perhaps he has certain skills and natural abilities that
mitigate against his idea of risk. However, anybody can see that there
is risk in gathering alligator eggs. Alligators are obviously dangerous.