The Invisible Hand of Dharma as Real Value

The Second Law of Value Icon

January 3, 2022

The First Law of Value introduced Exchangeable Value which is seen as Nominal Price to the Buyer. The Second Law of Value introduces Real Price which is the Exchangeable Value to the Seller.

  • Real value is the value of the effort, trouble, hardship, and sentimentalism that is put into the Item by its owner or seller. This leads to the Effort theory of value that we derived from Adam Smith, which is opposite of the Labor theory of value of Karl Marx
  • Nominal value is the value of the Item to its buyer/s who may or may not have idea of its real value to its owner

The Second Law of Value states that value goes from areas with high value to areas with low value in order to spread out the value and remove the lack in society. This mirrors the Second Law of Thermodynamics that states that energy goes from hot to cold to equalize the heat, or that organized systems become unstable as time passes. It also leads to the concept of economic development just as the thermodynamics law leads to the concept of time*.

Second Law

*It explains why people always make an effort to better themselves just as time always moves forward. The causal mechanism is the cycling of the Positive and Negative forces

The instability is a sign of Nature’s inherent dynamism* and manifests as the concept of Absolute Demand in pantrynomics, which does not exist in Economics. This demand manifests as the arbitrary motives such as profit, duty, conservation, benevolence, the force of capital, goal-in-life, etc. as part of the personal interest. This is different from Economics which enshrines only the profit motive as the selfish interest.

*In Medical Superphysics, this dynamism or entropy manifests as the mind jumping to conclusions unless it is restrained by conscience. In Supersociology, this manifests as popular opinion turning into mob rule unless it is restrained by the common interest.

The Effort Theory of Value

In the cake example, let us assume that the cake was baked by Mr. Chef for 2 units of effort. To bake the same cake, it will take Mr. C, D, and E 4, 6, and 8 units of effort respectively. And so they each assign a real price of $4, $6, and $8 for the cake.

Person Effort Cost (Real Value)
Chef 2 $2
C 4 $4
D 6 $6
E 8 $8

Thus, Mr. E is the worst at making cakes and so he values it the most at $8. Mr. Chef is the best at making cakes and so it costs peanuts to him at $2.

Assuming Mr. C, D, and E needs to buy a cake from Mr. Chef, who uses each sale from one cake as a capital to make the next cake (because his starting capital is only $2).

Newbie Entrepreneur: $10 Cakes

If Mr. Chef overvalues his effort and sells the first cake at $10, then he will not be able to sell it

Cake Market Price Day 1 Buyers Day 2 Buyers Day 3 Buyers Chef Revenue at the End Cake Value Created Unsatisfied Demand Days Taken to satisfy all demand
$10 no one no one no one -$2 $0 3 people fail

Entitled Entreneur: $8 Cakes

If he sells it at $8, then he can make 4 more cakes [$8 revenue / $2 real value] tomorrow at $8 each. He knows only 2 people are left to buy cakes so he will make only 2. But Mr. C and D won’t be able to afford it and so the $4 loss cancels the $4 excess revenue

Cake Market Price Day 1 Buyers Day 2 Buyers Day 3 Buyers Chef Revenue at the End Cake Value Created Unsatisfied Demand Days Taken to satisfy all demand
$8 E only @ $8 no one no one $0 ($4-$4) $8 (1 cake) 2 people fail

Socialist Entrepreneur: $2

If he sells it at $2, then he can only make 1 more tomorrow [$2 revenue / $2 real value] and so it would take him 3 days total to satsify all demand

Cake Market Price Day 1 Buyers Day 2 Buyers Day 3 Buyers Chef Revenue at the End Cake Value Created Unsatisfied Demand Days Taken to satisfy all demand
$2 C D E $2 $6 (3 cakes) none 3 days

Pantrynomic Entrepreneur: $4

So through trial and error, he sets his market price to $4. In this way, his first sale will let him make two more, and all demand can be satisfied in 2 days. His net nominal revenue will be $4 in the end. This can be used to export cakes to other towns to keep Mr. Chef employed and making cakes for everyone.

Cake Market Price Day 1 Buyers Day 2 Buyers Day 3 Buyers Chef Revenue at the End Cake Value Created Unsatisfied Demand Days Taken to satisfy all demand
$4 C D, E demand satisfied $4 $12 (3 cakes) all ok 3 days
Second Law Definition
The second law of value creates a downward sloping supply curve in pantrynomics. In Economics, it is limited to the profit-motive which causes its supply curve to slope upwards. While the concept of nominal value exists in Economics, real value does not. For example, Real GDP is still measured in money and not in commodities

Profit-Maximizing Entrepreneur: $6

The Pantrynomic supply curve is very different from the profit maximizing one of Economics which will sell the cake at a higher price of $6. This will:

  • create 3 cakes on the second day
  • 1 will be sold, leaving 2 unsold yet Mr. C would not be able to afford any of it
Cake Profit-maximizing Market Price Day 1 Buyers Day 2 Buyers Day 3 Buyers Chef Revenue at the End Cake Value Created Unsatisfied Demand Days Taken to satisfy all demand
$6 E D no one $4 (1 cake unsold) $12 (2 cakes) 1 person fail

This scenario leads to the same $4 net revenue, with one customer left unsatisfied.

Let’s Compare the End Results

Assuming the Chef learns this pattern and is able to not overproduce, then the ending revenues will be:

Chef Cake Market Price Chef Revenue at the End Cake Value Created Poverty of Cakes
Entitled $8 $8 $8 (1 cake) 2
Profit-maximizing $6 $10 $12 (2 cakes @ 2 days) 1
Pantrynomist $4 $4 $12 (3 cakes @ 2 days) 0
Socialist $2 $2 $6 (3 cakes @ 3 days) 0

From here, we can see that:

  • The profit maximizer systemically gets the most revenue (most labor of society) at the cost of creating 1 unit of poverty
  • The pantrynomist has less revenue than the profit-maximizer, but does not create poverty
  • The socialist also creates no poverty, but takes longer than the pantrynomist. Also, there is no left over revenue to improve cake-making or do exports

The Resulting Concepts from the Second Law

The resulting concepts from the Second Law of Value are:

  • The invisible hand of dharma
  • The Force of Capital
  • Real Prices
  • Economic Development
  • Primary arbitrage
  • Wholesale
  • The Philosopher class or cycle

The next post will discuss Exchange as the Third Law.