4. The Definition of Economic Value (July 13/14)

While the vast majority of so-called economists focus on monetary value, Lyndon LaRouche defines economic value as a measurement of the anti-entropic free energy of the economic process. To achieve this one must focus on scientific research and on technologies with increasingly higher energy flux densities. This is what LaRouche refers to as a science driver. Examples in recent U.S. history include the Manhattan Project and the Apollo Project. To expand the human economy, we must focus on such areas of fundamental research as fusion power, interplanetary flight and colonies on the Moon and Mars. In this class we will focus on what is required to achieve a tendency to increase the free energy of the system as reflected in LaRouche’s treatment of the ratio S′/C+V. This class will be given by Dennis Speed.

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  • Hugh Field
    followed this page 2018-07-14 14:57:11 -0400
  • Anthony Wicher
    commented 2018-07-14 13:54:53 -0400
    I would like to go over this part of “A basket of hard commodities” with the objective of understanding it and using it to actually develop a concrete proposal for a new Bretton Woods system,

    In the present situation, where the valuation to be placed on each and every currency of Europe and the Americas, among others, is increasingly in doubt, what constitutes the quality of durable value upon which medium- to long-term, hard-commodity capital formation could be rationally premised? In the celebrated words of Shakespeare’s Hamlet: “To be, or not to be: that is the question.” When it is, thus, most forcefully demonstrated, that durable forms of economic values, can not be adduced from a quantity of money, where does a measurable valuation of economic activity lie?

    Enter, once again, the matter of “a basket of commodities.” I mean a “basket of commodities” as that notion implicitly underlies the relative success of the 1945-1965 fixed-exchange-rate monetary system. I mean a “basket of commodities” as U.S. Treasury Secretary Alexander Hamilton’s 1791 Report to the U.S. Congress On The Subject of Manufactures defined what became known world-wide as The American System of political-economy. Just as the success of the 1945-1965 Transatlantic system was premised upon coordinate physical-economic growth in the combined national economies of the U.S.A. and western Europe, so Hamilton, basing himself, via Vattel, on the work of Gottfried Leibniz, based the economic policies of the U.S.A. on the mutual growth of the urban industries and the rural countryside.4 In short, sound economics premises its measurements of performance upon growth-rates, measured in physical units per capita and per square kilometer, not upon nominal (e.g., financial) prices attached to a list of produced goods.

    So, in a situation in which the hard-commodity content among currencies is fluctuating, one has still the option of constructing a synthetic unit of account which is based upon an agreed basket of hard commodities. Thereafter, as currencies fluctuate, it is the currencies, not the commodities, which are given implicitly adjusted values, as based upon the basket of commodities used to define the unit. Such a synthetic unit could serve as the accounting-system of an international credit facility, as, in that sense, the basis for creating a kind of successor to SDRs.

    Thus, in the matter of medium- to long-term capital loans for hard-commodity investments, the relevant currencies are priced according to the basket of commodities as a standard. The loan is made in these units, not currency-prices; however, the exporter is credited with that number of synthetic units at the time the product is delivered, and repayments of the loan are determined by the price of the relevant currency, in those units, at the time that specific payment is due.

    Thus, in effect, a barter-like system of medium- to long-term lending of hard commodity product, is used to approximate the “gold-reserve plus basket of commodities exported” system which operated in relevant Transatlantic relations during the 1945-1965 interval of a fixed-exchange-rate system.

    That is the gist of the matter.
  • Dennis Speed
    followed this page 2018-07-14 11:37:54 -0400
  • Elliot Greenspan
    followed this page 2018-07-14 11:37:47 -0400
  • followed this page 2018-07-14 11:37:37 -0400
  • Jason Ross
    followed this page 2018-07-14 11:37:19 -0400