Subjective and Solidarity Economic Theory (SSET)

SSET 02 - SUBJECTIVE AND SOLIDARITY ECONOMIC THEORY (SSET) 

INTRODUCTION

The purpose of this work is to highlight the fundamentals of this new economic theory, especially in relation to the reason for its name.

It is not an exaggeration to classify the SSET as a “new” economic theory, as it emerges from the definition we have coined:

Deductive logical theory that allows to understand economic phenomena in terms of the quantities of economic goods (total and exchanged), according to their behavior governed by the natural laws of: decreasing marginal utility of wealth (subjective) and relative marginal utility of exchange (solidarity).

We can we say that this new economic theory is the “old” economic theory that William Stanley Jevons intended to elaborate in his Theory of Economic Policy:

“INTRODUCTION. The science of political economy rests on a few concepts of seemingly simple character. Utility, wealth, value, commodity, labor, capital, are the elements of matter, and anyone who has a full understanding of their nature must have to be able to acquire a knowledge of science in its entirety. As most economic writers have observed, it is in dealing with simple elements that we require the utmost care and precision, since the slightest misconception can vitiate all our deductions. Consequently, I have devoted the pages that follow to investigate the conditions and relations between the above-mentioned concepts.” (From outstanding quote in SSET, bold text of ours).

In SSET (Chapter X) we showed that the theoretically subjectivist Jevons could not fulfill his task as a consequence of the crucial failure of the epistemologically objectivist Jevons.

• The laudable Jevonian objective is present in the Subjective and Solidarity Economic Theory:
• It is an economic theory based on the theory of subjective value, unlike the theory of objective value, present in the Jevons epistemologist, which trigger the consequences of the own warning: “since the slightest misconception can vitiate all our deductions.” Failure to contaminate all known economic theories, while trying to build from the objective “theory” of prices.¹
• The simple elements of economic theory, which Jevons sought, are the quantities of economic goods: total and exchanged.
• Economic theory is subjective because it derives from the theory of subjective value, specifically from the law that governs its utility dimension: law of decreasing marginal utility of wealth.
• The economic theory is solidarity because emerge from the positive cross correlation of the exchange,² which derive from the law of marginal relative utility of exchange.

Then, the Subjective and Solidarity Economic Theory (SSET) is the realization of the Jevonian dream of achieving one:

Other aspects to categorize the Subjective and Solidarity Economic Theory as “new”, is that:

It dispenses with (among other topics):

• Theory of interest (in line with our definition of it as the price of economic time, a variable dependent on wealth).
• Theory of currency (money) .
• Supply and demand as determinants of prices.
• Theory of prices: reduced to technical coefficient.
• Quantitative theory of the currency (money): reduced to the rotation coefficient.
• Theory of monetary cycles, reduced to the theory of price control.
• Gresham´s Law unnecessary because it is included in the cross-correlation of the exchange.
• Regression theorem.
• Inconsistency of the traditional equilibrium equality: S = I.

It incorporates (among other topics):

• Relative values, which determine prices.
• Utility of exchange: by means of the positivity of relative values.
• The Equation of the exchange.
• Positive cross correlation of the exchange: values-quantities.
• Theory of economic unit of measurement, economically neutral entity and independent of the theory of currency (money).
• Measurable value. Feasibility of monetary economic calculation without monetary prices.
• Theory of the distribution of wealth according to relative values (utility), not of prices.
• Theoretical corroboration of “the invisible hand”.
• Corroboration of theory of interest as the price of economic time, variable dependent on wealth.
• Evolutionary Optimal in opposition to the inconsistent Pareto Optimum.
• Positive correlation unemployment-inflation. Positive Phillips Curve corroborates this.
• Theory of the saving = credit.
• Theory of economic cycles in terms of putting the objectivism of quantities (prices) before subjectivism (relative value).

The SSET denies J.S. Mill and Alfred Marshall when they said that the theory of value and prices was closed and complete, for their time and future generations. They did not notice that relative values determine exchange, from which prices emerge as mere coefficients.

Carlos A. Bondone

[1] Make theory from a technical coefficient.
[2] Correlation between the values of an economic good whit the quantities of another exchanged.

To download the article, please click on the PDF or Word icon.