THEORY of VALUE and PRICES

THEORY of VALUE and PRICES
―Proposal of a synthesis of economic thought―

 

In our humble understanding, the most precious of all theoretical aspects that allow us to understand the relation of macroeconomics ―the economics that refers to a set of human entities― and microeconomics ―the economics that refers to individual human entities― is that which specifies and causally establishes the relation of “the” theory of value and “the” theory of prices.

Yes, it is based on an adequate theory of value, from which an adequate theory of prices is derived, that the economic individual ―microeconomic sphere― connects with all the individuals that interact economically ―macroeconomic sphere.

Further, it is based on the achievement of an adequate theory of value, operating causally on an also adequate theory of prices, that a theory synthesizing economic theory can be achieved.

This consists of showing how “the” theory of subjective value ―by Menger― allows us to achieve “the” theory of prices ―by Menger―, and supplement it with Marshall’s neoclassic theory, insofar as it is feasible to consider its curves of demand and supply as tool for microeconomic calculus, instead of considering it a “theory” of “price determination”.

Based on the proposed synthesis of economic theory, we will perceive the causal relation of individual (microeconomics) and general interest (macroeconomics), where it will arise that individual interests are not necessarily correlated positively with the general interest. With which we will have proven the inconsistency of the intuitive “iron” proposal by Adam Smith: individual interest always works according to the general interest. On the contrary, based on Smith’s proposal, economic evolution cannot be explained, since it is not a linear summation of successes. In turn, our demonstration of the “inexistence of Smith’s invisible hand” is the antithesis of what is known as game theory: methodological positivism on the basis of which there was the pretension of invalidating Adam Smith.


Buenos Aires, May 2016.

Carlos A. Bondone


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