1.-As you are proposing this, it looks you are trying to rebuild some type of “physical theory of value”, but value is subjetive. Any theory on prices, values, etc, shall be based on value subjetivity, and consequently, if properly done, you will reinvent classic micro economics:
2.- The representation of production in economics is surprisingly underdeveloped , but the problem is precisely the lack of details. Economists hate the representation of production, and they are very happy with the Cobb Douglas, while it is obviously crude, and hard to refine. Input output analysis is also crude, but at least the production is represented with some degree of sectoral detail.
So if you have any question, I can be of some help, but in my view the fruitful work is moving to a more detailed production representation, not to general physical economic theories:
There are few ideas I think I would really like to explore:
One is the detailed production representation becoming available to the public with a statutory requirement for all companies of a certain size (public and private) to quantify their TEMS inputs and outputs, similar to the way public companies are required to publish financial reports to the SEC. It would include info such as raw materials purchased, labor hours, and outputs including externalities. That would make the analysis part, much more doable, right? Because you wouldn’t have single economists trying to figure this stuff out by researching companies one at a time—it would just be available—and to everyone.
Two is the representation of TEMS EOL made more readily available in an organized format (ie per product at a single source) that doesn’t require so much time and effort to extract.
Three is studying the utility of objects in terms of their TEMS costs. So, how much TE does this new invention save the customer per unit output? My theory is that there would be a definite correlation between dollar returns, or some other measure of demand, and the provision of products with high TE utility, which would show that the assumptions hold—something I would like to work on in the near future, and something I could definitely use help with if you are available.
Regarding subjectivity, yes, I agree that a portion of value is subjective, but I also think that it is objective. It seems that many people try to fit things into neat categories of one or the other, but it seems in many cases that doesn’t hold up. There is a portion of value that is embedded in physical reality. My thinking is that it is important to understand that part and quantify it for easy analysis, otherwise the consequences of the physical reality are ignored and you have environmental disasters.
“One is the detailed production representation becoming available to the public with a statutory requirement for all companies of a certain size (public and private) to quantify their TEMS inputs and outputs, similar to the way public companies are required to publish financial reports to the SEC”
Currently the Bureu of Economic Analysis (BEA) in US summarizes inter sector relations in input output tables.
All this information is produced in monetary terms, because there is not other way to aggregate; One square kilometer of Manhattan can be hundreds or thousands times more valuable than the same “space” in rural Wyoming. Different energy sources, measured in “caloric equivalents” are extremely different in terms of cost of production and value (imagine the same Jules of coal vs. electricity!).
“Regarding subjectivity, yes, I agree that a portion of value is subjective, but I also think that it is objective.”
In economics, prices are a sufficient statistic that summarizes the subjective valuation of individuals AND the objective scarcity of each commodity. Micro economics (Competitive General Equilibrium is the canonical model) is the theory on how subjective demand and objective “production possibilities” produce price and quantities of each commodity.
Regarding economic theory, before you can change it you need to climb to the shoulders of the giants on which we stand. Only after you have assimilated microeconomics (either the reasonable advanced Micro book of Varian or the monumental Mas Collel) you can make relevant contributions. I want more centrality for natural resources and production economics, but there is an enormous body of knowledge on this fields, that in my view is the most solid (while not very central!) part of Economics.
Yes, Pigovian taxation is the natural way to deal with externalities. I summarize my position now: our economic theory is sound, and new foundations are not necessary. There is enormous room for improvement in “social engeneering”, and representation of production.
A last link. Probably what you are trying to do is EIO-LCA:
The original tool from Carnegie Mellon looks discontinued, but there are papers from 2019 (second lik above) and some other commercial tools (https://vitalmetrics.com/ghg-accounting).
Hello,
1.-As you are proposing this, it looks you are trying to rebuild some type of “physical theory of value”, but value is subjetive. Any theory on prices, values, etc, shall be based on value subjetivity, and consequently, if properly done, you will reinvent classic micro economics:
https://www.amazon.com/-/es/Hal-R-Varian/dp/0393957357
2.- The representation of production in economics is surprisingly underdeveloped , but the problem is precisely the lack of details. Economists hate the representation of production, and they are very happy with the Cobb Douglas, while it is obviously crude, and hard to refine. Input output analysis is also crude, but at least the production is represented with some degree of sectoral detail.
I used to work on this field: https://www.sciencedirect.com/science/article/pii/S0301421515300392
So if you have any question, I can be of some help, but in my view the fruitful work is moving to a more detailed production representation, not to general physical economic theories:
https://link.springer.com/book/10.1007/978-3-540-75751-1
There are few ideas I think I would really like to explore:
One is the detailed production representation becoming available to the public with a statutory requirement for all companies of a certain size (public and private) to quantify their TEMS inputs and outputs, similar to the way public companies are required to publish financial reports to the SEC. It would include info such as raw materials purchased, labor hours, and outputs including externalities. That would make the analysis part, much more doable, right? Because you wouldn’t have single economists trying to figure this stuff out by researching companies one at a time—it would just be available—and to everyone.
Two is the representation of TEMS EOL made more readily available in an organized format (ie per product at a single source) that doesn’t require so much time and effort to extract.
Three is studying the utility of objects in terms of their TEMS costs. So, how much TE does this new invention save the customer per unit output? My theory is that there would be a definite correlation between dollar returns, or some other measure of demand, and the provision of products with high TE utility, which would show that the assumptions hold—something I would like to work on in the near future, and something I could definitely use help with if you are available.
Regarding subjectivity, yes, I agree that a portion of value is subjective, but I also think that it is objective. It seems that many people try to fit things into neat categories of one or the other, but it seems in many cases that doesn’t hold up. There is a portion of value that is embedded in physical reality. My thinking is that it is important to understand that part and quantify it for easy analysis, otherwise the consequences of the physical reality are ignored and you have environmental disasters.
“One is the detailed production representation becoming available to the public with a statutory requirement for all companies of a certain size (public and private) to quantify their TEMS inputs and outputs, similar to the way public companies are required to publish financial reports to the SEC”
Currently the Bureu of Economic Analysis (BEA) in US summarizes inter sector relations in input output tables.
https://www.bea.gov/resources/methodologies/concepts-methods-io-accounts
In Europe we have the KLEMS project for additional information on capital, labout, etc:
https://economy-finance.ec.europa.eu/economic-research-and-databases/economic-databases/eu-klems-capital-labour-energy-materials-and-service_en
All this information is produced in monetary terms, because there is not other way to aggregate; One square kilometer of Manhattan can be hundreds or thousands times more valuable than the same “space” in rural Wyoming. Different energy sources, measured in “caloric equivalents” are extremely different in terms of cost of production and value (imagine the same Jules of coal vs. electricity!).
http://www.sterndavidi.com/Publications/Aggregation.pdf
Finally the most important:
“Regarding subjectivity, yes, I agree that a portion of value is subjective, but I also think that it is objective.”
In economics, prices are a sufficient statistic that summarizes the subjective valuation of individuals AND the objective scarcity of each commodity. Micro economics (Competitive General Equilibrium is the canonical model) is the theory on how subjective demand and objective “production possibilities” produce price and quantities of each commodity.
Regarding economic theory, before you can change it you need to climb to the shoulders of the giants on which we stand. Only after you have assimilated microeconomics (either the reasonable advanced Micro book of Varian or the monumental Mas Collel) you can make relevant contributions. I want more centrality for natural resources and production economics, but there is an enormous body of knowledge on this fields, that in my view is the most solid (while not very central!) part of Economics.
This is a very helpful post, thank you. I especially appreciate the names and the resources.
I think where I would disagree is that price is a sufficient statistic, especially for externalities.
Your assessment would be that those need to be taxed into price?
Yes, Pigovian taxation is the natural way to deal with externalities. I summarize my position now: our economic theory is sound, and new foundations are not necessary. There is enormous room for improvement in “social engeneering”, and representation of production.
A last link. Probably what you are trying to do is EIO-LCA:
https://en.wikipedia.org/wiki/EIO-LCA
https://www.sciencedirect.com/topics/engineering/economic-input-output-life-cycle-assessment
The original tool from Carnegie Mellon looks discontinued, but there are papers from 2019 (second lik above) and some other commercial tools (https://vitalmetrics.com/ghg-accounting).