Society for Sacred Sexuality

Gary Joseph · Posted: September 3, 2009

NOTE:
A separate website has been set up to educate the public about Value Economics —
visit: FreeAmerica.us (under construction)

Value Economics
A True Free Market for True Global Freedom

Summary Points:

Accounts for full value — including ruinously costly economic externalities (side effects) — to achieve true pricing, profit incentive, and production value; solves problems of health, education, social welfare, infrastructure, security, energy, resources, and environment, including climate change.
Improves business and economic efficiency through perfect competition & information.
Self-regulating to function smoothly and robustly without government or central bank intervention, and without debilitating boom/bust cycles.
Self-enforcing to safeguard free market functioning without constricting regulation and bureaucratic control; every citizen protects the market.
Creates free market mechanism to protect, preserve & promote the value of public goods; ends 'tragedy of commons'.
Distributes wealth and dispenses social justice fairly through free market exchange, according to merit, free of class bias, and without social engineering.
Minimizes (or eliminates) taxes and maximizes investment; ensures capital flow to highest value outcome, including public needs: citizens invest in the nation.

~ ~ ~

Free market economics is a crown jewel yet to be set on the true throne of freedom.

Economic freedom — as we know it — has proven to be a mixed blessing for society. Our free market system has brought great prosperity and progress, but all too often it has the opposite effect, creating problems that drain our resources, sap wealth, leave waste, divide society, and erode our quality of life. Vital needs go unmet, quality of goods and services fail, and negative side-effects eat up value. On rare occasions, our economy spirals into meltdowns that threaten the very fabric of the free market system itself. They force us to compromise market ideals in order to save the system. Bailouts, regulation, and other intervention water down the value of economic freedom. Booms have been our blessing, but busts our curse.

Fortunately, the curse is a mixed blessing too. Economic suffering aside, downturns present both a challenge and opportunity. The challenge is to examine our economy and see why it doesn't always produce the result we want. Is there merely a bug in the system or is the system itself to blame? If we accept this challenge and probe deeply, we find that the ideal of economic freedom is sound, but that the flaws in our version of it are far more fundamental than we think. Free markets work, but we don't have a true free market. This presents the opportunity.

The opportunity is to re-explore and restore true free market ideals. If we embrace this opportunity, we will not only solve our economic problems, but also transform free market economics into a system that solves all of society's ills. We will create a market economy that accounts for all that is best in humanity, and manufactures that into economic output. We will forge an economy that employs all of our hopes and dreams — our best values — and crafts them into goods and services. We will construct markets that assemble every resource of human potential and fashion from that our material world. We will discover that free market economics is a system so perfect that it can bring forth — literally — a utopian society.

Through a pure freedom ideal we will remake economy, and in so doing, remake our world.

Freedom is our heritage. It opens the door to the blossoming of the human spirit. Economic freedom — in its pure form and true expression — monetizes and materializes that spirit. It manifests the full value of that spirit. Economic freedom makes the human ideal practical.

Free market economics thrives on the opportunity to meet society's needs. It flourishes on the chance to satisfy human desire. A true free market economy meets every human need and satisfies all desire. It succeeds because at the same time, it cultures holistic life built on honest need and balanced desire. It fosters life in harmony with the resources that nurture and sustain it.

A true free market works the same way our broken one does, without the failings. If that sounds modest, it is only because the failings are so chronic and ingrained that we no longer even notice, accepting them as part of the system. The system is so broken that we don't realize the extent of the break.

An added woe of economic crises is that, while they motivate us to reform the system, they mask the broader problem and therefore blind us to more fundamental solutions. We see only the immediate financial crisis, and not the more systemic sickness. We fail to comprehend the true nature, depth, and scope of our economic plight.

We also miss these issues because we're caught up in the areas they impact, ignoring the underlying economics. We face a health crisis, an education crisis, social crises, environmental crises, and an energy crisis. We see all these as distinct and separate from economy, but they are not. In every case, the underlying economics fail to fuel solutions to these problems.

We don't so much face a health crisis as we do a health economics crisis. Our environmental crisis is fundamentally an environmental economics crisis. Our education and social crises are also rooted in economics, as is our energy crisis. Even our international crises have major economic components.

The root problem is deeper even than this. We do not even face a collection of economic-related crises in these fields. Fundamentally, we face one crisis alone, a purely economic crisis. In every case — health, education, society, energy, and environment — the profit incentive that drives our free market system fails to spur solutions to the problems at hand. Yet for each crisis, solutions either exist or can be developed given financial incentive. With proper incentive, the free market will solve these crises the same way it meets every need: through innovation, applied resources, skilled training, and work.

This crisis is not new. Our health, social, and environmental problems have not suddenly exploded onto the scene. Rather, they have been brewing and growing — sometimes in view, sometimes not — for years. They are chronic burdens present long before any current meltdown, and will weigh on us long after if we don't treat the real crisis.

Nor is this economic crisis based in political ideology. It is not a matter of government involvement, regulation, or taxation. Again, it is purely economic. If the free market works as it should, questions of ideology become moot. Ideology rages because the system doesn't work. So we fight over whether and how government should fix it.

While the depth and scope of the problem may sound dire, it is actually good news. It means that, because all these crises stem from one basic problem, they are resolved by one fundamental solution. A working free market system solves them all. We need only restore true free market principles.

A true free market is self-regulating, self-correcting, and a self-dispenser of economic justice. It self-manages economic and environmental resources, and self-promotes personal and social welfare. A true free market centers on the emblem of economy: value.

Value is the measure by which we assign a monetary number to everything we buy & sell. By accounting for all value we can measure, we set fair prices in the marketplace, and let economic freedom do the rest. This translates to maximum value in economic output.

The economic system that achieves this is a free market economy, but being an evolution of our current system — which ignores value in many ways — it is best termed 'Value Economics'. The name reminds us of its aim. Value Economics maximizes production value. It is a free market system that runs smoothly, free of intervention. Value Economics restores full value to the ideal of economic freedom.

Economics today is at a crossroads. We face a crisis far deeper, broader, more systemic, and costlier than any current financial crunch. The up-side is that with one deep, broad, systemic stroke, we can solve not only our economic crisis, but also our many other crises, and achieve our full economic potential. We do it simply by making our free market work as it was originally intended to work.

The direction we choose at this juncture in time determines our economic future for generations. We can address this crisis in cursory fashion and wait for the next to occur, throwing good money after bad while fleeced by our own economy. We can invest — poorly — in patchwork solutions, waiting for the next bubble to burst. Or we can see the enormous economic value — and human value — in doing it right, and make a sound investment in restoring the system. That is the wiser economic choice.

When systems fail, we question our core values. In times of economic crisis, we debate our free market ideal. Some say leave it alone and accept its shortcomings and occasional crashes. Others say intervene to control and shore it up. Still others — opponents of the free market system — say abandon it all together.

Should we forsake free market economics? No, we should perfect it.

Free market economics is not ready for rejection. It is ripe for revolution.

The ideal of economic freedom burns as brightly today as ever. To restore its full value, we need only return to the root of its glory.

Free market economics was a revolution in itself and is steeped in revolution history. It arose amidst a sea of economic turmoil. It is credited with fueling the industrial revolution, which brought great progress and filled society with a spirit of achievement. Today, rising from our own economic turmoil, we can spark a new economic revolution — not an overthrow of our past, but a renewal of it — and rekindle our entrepreneurial spirit once more.

If we do, we will inspire an age of innovation and abundance, founded on holistic values, the likes of which we have never seen. Economic freedom will literally set the world free.

To understand that this is no exaggeration, let's explore the promise that economics holds.

It lies in the spirit of that word which is everyone's favorite economic term: FREE.

DAWN OF ECONOMIC FREEDOM

By all historical accounts, 1776 was a banner year for freedom. Most know 1776 as the year of American Independence. On July 4 of that annum, colonial leaders signed the Declaration of Independence, beginning a new age of political freedom.

Political freedom is no doubt a blessing to civilization. It unleashes the creative genius of man & woman for the betterment of all society. As a governing principle, it protects our sovereign birthright as free human beings.

Remarkably though, it may be that the declaration of political freedom in 1776, for all its impact and worth, was not even the most vital freedom established that year. That exalted honor may instead go to a declaration of economic freedom — published the very same year, 1776 — by a largely unknown Scotsman named Adam Smith.

Smith's book, titled The Wealth of Nations — well known to economists, but few others — set down the principles of free market economics. In doing so, it lay the foundation for economic freedom in the world.

While economists avidly affirm the seminal nature of Smith's work, not even they likely would go as far to suggest that it surpasses the famous political declaration of that year. But despite the lack of annual fireworks to back it up, we can make a serious case for it.

For while a nation's political system no doubt sustains the life of its people, on a daily basis its economic system impacts them more.

How often, for example, do you exercise your free speech right to protest government, or demand action on a strongly held view? How often do you believe government — 'representative' as it is — actually does your bidding? How often do you neglect to vote because "it doesn't change anything anyway"?

In contrast, how many times a day do you buy something you want at a fair price, to provide for your wants and needs? How many times do you marvel at the mall at the incredible variety of products available? Phrases like, "what'll they think of next" and, "too much to choose from" come to mind.

When was the last time government came out with a technological innovation — like the automobile, television, or computer — that transformed life overnight?

There is no doubt that political freedom has a silent value that we take for granted every day, but economic freedom is more responsible for advancing our quality of life. We might say that political freedom's best feature is providing the environment for economic freedom to flourish. Indeed, the two invariably go together in society, making their tandem 1776 declarations all the more extraordinary.

But economics is a ruler of life in its own right. How often are your shopping, activity, entertainment, or other plans dictated by the economics of price and availability? We drive the extra mile for that sale, or because one store has exactly what we want. We go here, not there, because of brand or because it's cheaper. We change plans because they're out of tickets or out of stock.

Not just little things, but major decisions too. We take that job because it pays better. We send kids to college within our budget. We put off that car to pay for the wedding, spending it on a thousand dollar dress. We retire when our end-of-life savings are secure. All these choices are economic.

Economics governs our lives. It is the prime mover of behavior on a day-to-day basis. The daily act of earning a living and providing for self and family directs societal life.

Politics itself bows down to economics. "It's the economy, stupid," is ingrained in our political lexicon. Elections are won & lost on the issue. Thomas Jefferson, one of America's great political leaders, paid it homage: "I place economy among the first and most important virtues...."

One notorious sign of the sway economy holds over us is that old adage, "money is the root of all evil." While this seems to undercut the vision of economics as savior, it hints the reverse. If we can use money in a truly positive way, it can be a means for all good. Our economic system holds that much power.

Remarkably, Adam Smith's free market ideal holds the key to do it, if only we apply it fully. All we need do is restore full value to money, and what it buys.

ECONOMIC VALUE

Economics is, if nothing else, the science of value. It quantifies value and manages its exchange to produce output of value for society.

Value itself is abstract. The challenge of economics is to quantify and account for it as accurately as possible. Economy fails to produce ideal output when it inadequately accounts for value. Such is the case with economy today. For all its achievements, we can do better.

To see how, let's get a grasp on this abstract thing called 'value'.

The first, and most important, thing to know about value is that you decide it. In a free market, you — not government, not elite economists — determine the value of things. This is the first hint of the transformative power of economy. There is no bureaucracy, no planned management, no political agendas, or ill-conceived ideas. There is just you and your wallet or pocketbook to decide value.

So what is value?

Typically, value boils down to the simple notion of how much something is worth. This is so basic to free market exchange that we take it for granted. Every time we shop, we consciously or unconsciously decide how much products are worth. But even this most basic concept has more impact than you think.

To demonstrate, let's discuss the value of things, starting with one that is part of every economic exchange: the money with which you buy.

Value of Money

Believe it or not, you decide the value of money. That's right. Money only has value to the extent that we give it.

This is more than hyperbole or semantics. Paper money, unbacked by a commodity valued in its own right (such as gold), is worth only the value we give it.

Unbacked currency is technically known as 'fiat' money. Fiat simply means "by authorized decree". In other words, the money has value because government says so. But that is only half the story.

Government decrees that the national currency (in America, the dollar) has value, but it does not decree how much value. That depends on economic factors.

One such factor (a major one) is money supply. When a nation's Central Bank (in America, the Federal Reserve) authorizes the printing of more paper money, its value goes down because there is more of it. More money serving the same economy means less value for each currency unit (i.e. dollar). An example makes it clear:

If there are $100 in circulation and 100 loaves of bread comprising the entire economy, each loaf might sell for $1. If the money supply suddenly grows to $200, each loaf now costs $2, because there's more money buying the same bread. Each dollar then, is worth only half of what it was: $1 buys half a loaf. The value of $1 is now 50 cents. There is a common term for this: inflation. If you want a real world lesson, ask your parents what a dollar bought when they were young.

Inflation is stark truth that the value of money is its real worth, not some dollar designation.

Money supply though, merely influences its value. It doesn't set it. That power remains with you. If, in the market, you and everyone else refuse to buy bread at $2 per loaf, the price comes back down. If you are steadfast, you can bring it back to $1. If you're irate at the price hike and want to teach the baker a lesson, you and your fellow shoppers can boycott the bakery, driving the price down more.

This is the most well known principle of economics in action: supply & demand. When demand drops, so does the price. You, the consumer, controlling demand, ultimately set the price. And thereby, you set the value of your dollar.

Every time you buy or don't buy an item, you change — ever-so-slightly — the value of money. If you buy, you tell the market that the item is worth more than your money. That devalues the dollar, literally. (By buying, you increase demand, driving up prices. With higher prices, your dollar buys less: it is devalued.) By not buying, you say that your dollar is worth more than the item. By holding onto your purchasing power, you increase the value of the dollar.

These value shifts, of course, are microscopic. They're the domain of microeconomics, which studies individual transactions in the marketplace. But don't be fooled; how you value things can have macroscopic effects. To see the dizzying — and devastating — power you have, just look at the times when we all act as one. Then we, the people, have far more power to set value than any Central Bank. We can make things exceedingly over-valued...or practically worthless.

Before we give some examples, note that value is always relative. When you shop, you're not so much setting the value of money or products as you are weighing the relative value between them. With each purchase decision, you ask, "Which has more value to me, my money or the item?" If it's the item, you buy; if it's your money, you keep it. That's why in every exchange (or non-exchange), the value of one goes up while the other goes down.

So the following extremes, which we typically see as over- and undervalued assets ('items'), are just as truly over- and undervalued money. They should be painfully familiar:

Wall Street Crash of 1929;
Black Monday, 1987 (largest 1-day % stock decline in U.S. history);
Dot-com bubble...and burst, 1995-2002;
Housing bubble of the 1990's...and burst, leading to the subprime mortgage meltdown and global financial crisis of 2008.

In each case, consumers (typically investors) bought something in great quantity, driving prices exceedingly high. Values skyrocketed above their true market value. When unsustainable levels peak, they plummet. Economic disaster results.

The Dot-com crash at the turn of the millennium by no means had the greatest impact, but it's an excellent teaching tool for several reasons. The main one is that it weighs the value of something highly intangible, like fiat money itself. The Dot-com boom & bust centered around the value of stocks (paper certificates of value) of startup companies (with few hard assets and no track record) competing in the internet market (unproven, existing only in cyberspace, and lacking traditional market territories) against virtually identical companies (same business plan and model, with only a different dot-com name).

Nearly all value was in everyone's head. With very little real and concrete worth, the Dot-com boom/bust shows how our perception of value has huge economic impact.

The Dot-com event also teaches well because it clearly shows both sides of the story.

There are two phases to every boom/bust cycle. Both misgauge true market value. The Dot-com bubble (boom phase), from 1995-2001, saw the NASDAQ stock index (serving the tech market, including internet cos.) rose from under 1000 to over 5000 in March, 2000. Most of that was in a frenzied 1 1/2 year period that saw the index more than triple in value. Hi-tech wizards quit traditional jobs, competing in cyberspace. They were all looking to cash in on perceived value.

At the very outset of the bubble in 1996, Federal Reserve chairman Alan Greenspan made an oft-quoted remark, warning of "irrational exuberance" in the stock market. Translate that as overrated value.

The Dot-com bust was equally dramatic, wiping out $5 trillion in market value from March, 2000 to October, 2002. Most of that came in one short year. As of 2008, the market is still barely half of its peak value.

How real is the impact of perceived value? If everyone today were to suddenly decide that the stocks again had value, tomorrow they'd be back at 5000. The likelihood of that happening may not be real, but the economic impact of how we gauge value is very real. It almost defies logic, but it is.

The NASDAQ chart below clearly shows both the rise and fall of tech stock value:

Another reason we can well learn from the Dot-com episode is the balanced nature of the cycle. The near perfect symmetry of the Dot-com swing might even be beautiful, if the downside weren't so painful. But that's the point. We lament the $5 trillion lost, but if we overvalued it to begin with, was it ever really there?

Balanced between every boom & bust is true market value; everything else is, well, misvalued.

All this results from how we quantify, measure, and account for value. And when we set the value of items in the market, we also set it for the money with which we buy. Booms & busts exceedingly inflate, or deflate, the value of money.

It may be mind-boggling to conceive, but the same statement made earlier about stock value can be applied to money. If everyone today agreed that our money was worthless, it would be so. Don't believe it? Look it up:

The Random House Unabridged Dictionary (2008) defines 'fiduciary' thus: "depending on public confidence for value or currency, as fiat money." Money, like everything else, only has the value we give it.

Value is everything. Economy trades in value, not money. Money is just a medium of exchange. What we exchange is value. Economy must represent true & full value.

That is the need for Value Economics.

Economists will argue that our current free market system correctly accounts for quantitative value through the law of supply & demand. It weighs the value of supply (production costs) against demand, the item's value to buyers. As explained above, every microeconomic purchase (and non-purchase) contributes to its consensus value. That sets the "true" market value.

But what about booms & busts, and the more common but less extreme inflationary spurts & recessions? Something more than single market transactions are setting value. 'Irrational exuberance' and equally unreasonable panic & fear distort value and drive it to extremes. Do we account for these in ways that help to smooth the bumps? Value Economics does.

But there are even greater unaccounted for values in the equation. What about health, social, or environmental costs (and cost benefits) associated with goods & services? These are very real — and vital to society — yet rarely included in product value. Shockingly, this is the sole reason economy doesn't produce what we want in these areas. Value Economics does.

Before we explain how, let's explore another side of value.

Value Quality

Above, we talked about quantitative value: that money (and what we buy with it) are worth certain amounts or they're not. That is certainly important, and Value Economics increases economic efficiency and improves its functioning, producing more output. It also stabilizes the economy so that it has fewer and shallower recessionary swings, where monetary value is lost. But this is not its main contribution. Quantitatively, our current economy does pretty well. There is definitely room for improvement — and devastating value meltdowns must be eliminated — but overall, production and growth are good.

That in itself is a testament to free market principles, and hints at the productive potential we can unleash by applying those principles truly and fully. As you'll soon learn, there is much in our current economy that inhibits free market functioning.

Beyond this though, is something more than quantitative value. That is qualitative value. This is the real contribution of Value Economics.

We're not talking here about the quality of our cars, clothes, and appliances, etc. Again, our current economy does a decent job at that. Rather, we're speaking of overall quality measured by a broad spectrum of human values.

To show exactly what we mean by value quality, and how vital it is to a related value — quality of life — let's examine the economy of a small, hypothetical nation. It also clearly shows the difference between qualitative and quantitative value.

A Tale of Two Economies
~ Part I ~

We'll call this country, 'Dollarland'. Its population is two, which conveniently simplifies our study of free-market exchange. Dollarland's economy is vibrant. Here are the statistics:

100% employment;
0% inflation;
$100,000 per capita gross economic product;
$100,000 per capita income;
100% annual economic growth;
100% equal distribution of wealth.

Based on quantitative value, is this a healthy economy? Any economist would say, 'yes'.

Let's look closer.

Dollarland's economy is famous around the world. Some would say 'infamous'.

One of Dollarland's citizens produces and sells guns; the other traffics in drugs. Together they make a dynamic economic duo, transacting with each other, annually doubling their production, sales, and wealth, to the tune of $100,000 each in the current year.

Dollarland's vigorous economy thrives another day, until one accuses the other of theft. A fight ensues, and they each pull a gun and shoot the other dead. Immediately after, two citizens return to the country from overseas, looking for work. Finding only guns and drugs, they gather the items and pick up exactly where the first two left off, leading to their own fatal duel. Fresh citizens fill in again, doubling their wealth until death. Thus Dollarland's economic cycle repeats, producing ever-expanding growth.

Now, based on complete value, is this a healthy economy?

The value difference is quality.

If you need figures to drive home that this also has real quantitative value, here they are:

100% drug use;
150% crime rate (2 murders, 1 theft);
100% mortality rate;
0 housing;
0 healthcare;
0 education.

Of course, in a real society impacting others, these would have real dollar costs, including law enforcement, public housing, drug abuse treatment, healthcare (gunshot wounds), and lost production in more useful economic sectors.

While obviously extreme, this example makes graphically clear that there is more to economy than money and quantitative value. Numbers do not tell the whole story. What is missing in Dollarland's economy?

Full Value

The answer is what we've been discussing all along: value. Not mere 'utility' value, but broad human value.

Dollarland's goods and services do not represent all that society values. Economy aims at producing value, not mere money exchange. Quality matters as much as quantity; what we produce impacts our quality of life more than how much. Economic abundance ultimately has little value if it doesn't give us the life we want.

This doesn't mean Dollarland's economy has no value; it just lacks full value. Its goods and services provide some immediate value. But why does it not produce a better society?

The reason is that value is not restricted to obvious goods and immediate services, or mere labor and materials. Full value includes these, but also more. It encompasses everything we cherish in life — the full spectrum of human values. Their worth is expressed in their name: values.

We value health, vitality, and longevity in personal life. We value quality education for our children. We value social justice, order, and welfare. We value art & culture. We value appealing urban environments and sustainable resources. We value clean air, water, and land. We value peace.

Value applies to every facet of life. These are real economic commodities that we desire.

If long, healthy life were available in the market for a price, would you buy it? Many, if not most, would. Most would also buy crime-free society and a clean environment. If these are real economic commodities that we would pay good money for, why aren't they included in price insofar as products impact them?

Dollarland's economy, like ours typically does, only accounts for immediate and obvious values. These drive the economy, deciding the goods and services available. They also set relative prices between products, influencing which ones we purchase. Even when full value products are available, price motivates us to buy inferior ones because it doesn't account for their true worth. Thus, our economy promotes immediate value at the expense of greater, overall value.

And because of its power, economy blinds us. We get wrapped up in the money aspect. Dollarland's citizens want the best guns and drugs at the cheapest price, thinking that's the ideal. Chasing dollars, they never have time for their real values. They lament the 100% murder rate, but think, "What can I do about it?"

What kind of society does this create? Like Dollarland's, not the one we want. Consider the following problems we face, and the economic conditions that perpetuate them: countless social ills, which many products & services contribute to, despite the cost; failing education, which we fail to fund with the enormous cost benefit it brings; poor public health, which we perpetuate with products that ignore huge health costs & cost benefits, and fight with a medical system that profits when we're sick; crumbling infrastructure, which we ignore though that cost is more than the cost of rebuilding; energy crisis, which we fail to address despite the vast economic windfall it would bring; environmental pollution, which we never account for until taxpayers must clean it up; underdeveloped arts, while economy promotes 'starving artists'; and billions spent preparing for and waging war, which ignores the enormous economic value of peace.

Worse, because economy doesn't address these issues as it should, we dump them off on government. Then we fund the bureaucratic mess by a method that we seek to minimize: taxes! Thus, we tackle ever-growing problems with a hopefully ever-shrinking pool of money. How economically prudent is that?

If we don't want these things, why does our economy promote them? Economy is to serve society, not enslave it. Its purpose is to produce value. Value is what we desire, not economy replete with negative side effects.

Now think if the opposite were true. What if chasing dollars produced all the things we value? Envision economy solving — no, preventing — these problems, one purchase at a time. Imagine the world we can create by awarding profit to the values we want.

That is the promise of Value Economics.

Value Economics is a practical way to promote better health, education, social welfare (reduced poverty, crime, drug abuse, etc.), environment (sustainability & preservation), and even international relations. Yes, merely by exercising the power of your pocketbook, you can qualitatively improve every area of life, including promoting world peace. That is the promise — and power — of Value Economics.

Value is everything; what we value and how much. Value Economics restores quantitative and qualitative value — full value — to economy.

The above introduction has been lengthy, but it was needed to show just how central and vital value is to the economy. In doing so, it makes clear that by truly and fully accounting for value, we can wholly transform economic output, qualitatively and quantitatively.

Now it's time to learn how to use the power of value. By exercising your power in the market, you help build the society you want.

THE FREE MARKET IDEAL

Adam Smith's Wealth of Nations, despite limited fanfare, has endured over two centuries of economic thought and is still regarded as an accurate presentation of free market principles.

Smith's basic premise was that individuals, acting in their own economic 'self-interest', serve the needs of society. This oft-cited passage makes the seemingly paradoxical point:

Gary Joseph · Posted: September 3, 2009

VALUE ECONOMICS

First Principle of Value Economics

Value Economics starts from a premise with which every economist will agree:

Account for full value in the price of goods & services.

This is nothing new. Economics already aims to account for full value in pricing. It's just been neither accurate nor complete. We've left value out. This is understandable if we look at history.

In the past, especially in Adam Smith's day, this value was negligable. The world was like an open frontier. Man's impact on society, the environment, and even his long-term impact on himself (health, etc.) was small compared to the value of his economic production. Accounting for them seemed trivial. Things were also more natural then -- fewer man-made products meant less unintended side effects. The sky was our only limit.

Today we see the sky, and it's dirty. We see the impact of food & drink on health. We see how media and entertainment impact culture & society. We see the reality that our once endless resources are limited.

Also today, we're much better equipped to account for these values. Research studies in health, education, sociology, ecology, and more not only verify the impact on these values, but also indicate real dollar amounts. Computer technology makes organizing, parsing, and applying these results easier. And the Internet makes them universally available.

In the past, even if we sought full accounting, it was undoable. Today, we see the need and have the research & technology to make our free market ideal.

The first principle of Value Economics creates true profit incentive. By accounting for all costs & cost benefits, we lower the price of true quality products. We also require products with negative impact to account for these costs up front, raising their prices. This encourages sales of products with the best total value. That means profit for the companies that make them.

This is a corollary to the first principle:

Maximum profit goes to the economic outcome with the most total value.

This profit incentive induces business to invest in and develop such products & services. Entirely new businesses spring up, committed to positive product solutions. At the same time, the free market discourages negative impact products.

In this simple way, Value Economics achieves what mountains of legislation, regulation, and health, social, & environmental programs never can.

Through true profit incentive, economic output rises in value, tending toward full value.

This fulfills Adam Smith's free market ideal of self-interest that best serves society.

It also gives us a litmus test for evaluating every feature of our economic system. It is a simple way to see if we're accounting for value.

Value equates with desire. If nobody wants a thing, it has no economic value. Conversely, if everyone wants it, it's worth a fortune, regardless of any other factor. Good health, social welfare, and a livable environment all have value because we want them. We're willing to pay for them -- their costs figure into our lives. Desire defines value.

The litmus test for every aspect of economy then, is this: does it create profit incentive for what we want? If it doesn't, it is likely because we're not accounting for full value. We're not counting all the costs & cost benefits involved.

Our polluting power plant was one example of how profit incentive didn't create what we want. Here are some more:

health system with profit incentive only to cure illness, not prevent it;
education without profit incentive to educate well;
no profit incentive to maintain infrastructure;
little profit incentive to develop renewable energy;
no profit incentive to manage natural resources;
no profit incentive to preserve the environment;
no profit incentive to stop climate change;
profit incentive to wage war, but none to keep peace.

There is a common expression we use in trying to figure out why things turn out the way they do in life: "follow the money." Plain & simple, results go where the money is, for better or worse. Problems abound because profits - money - lead to them. Value Economics promises better results by shifting profits to positive economic outcomes.

Money and profits are not the problem. It is what we encourage in order to get them. Value Economics uses money and profit to create the results we want. It works because those results also happen to be the best economic value.

Thus by one simple method - accounting for full value in pricing - Value Economics transforms the entire economy.

Nothing outside is needed -- no government regulation, no court litigation. Value Economics is virtually self-sufficient. This built-in strength shows itself in a profound feature: Value Economics relies on 100% free and open markets.

Let's take a closer look at the mechanism by which it achieves this.

True Value Accounting

In Value Economics, all items sell at True Value Price -- price that accounts for full value. True Value Pricing comprises two parts:

regular market price

+/-

corrections for externalities

Business takes care of regular pricing, as usual. Value Economics computes the corrections. Business then combines the net correction with its regular price, giving the True Value Price.

For example, if an item normally sells for $10, but there is a value correction of $2 to account for negative externalities, the item will now cost $12. If the $2 accounts for positive externalities - cost savings - the new price is $8.

Value Economics computes the corrections using True Value Accounting. True Value Accounting, as its name suggests, restores true value to the price of goods & services. It achieves this by accounting for the real dollar costs and savings of known externalities. True Value Accounting is simply the math that quantifies the value of externalities. It computes the exact dollar amount of an externality for a given purchase. It applies these amounts using Value Savers.

Value Savers can be positive or negative, depending on whether they account for positive or negative externalities, respectively. Value Economics accounts for positive externalities using Value Added Rewards. It accounts for negative externalities through Value Lost Fees.

Value Added Rewards are paid to firms, allowing them to lower item pricing. Value Lost Fees are charged to firms, forcing them to raise item prices. Value Saver is the collective term for both.

Value Savers preserve the value currently lost to the pricing equation through externalities. An externality again, is any cost or savings external to the transaction itself. Because we currently don't account for their value, it is lost to the pricing equation. Like any real cost or savings though, we must account for it sometime. Thus we end up paying for side-effects, overruns, inefficiencies, hidden costs, and raised taxes, etc. elsewhere in the economy. These are largely externalities we didn't account for. Value Savers account for externalities now, letting us make better economic choices, so they don't come back to haunt us later. Value Savers protect value.

In most cases, we'll refer specifically to Value Added Rewards or Value Lost Fees, as appropriate. Sometimes though, we'll discuss their collective role as Value Savers.

Returning to our $10 example, in the case of positive externalities, a $2 Value Added Reward would be paid to the firm, letting them lower the price to $8. In the case of negative externalities, the firm would pay a $2 Value Lost Fee, making them raise the price to $12.

Value Savers apply to both production and consumption of the product. For example, a product may have negative externalities associated with manufacturing, but positive externalities benefiting consumers. Value Economics accounts for both, resulting in a net correction for business equal to the sum.

To illustrate, our $10 sample product may have a negative $2 pollution externality for manufacturing, but also a positive $2 healthcare reducing externality. That gives a zero net correction, so the price remains $10.

Value corrections are based on the best science available, agreed to by expert consensus. Issues in determining Value Saver amounts are discussed later. Methods for collection and disbursement of the two types of Value Savers are also explained later.

Value Savers apply to both goods & services -- all economic transactions. Everything sells at True Value Price.

True Value Pricing shifts market dynamics in an intriguing and positive way. High value products become cheaper in the marketplace, while low value items get more expensive. Typically it is the opposite, but that is only because high value products commonly cost more to make - better quality materials & labor - and so are more expensive. But with externalities, there are no extra direct costs that the seller must recoup. Externalities are indirect costs -- costs that show up later & elsewhere in the economy. Now that cost, or savings, is applied to the current purchase. So if the product saves money somewhere in the economy, you get that savings now. That lowers the price of a high value item.

Low value items work just the opposite. If a product causes added costs down the road, we must pay it now, so we know its true cost. That raises its price, discouraging purchase. (Note that 'low value items' doesn't mean currently inexpensive ones. It means items that are worth less than their current price, due to negative externalities. Only these go up in price, not any item that costs, say, under $10. In other words, it's not a loaf of bread or a quart of milk that goes up in price, it's that gas guzzling car or cancer-causing cigarette.)

All this makes for a shopper's paradise. Consumers buy the less expensive product, as usual, but this now is the best total value. Thus sales - and profits - for high value products increase. That makes business happy.

Value Savers create true profit incentive -- monetary reward for high product value.

True profit incentive has both economic & psychological effect. This results from the way that profit incentive works. It has the straightforward economic effect just discussed -- consumers buy low priced, high quality items and firms profit from that. But there is an added effect as well.

Because firms want to profit, and in order to secure future profits, they will commit themselves to developing new, high value products. This fuels an entirely new corporate mind-set, one that will unleash a flood of innovation aimed at profiting from the newly accounted for value.

At the same time, consumers will demand and clamor for more high value products, that are now more affordable than low value ones. Consumer psychology shifts as well. Together, these transform the market into a hotbed of innovative value. Everyone benefits. It is the Anti-Dollarland.

Beyond creating true profit incentive, one Value Saver - the Value Lost Fee - has the added role of funding remedies for the negative externalities for which they account. Value Lost Fees, which are collected from business, go toward fixing the negative externalities they are responsible for. They do not add an economic burden; they merely pay for existing burdens up front, so we can decide whether they're worth it when we purchase.

If a $2 Value Lost Fee is assessed to tobacco companies for each pack of cigarettes sold, that fee goes to pay cancer treatment for smokers. Thus that expense is no longer borne by the public through taxes, insurance premiums, or other means. Those who choose to buy & sell cigarettes take full responsibility for the act, and pay the costs at time of transaction. Society is not soaked with the bill down the road.

We'll emphasize here that Value Lost Fees are not 'added' costs. Nor are they taxes, fines, or any other punitive fees, just as Value Added Rewards are not subsidies, etc. In both cases, the value corrections are the actual costs or savings attributed to the manufacturing and consumption of the product, as best determined by science.

In the case of Value Lost Fees, they are not new costs because we pay them even now. We simply pay them in other ways or at other times. We may pay them through taxes, insurance premiums, higher prices on other items, or general higher prices on all items. Or we may pay them later through lost productivity, healthcare, environmental clean-up, etc.

Value Economics simply accounts for them here & now - at point of purchase - rather than elsewhere and later. It merely restores, in an ironically appropriate way, accountability to economics. Every product sells at true price, and the consumers and firms that buy & sell them take responsibility for their actions.

Neither are Value Added Rewards and Value Lost Fees arbitrary. Value Economics does not assign vague or wishful values to externalities. If real dollar impact is there, science will prove it, and thus justify accountability.

Value Added Rewards (VARs) and Value Lost Fees (VLFs) are like any other cost or cost reduction that firms account for when setting price. And like now, firms aim to account for all costs and reductions in order to determine the true price. Now they simply have more data - all data - in their pricing equation. That gives the True Value Price.

We've seen how True Value Pricing, by changing profit incentive, brings the best products to market. This greatly improves quality of life in society.

One of the remarkable features of Value Economics though, is the ease with which it achieves this.

You might think that to bring about substantial change in society, we must apply Value Economics to every last item, accounting for every detail, leaving no stone unturned. While we'll see later that it's relatively easy to implement a comprehensive system, we need not even do so.

Several factors greatly increase the speed, ease, and profitability of effecting great change in society.

First, high value solutions typically have a dual impact. They not only decrease negative externalities, but also they increase the positive. For example, health solutions not only cut treatment costs, but also they increase economic production. Healthy workers mean more vitality on the job, less sick-leave, and more output. This expands the economy.

Second, broad values, as you might expect, impact a wide range of cost-saving issues in society. This means we can achieve widespread benefit through a few key areas of life.

A perfect example is education. Raising the quality of education has numerous cost benefits. It has the basic impact of increasing productivity. It inspires genius to solve our most pressing and intractable problems. At the same time, it reduces a host of social problems, including crime, substance abuse, unemployment, and others. It also reduces healthcare costs, because better educated citizens take better care of their health.

Value Added Rewards in this one area - education - would ripple throughout society. In fact, it is hard to conceive of an education system that could possibly cost as much as the value it creates. Therefore, whatever we invest in free market education will pay for itself many times over.

Last, but by no means least, Value Economics breaks the cycle of problems so that we needn't face them again. One-time investments produce lifetime returns, and in this case lifetime refers to society, which endures for millennia. For example, developing clean renewable energy and eco-friendly products resolves environmental issues for all time.

These factors - when translated into Value Added Rewards - create more than enough profit incentive to tackle the greatest issues of our day. They also promise a real-dollar return on investment.

Though not necessarily recommended, one more point can be added. In many - if not most or even all - cases, it may be possible to achieve results using Value Added Rewards alone, without resorting to VLFs. This is because the cost savings of positive solutions are enough to create profit incentive for business, if we monetize them through VARs.

For example, the education incentives indicated above may be enough to address social issues, without needing to assess Value Lost Fees for negative impacts. Likewise, clean energy incentives may solve environmental problems without resorting to VLFs for (minor) polluters.

We'll talk more about this option later.

With these added selling points in mind, let's give some examples that show how Value Economics creates a veritable free-market utopia.

Value Economics
in Action

Before we apply Value Economics to specific items & issues, let's list a few examples of current policy toward externalities.

Common mechanisms for addressing negative externalities are excise taxes. Among the most familiar are alcohol, tobacco, firearms, and gasoline taxes. Also common are pollution taxes, or so-called 'eco-taxes'. Where legal, activities like gambling are also often taxed. Excise taxes can amount to up to half of consumer cost on an item or act.

These examples show that Value Lost Fees are not out of line with current policies toward negative externalities. VLFs simply replace them with a more complete, accurate, non-bureaucratic, non-moralistic, and economically effective mechanism. VLFs are based purely on economics.

Current responses to positive externalities are less common, but they do exist. The main mechanisms are subsidies. One emerging class of these rewards renewable energy use and other eco-friendly practices.

The problem with these is that they are typically narrowly applied and unfairly distributed. More important, they are woefully inadequate in accounting for the full economic benefit of the externality. This creates insufficient profit incentive pursue it. VARs apply throughout the economy fully and equitably, creating strong profit incentive.

One interesting example is a protection offered by regulation. Copyright and patent law ensure that authors and inventors profit from the positive impact of their ideas. This provides the incentive to innovate.

With that background, let's explore solutions promised by Value Economics.

We'll look at several major social & economic areas it will effect. For each we'll list current problems and their real dollar costs. We'll point out how we pay these costs to show that they're real, even though we don't pay them with our purchase. We'll show the inadequacies of current solutions. Then we'll show how Value Lost Fees reduce profit incentive to produce & consume these items, thereby reducing or even eliminating the problem.

Next, we'll identify current solutions that we under-produce due to lack of profit incentive. We'll explain how added profit incentive increases production, resolving the problem. Beyond that, we'll show how increased profit incentive inspires investment in innovative solutions that we can't even fathom today.

We'll even show that VLFs and/or VARs may prevent the problem all together, entirely removing the need to address it. We'll show that solving these problems may have cost saving benefits for all future generations. These further increase VARs, creating still more incentive.

Last, we'll estimate the total net savings Value Economics brings in real dollars. Equally important, we'll indicate the shift in qualitative value - the Dollarland effect - that raises our quality of life. We'll end by noting any side-benefits or other relevant points influencing value.

Sources for statistics quoted in the examples are listed at the end of this work.

As you read through the examples, you may find yourself thinking, 'That sounds great, but it's impractical to apply.' Or you might think that it's impossible to enforce, or find some other flaw. We will answer all those questions and concerns after the examples. We will also deal with criticisms that some may have. Value Economics offers ingenious - and free market based - solutions to all these issues, making it a practical, profitable, and equitable system to apply.

For now, we'll just focus on how Value Savers (VARs & VLFs) apply to different areas of society, and the economic and social - quality of life - impact they have. Keep in mind that, while they are value 'corrections', they do not, in truth, change free market prices. They restore free market pricing. By accounting for full economic value, they remove the price distortions in our current economy. Value Savers ensure True Value Pricing.

[Value Economics continues in the post below.]

Copyright 2009, Society for Sacred Sexuality - all rights reserved.

Gary Joseph · Posted: September 3, 2009

Public Health

That our current healthcare system is in crisis is news to no one. Yet this is so despite the fact that the free market mainly drives it. Clearly, either the free market has failed or we've failed to correctly apply it. It is the latter.

Our current healthcare problems start with our inability to cure, alleviate, or even diagnose many conditions. It goes on to include drug dependencies, side effects, and creation of treatment resistant viruses and bacteria. On the patient side, it leaves lack of vitality and fitness even in the absence of specific symptoms, high incidence of obesity and other risk-factors, and public ignorance of dietary and other self-health measures. Compounding the crisis are conditions relating to environmental toxins and pollution, pesticide contamination of food and water, and substance abuse, none of which our healthcare system does much to combat.

The direct cost of these problems is our consequent healthcare bill, which has risen to crisis proportions. The U.S. spends over $2 trillion annually on healthcare ($6,700 per capita, over $25,000 for a family of four), and rising. In 2006, spending translated to over 15% of our GDP (highest in the world), compared to 8-10% for the UK, Canada, Sweden, and Japan, all of which rank higher than the U.S. on the World Health Organization Life Expectancy scale. Worse, in an economic slap in the face, none of those four have a free market healthcare system -- all have some form of socialized medicine.

Federal healthcare spending exceeds all other areas of public spending, including defense. Yet even when combined with state & local government health expenditures, it still covers less than half the national health bill. Moreover, the tab is rising faster than our ability to pay it. In 1960, healthcare spending totaled 5% of the U.S. Gross Domestic Product (GDP). In 2005, it consumed 16%. In 1960, healthcare spending represented about 3% of total government spending. Today it eats up over 25%.

Spending on Medicare, our main public health insurance, is expected to double over the next two decades, ballooning to nearly a quarter of the federal budget. Medicare has grown 1.5 times faster than the economy for the past four decades. It is projected to be insolvent by 2019, according to the most recent report by the Social Security and Medicare trustees.

The private insurance picture is no prettier. Family premiums have risen to over $12,500 for employer-shared plans, the most common type. That's up from under $6,000 a decade ago. Today's plans feature higher deductibles and a higher payment share for employees. Premium hikes routinely outstrip pay raises.

All that is just a partial diagnosis. Direct medical costs do not even disclose our full economic burden. For that, we must add lost productivity in the workplace, called indirect costs.

Indirect health costs include economic loss due to employee absenteeism, on-the-job productivity loss, contagion to other workers from sick employees, and reduced business profits due to company health costs. There is also the lost productivity due to premature death from illness.

One study pegged this cost at $1.5 trillion for a list of major conditions, nearly doubling our healthcare tab.

One group of ailments account for the lion's share of direct and indirect healthcare costs: chronic conditions. They also best illustrate the problems with our current system, and point to the solution.

Chronic disease - any condition that is recurrent or long-lasting - includes a list of familiar and costly maladies:

heart disease (inc. hypertension & high cholesterol precursors)
cancer
diabetes
obesity
allergies
asthma
arthritis
osteoporosis
chronic pain
attention & psychological disorders

In 2005, almost 50% of the population (133 million) suffered from at least one chronic condition. That number is more striking considering that nagging symptoms often go unreported. (A 1990 Census study reported a whopping 300 million conditions - more than the entire population at that time - indicating many people with multiple ailments.)

Chronic conditions account for over 75% of healthcare spending and 70% of all U.S. deaths -- over 1.7 million annually. Lost productivity resulting from these ongoing ailments can cost as much as 2-3 times that of direct treatment. In 2003, the U.S. spent over $1 trillion in work-related costs for chronic conditions.

Chronic health conditions and/or associated risk factors such as obesity, tobacco use, and low physical activity are linked with:

greater job impairment
more sick days and absenteeism
more workers' compensation claims
higher injury rate
higher disability rate

Costs for chronic conditions, like all health costs, are projected to balloon in the future. One estimate predicts a 42% increase by 2023, totaling $4.1 trillion in treatment and lost economic output.

All in all, direct and indirect health costs for all conditions already take a toll of $3.5 to $4 trillion dollars -- more than the entire federal budget. That comes to over $11,500 for every man, woman, and child in the United States each year.

We pay most of this massive hemorrhage of our economic lifeblood in ways we don't realize. A full 87% of medical treatment costs are indirect payments. We pay over 45 percent - $900 billion - through federal, state, and local taxes, which fund Medicaid, Medicare, and other government programs. We dole out another $850 billion (42%) for health insurance premiums and other private programs. We shoulder the remaining $250 billion through direct payments to medical providers.

Then there is the $1.5 trillion or so that we pay through lost economic output, which translates into a lower standard of living for all. If you need a dollar figure, it amounts to not getting a $5,000 bonus each year -- $20,000 for a family of four. What could you buy with that extra wealth?

Spreading the cost out through taxes, insurance, and lost productivity hides the real economic pain and masks the true extent of our healthcare crisis.

The state of our healthcare system was accurately summed up in a Washington Post report titled, "U.S. 'Not Getting What We Pay For'" (November 30, 2008). The article is a clear indictment of the economics that drive our current healthcare system and issues a clarion call for a new one based on real value -- positive health results.

According to the chairman of a leading medical center, "As much as half of the $2.3 trillion spent today does nothing to improve health." A chief executive of Kaiser Permanente adds even that "much of it is dangerous."

It is not that we don't have answers. The article states:

Gary Joseph · Posted: September 3, 2009

[Remaining sections on Value Economics will be presented in point form as time permits.]