Before considering the relationship between basic thermodynamic concepts and value in use it is necessary to briefly redraw the production boundary.

From the perspective of value in exchange, only things that have the power to be exchanged are included in the production boundary.  As a matter of classification things that produce change but cannot or do not enter into a market relationship are often outside the conventional production boundary.    Likewise, those who produce things with the power to bring about socially useful change in ways that don’t involve markets and exchange typically sit outside the production boundary.  For example, government will often be described as unproductive.   In this sense, like so many other economic concepts, the production boundary is more accurately defined as the exchange production boundary. 

However, another production boundary exists and it is the subject of the the Millennia Challenge series. 

The value in use production boundary includes all things that can produce change.  Paradoxically, government sits within the value in use production boundary because despite not typically producing things with the power to be exchanged, they still produce or enable the production of things that can produce socially beneficial change. For example, social cohesion and other commons.  Moreover, as many of these things are not conditional upon having something to exchange, the value in use embodied in them is freely available to society to do socially useful work without having to give something up in return.

The paradox continues for those within the exchange value production boundary who finds themselves outside the value in use boundary.   For example, it is arguable that much of the finance industry sits outside the value in use production boundary and are therefore unproductive.   In simple terms, this is because the finance industry tends to produce exchange value at the expense of value in use.   The net impact of the industry is an increase in financial capital but a corresponding decrease in the capacity of the system to bring about socially useful change.   From a value in use perspective,the finance industry is best described, as explained later in the series as a value in use sink rather than a value source.

Re-framing the production boundary is necessary for at least two reasons:

• Thinking only in terms of the exchange value production boundary tends to lead to the materialization of things. Typically in the form of commodities that can enter into exchange relationships with other things. Whereas thinking in terms of who and what produces value in use can lead to a de-materialization of things. The focus is the production of things that can do the most work irrespective of their material existence or whether they can be exchanged in a market. Why produce a commodity or money if an idea or relationship can effect greater change than both put together?

• Thinking only in terms of the exchange value production boundary might lead to the idea that markets are the only legitimate mechanisms by which value in use is created. In the same way as “Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.”.(Adam Smith) No one has ever seen an apple tree negotiate with the sun for its sunlight. And yet, we have the trees shade, its apples, its oxygen etc. etc. That humanity is alone in the universe in adopting markets as the engine for growth is telling.

  Within the value in exchange production boundary the market is the primary value engine. Within the value in use production boundary each store of value (capital) has its own unique value engine required necessary for its production.

  Proponents of exchange value go as far as to describe the production of things with no exchange value as a market failure. Whereas, the reality is that markets can no more create certain things than I can turn sunlight into chemical energy to sustain my existence. No one described this as a metabolic failure!

By redrawing the value in use production boundary I’m trying to make three points. The traditional exchange production excludes too many things, producers and mechanisms to understand the production of value in use. Only by redrawing the boundary can all these factors of production be brought into the light of inquiry

In the next in the series, I consider the motive force of value in use.

Part 7 in the Millennia Challenge grounds the idea of Value in Use in the the physics of Change. If all things with value in use posses the ability to effect change, the science of change, and more precisely, the Second Law of Thermodynamics, may explain why.