Value theory has long tried to explain why things are exchanged at a given price or in a given magnitude. Over the centuries, cost of production, labour time and marginal utility have all competed to solve the exchange value problem - “the ratio between any two commodities or services”. But missing from all these approaches is a simple question for which the planet begs an urgent answer: what is the value of value in exchange if it does not lead to the best use of vital resources.

Coined to reflect that importance of the solution, the Millennia Challenge is a call to resuscitate a much older version of value theory - value in use. In short, to answer the ageless but ignored question “how to decide the best use of a thing”.

For centuries, the idea that the best use of a thing can be determined objectively has been dismissed by economists who say that use value is incapable of serious thought (outside of exchange value theory). Based on individual tastes and preferences over time, geography and social structure value in use is always subjective. Likewise it is said that things that possess value in use are incommensurate. Being tied to the physical properties of a thing one thing cannot be readily compared to another. Finally, unlike exchange value that can readily be measured, it is claimed there is no way to measure value in use. Indeed, the ubiquitous $ symbol representing exchange value has no equivalent in value in use.

For all these reasons and many more, we are told that solving societies greatest challenges can only be achieved through lens of exchange value - friendlier commodities, more informed and empowered shareholders, ESG, carbon markets, circular economics, doughnuts etc. etc. All coded in the language and logic of production, exchange and consumption. Despite, a recent major study concluding that the world is on the brink of multiple “disastrous” tipping points, we approach the climate crisis with the same value theory. But we are not in a climate crisis. We are in a value crisis. The climate is the most obvious consequence of an approach to value that allows price to be the arbiter of the best use of a thing. Transforming the use more into the use less and mistakenly describing it as “growth”. Allowing pleasure or pain to determine the best use of a thing is to hold the planet hostage to the passions.

This is our Copernican moment. Confronted by the growing distance between economic theory and an imperiled reality, do we double down on the current value structures or admit Aristotle was right and Smith and Marx were both wrong. There is no distinction between value in use and value in exchange. Exchange is just a type of use. All value is value in use.

But what is value in use? My solution to the Millennia Challenge is both simple and difficult. Value in use can be defined as the ability of a thing to perform socially useful work that results in change. Value is energy in its social form. The best use of a thing is the use that produces the greatest ability to do useful work now and in the future.

Basic physics tells us that there can be no work or change without the transfer of energy. Maxwell (1872), states “energy is that which allows a change in the configuration of a system, as opposed to a force that resists to this change”. To change or modify a social system value in use must be added, generated or destroyed.

Over the previous 11 parts in this series, I’ve expanded on the value/energy proposition by formulating a series of falsifiable principles that seek to explain the relationship between value and change, value and things that store value in use or capitals and how value in use is generated from the transformation of one capital into another.

I’ve even suggest we give value in use its own symbol - the Greek letter phi Φ. Associated in physics with the energy available to do useful work (Chaisson 2001), phi or Φ denotes the potential value in use embodied in the capitals do useful work.

Some of the more interesting ideas I’ve considered are the following:

1. Things that can effect change and growth possess value in use or Φ .

2. If things with value in use posses the ability to effect change, the science of change, and more precisely, the Second Law of Thermodynamics, provides a lens through which to better understand value in use.

3. Based on science of change, I’ve formulated a number of propositions:

   • Value in use exists in two states - in motion (work) and at rest (stored value or capital)

   • Capital exists in various physical and fiat forms - these include social, natural, intellectual, human and financial capital.

   • The universal measure of equivalence between all capitals, the thing that all capitals have in common, is not money. It is the ability to cause change. The ability to cause change is the only characteristic all capitals have in common.

   • Each form of capital possesses unique characteristics - tranferability, convertibility, exhaustability etc. Some capitals exhaust their value in use through use. Others increase their value in use through use.

   • The characteristics of capital determine the “gradient” or the amount of work that a capital can perform over time.

   • Social systems extract their energy to do the work of positive social change from gradients found within various capitals coupled with the motive force of entropy.

   • Gradients are released to perform work when one form of capital is transformed into another using a prime mover capable of producing capitalization ( a net increase in the available value in use) or de-capitalisation ( a net decrease in available value in use).

   • The differential in value between capitals drives systemic growth.

     Where ever there exists a value difference in capitals there is an opportunity to create value in use. This is the key to capitalisation.

   • Capitalisation is subject to constraints:

     • Capitals are not universally transformable.

     • Capitalisation requires an “interposed” engine between capitals. For example, ,markets are principally engines interposed between financial and manufactured capital that enable the transformation of one into the other.

     • Engines are specific to output capitals. A market can transfer intellectual capital but it cannot transform that intellectual capital into social capital or human capital. A different engine is required.

     • Engines typically “consume” value in use.

     • In the absence of a suitable engine value in use may be stored but is not available.

     • Engines can go both ways. Transforming capitals with the ability to do more work into capitals that can do less work. The production of certain commodities to exchange in markets for financial capital is a typical example of an engine producing less capacity to effect change.

     
     

The process of capitalisation captured in the following diagram:

Through the lens of second law of thermodynamics, value is coded in the same language and logic of life and the universe. Simultaneously able to explain the causes of our greatest challenges and pose unbelievable interventions and solutions. Signally a slow tectonic shift from the the exchange value death spiral of production> exchange> consumption to a use value mentality of transformation > generation. Where growth is measured not by spending but by the net increase in the value in use stored in all its form. Available and accessible to all. A truly generative theory of value.

In the next parts the seach for Phi continues. I’ll begin to connect energy in its social forms to systems theory. Does value in use in social systems behave in a similar way to energy in physical system? And, when the science of value in use is coupled with the science of systems can it be used to better explain the growth and decline of social systems.