When it comes to usefulness, economics has a supply problem. Things with with the greatest value in use are in short supply and things with the greatest value in exchange are not.

The economic style of reasoning that underpins contemporary capitalism emphasizes prices, markets and efficiency over the production of useful things. And despite the social welfare promise behind the brutal faith that economists place in their mathematics and modelling, the profession failed to predict that societies would soon run out of their most useful things - clean air and water, biodiversity, a stable climate and peace both at home and abroad.

Each of the existential challenges the planet confronts can be understood in terms of a crisis in usefulness or the great collapse:

• Many useful things are disappearing -food, spare time, savings, languages, bees and butterflies, native forests, fertility and birth rates, attention spans, housing, social license, fish and other wildlife in number and species, research and development, global habitability, community and liberal arts degrees.

• The things that are in abundant supply, opinions, heat, carbon dioxide, weapons, money, storms and consumable stuff, are often less useful than the things destroyed in their production For example, if money cannot buy or compensate for that which is useful for life and is lost forever in the pursuit of financial wealth, money may not be useless but it may be use less relative to the useful things that won’t exist.

  And if a life is needlessly destroyed in the process, whether an insect, a fish or a mammal, the equation is not the first life to the dollar but all the life forms over time that will never exist because of that dollar. And if all that life does not exist neither does their humble work of recreating the conditions for all life on the planet. It’s probably the most expensive dollar ever made.

• What useful and use less things remain tend to concentrate in the hands of those who, having so many useful things, can’t or wont do anything useful with them - corporation’s hoard their money, share prices are surging, self storage is booming (as are waistlines in much of the world) and billionaires can’t use all their billions.

• Even the things out of circulation are not immune from the crisis. Eventually losing their value in use to inflation or entropy - use it or lose it.

Useful things are useful.

The Great Collapse

In the fifty years that it has taken for the economic style of reasoning to monopolize public policy and the regulation of much of civil society, the planet has gone from brimming with life and opportunity to running on empty with fewer choices. And though it is impossible to deny that a great many useful things have come in and out of existence in that time, the same can not be confidently assured over next fifty years.

This state of affairs is probably not a co-incidence.

The great collapse in value in use was hardwired into the key assumptions of neoclassical economics from its very beginnings. A seemingly benign mechanism that, in the name of exchange value, creates counter value - the opposite of value in use.

By emphasizing the allocation and distribution of things that come to market and neglecting the production of useful things that may or may not have a price, Neoclassical economics failed to include within their cannon anything that might explain the existence of useful things. Indeed, based almost entirely on the idea of value in exchange or the ratio by which things exchanged in markets, their science cannot explain anything about value in use, the usefulness of a thing or the capacity of a thing to affect positive change. Had they taken Aristotle and Socrates seriously, and not ignored value in use, they may have realized that their theory of demand and supply was the gravest of all mistakes and kept searching for a better solution to the value problem.

Not that the profession seem that aware.

Economists suffers a kind of shifting baseline syndrome. Demand based theories of value perfectly adapt to any loss of value in use. Maintaining explanatory power despite a degradation in the things available in the market and largely ignoring what is happening outside the market as an “externality”. The "facts" hold true for economics irrespective of a declining or degrading baseline. I think this is why why economists “commonly prefer objective empirical evidence over unverifiable reports of affected individuals” ( Bebchuk, 2013). As long as we stick to the evidence that fits their model, they can never be wrong.

But what of the anti-economists? The growing number of scholars and practitioners that reject the economic style of reasoning. Can ecological, institutional, Marxian, complexity or any other hetrodux economic ways of thinking solve the growing problem of supply?

As far as I can tell, there’s no obvious contender.

Absent a theory of value in use the varieties of new economics are still largely anchored in the past. Unaware of the contested history of value, the economist and many anti-economists share the same intellectual foundations. And whilst the do less harm approach of the anti-economist is vastly superior to harmful marginal utility strategies, these new ways of thinking are, by and and large, not generative theories of value in use.

Some alternatives are akin to theories of bio/physical constraints upon the Neoclassical model of demand and supply. Reducing and redirecting economic activity. Whereas others approaches focus on refining the demand side of the equation through the explosion (and disturbing ISSB implosion) reporting standards and disclosures and pricing nature. Nudging preferences on the demand side entailing a response on the supply side to produce “green growth” (Jackson,2009) . But like neoclassical economics, most are principally theories of allocation and distribution rather than useful production. And like the economists, the anti-economists rely on the evidence to do the work of persuasion rather than methodology and reason.

Consider the increasing popular idea of degrowth and the transition to a good life for all within the planetary boundaries. Though more a social movement and program of practical action than a full blown theory, the approach is generally concerned with inequality and its reduction within the constraints of the physical world (Hickel 2021). The degrowth literature reflecting a focus on questions of the redistribution of wealth income and resources ( Engler et. al 2023). Understandably the focus is on what can be done now given the likely course of the planet’s condition. And whilst laudable, degrowth does not appear to backed up by any parsimonious theory that explains, from the basics, whether those action can bring back all the useful things necessary for a good life (Martinez-Alier et.al 2010, Engler et. al 2023).

Even those approaches that focus on the supply of useful things have significant limitations. For example, ecological economics can explain how the planet might regenerate its natural capital, but it lacks a realistic economic theory of capitalism, spelled out from its basics (Pirgmaier, 2020). In other words how all the other capitals will be generated in their most useful forms and magnitude - social, intellectual, human, manufactured and financial.

In the alternative of worlds of the anti-economists, goods and services “tends to grow mechanically” (Picketty, 2020) or are all mysteriously there but suppressed under the conditions of capitalism (Hickel, 2019). Useful things don’t just materialize. Before useful things can be distributed they must come into existence in requisite number and form. But as far as I can tell, this detail has yet to be figured out by those who oppose the Neoclassical model.

This is not a criticism of the anti-economists but an observation.

There are good reasons for the omission. According to the scientists the planet is, if not on fire, well on the way to a rolling boil. In an emergency, low impact theorizing is, as one academic bluntly told me, unethical and even dangerous. If everyone agrees with the goal, say net zero, the only question is how we get there - markets, government or civil action. We must all act faster than the speed of change.

Thinking at the Speed of Change

“studying value can be monumentally difficult, but it can be done”

Anderson and Narus (1998)

Theories of value are like the trees cliche. The best time to plant a tree ranges from 25 to 50 years. The next best time is today.

I’ve been thinking about value in use in some form or another for three decades of professional life. In that time I’ve never got close to the speed of change. Everything is new and no sooner do I realize something than I forget it. A new matter and it may be a month or more before I can again pick up the work.

Value theory is slow theory. Taking decades, centuries or even millennia for another person to understand what is ( or even think) is being proposed by the the theorist. I have little doubt that Aristotle, Socrates and their equivalent throughout the non western world, are in line for a posthumous Nobel prize for (anti) economics for their early work on value in use.

But the speed of thinking is only part of the problem. There’s also a theory of change of change problem. I prioritize deep thinking over action because not only do I subscribe to a different theory of value I also subscribe to a different theory of change.

Underpinning both the economist and anti-economist approaches the crisis of usefulness is the domain assumption about how change occurs. What we must do now is guided by the future we want. In that sense, the argument between economists and the anti economists is not about the ends but the means of getting there. For example, markets vs social responsibility.

In my view, change is better understood by examining the conditions that make change possible. Accordingly, the future can be explained not with regard to its “telos” but by something closer to what Spinoza called “conatus” - the tendency of all things to persist in their own being. Every part of the the future, a product of the things that are brought into existence in the present and the past, to permit living things to continue to exist. Thus, the purpose of the economics of value in use is to understand how useful things come into existence and their relationship with change in the future.

This approach to change reverses the means to ends dichotomy. The ends can only be that which the means permit. This is a very practical way of thinking. For example, if a useful thing doesn’t exist any more neither does the change it could have produced. Imagining futures and deciding the actions to get there is meaningless if the physical and fiat capitals required to build the bridge to get there are disappearing. Without enough of the building blocks you will always come up short and then just jump in hope and fear.

It’s fair to say that there is a relationship between theories of change and theories of value which will need to be addressed more fully as part of the Millennia Challenge. But for now, if the economists are to be displaced and a new era of abundance declared, we will need more than slogans, rules, principles and earnest action. What might be needed is a new narrative and a modern theory of value that goes back thousands of years:

a “statement of relations among concepts within a set of boundary assumptions and constraints”, and its purpose is “to organize (parsimoniously) and to communicate (clearly)” (Bacharach, 1989) . The primary goal of a theory is to answer the questions of what, how, and why (Bacharach, 1989; Whetten, 1989) . Theory emphasizes the nature of the causal relationships, examines the underlying process, and interprets the systematic reasons for occurrence or nonoccurrence (DiMaggio, 1995; Sutton & Staw, 1995; Weick, 1995) .

A stream of reason that connects entry points to objects to conclusions about the what, how and why useful things and value in use come into existence. In short, a theory that identifies the mechanisms behind collapse and generation.

Bridging the current gap between public policy, that remains captured by the economic style of reasoning and its faith in market based solutions, and the real world usefulness offered by the anti-economists, will require more than planting trees today.

In this three part edition of of the Millennia Challenge, I propose a modern theory of value by considering three key questions:

• How the current demand theory of value destroys value in use and causes a crisis in usefulness; and

• What role corporate law and corporate governance play in the crisis of usefulness’

• Why a modern theory of value (and corporate law and corporate governance) will be a supply theory.

HOW DEMAND THEORIES DESTROY VALUE IN USE

Every new era claims to be modern. In 1951 “Modern Value theory” was a demand theory. So wrote A Hare in an essay entitled “The Theory of Effort and Welfare Economics”. Echoing Aristotle, his was an early warning to humanity of the dangers of demand theory of economics:

Unlike the earlier theories of the classical economists, who were ever aware of the struggles of man to wring a living from nature, value theory now lays little emphasis on the sacrifices involved in work and approaches the subject from the starting point of the consumer engaged in maximizing his satisfactions. Modern welfare economics likewise concentrates wholly on the economic welfare derived from consumption…This emphasis on satisfactions has involved the almost complete neglect of dissatisfaction and the gradual disappearance from economic literature of such terms as “dis-utility” and “real cost”

Today, despite the crisis in usefulness forewarned by Hare and now marked by climate change, civil polarization, the substitution of political with ideological regimes and bio-diversity loss, modern value theory remains, by and large, a demand theory:

exchange value emerges at the intersection of marginal benefit (demand) and marginal cost (supply) curves and is thus determined by utility (subjective individual preferences) and the cost of production (scarcity)    

The problem with a demand theory of value is paradoxically not demand but supply.

Within the the theoretical construct of Neoclassical economics supply is uninteresting. After all, what can be meaningfully be said about a construct called a firm that performs only one function - to respond to demand/market prices and transform capitals (produce commodities and services) that cost less to transform than the market price. Critically the firm has only one decision criteria - to maximize profit and generate value in exchange. Infamously summed up by Milton Friedman:

There is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

The Nobel Laurette has been thoroughly criticized for what he said but he and those who gave him the prize have have never been held accountable for what he did not say.

By focusing on profit making and maximization as the purpose of business and corporations (and hyper efficiency for governments ) the economists had damned us to world with less useful things in at least five ways:

• First the supply of useful things is not the responsibility of business. And whilst it is true that businesses supply a great many useful things. The real world usefulness of those things played no part in the production decision. Supply decision are a question of weighing the economic costs and benefits that theoretically neglect considerations of value in use vs counter value outside the firm.

• Second, the costs of production don’t factor in the useful things destroyed in the process of supplying things that generate a profit for the firm. If these counter-values are generated outside boundaries of the firm they’re called “negative externalities”. A “cost” that the firm does not have to carry. But counter-values are not costs. There is no market for useful things that can no longer exist. There is only a void in which to throw money.

• Third, the firm is not immune from the crisis of usefulness. Under the standard neoclassical model firms can have no welfare interests of their own other than profit. Production decision, like supply decision are a question of weighing the economic costs and benefits that again theoretically neglect considerations of value in use vs counter value within the firm.

  Ironically, creating a crisis of usefulness within the firm. Prioritizing the production of things that the firm cannot use - a surplus of money - over things that are highly useful to the firm - social license, research and development, “stakeholders” who want the firm to succeed. Under the Neoclassical model of economics , the class of things called firms (prime movers for those familiar with my work) are simultaneously engaged in creating the conditions for its their own crisis of usefulness and a crisis of usefulness for everyone else. Pursuing a surplus of things that the firm has no intention of using and never creating the things the firm and others could use.

  In practical terms the firm experiences a shortage in supply of useful things to the firm:

  • on one hand, things that have traditionally held great value in use are disappearing - corporate memory, solvent suppliers and long term research and development to name a few.

  • on the other, things with counter-value, the opposite of value in use may be increasing - distrust and lost or compromised social license, stranded assets and corporate scandals. None of which are particularly helpful or in the firm’s interest.

• Fourth, education has shifted from the supply of individuals that are useful to themselves and society in the broadest sense to a very narrow concept of usefulness.

  If value in use represents the capacity of a thing to do work, in the context of human capital, that value in use is ceasing to be applied to the work of generating and regenerating civil society. Instead, our systems of education prioritize the production of graduates that are only useful in the production of things for which, as noted above, don’t necessarily account for value in use.

  But that only part of story, debt is only so useful. The space that debt occupies is the lives of graduates displaces so many other useful things for a time - a family, a shorter commute and the time to do the most useful thing of all - idleness.

• Fifth and by no means finally, the number of firms that either create little to no value in use (the financial services industry) or, in a net calculation, dangerous counter value (fossil fuel companies, weapons manufactures and social media companies) have increased over the past 50 years. The implications for the supply of value in use has been profound:

  • the production of counter-value is a gold mine. The top greenhouse polluters into super profit maximizing power plants, petroleum and natural gas systems, minerals and metals, chemicals and refineries.

  • Equally the production of little to no value in use has been extremely profitable. But it has led to a double sided brain drain

    • Inside the firm engineers, scientists and even lawyers who work for these firms focus on the maximizing profits to the firm rather than applying a portion of their talent and the profit to the production of things that might be more useful to the firm and the community.

    • Outside the firm, social media companies now cannibalize billions of hours of “free time”. Hours that might once have been transformed into something more useful now applied to the production of content which is of use to the social media company but arguably less so for the user.

The decision to cast supply in terms of profit alone hardwired the destruction of value in use into economics and eventually into every discipline the economic style of thinking came to infect. What we experience and countless people fear is the product of a hollowing out of the world of useful things now and ensuring there are less useful thing available to use in the future.

The whole sorry affair masquerading as a form of capitalism but more accurately “decapitalism” - an economic system that prioritizes the production of value in exchange over value in use. Under current conditions, there is less rather than more capitalization of things leading to greater available and accessible value in use. Just a steady increase in less useful things with higher and higher prices.

Capitalism is not the last 50 years.

The more I allow myself to think about what will not exist because this way of thinking, the more I am reminded Hannah Arendt’s impression of Adolf Eichmann:

I was struck by the manifest shallowness in the doer [ie Eichmann] which made it impossible to trace the uncontestable evil of his deeds to any deeper level of roots or motives. The deeds were monstrous, but the doer – at least the very effective one now on trial – was quite ordinary, commonplace, and neither demonic nor monstrous.

There is an unmistakable banality to the economists solution to the challenges we face. Imagine consuming the world’s best and brightest minds and billions of dollars cataloging the destruction so that investors and pension funds know where not to spend their money.

According to Ernst and Young there are an estimated 600 environment, social and corporate governance (ESG) reporting standards globally. In line with the old economic theory, a new global information infrastructure has been spawned. Documenting the collapse with accounting accuracy so that future generations will not only know the ideas to put on trial but have more than enough evidence to convict.

And the process is not slowing down .

The DECLINING BASELINE

There is no supply side limit on transformation of physical and fiat capital for profit.  Something Aristotle warned about:

“riches and property [which] have no limit”

There being no natural limit on financial capital, the neoclassical model is consistent with a firm transforming all useful capitals to the point that financial capital becomes truly useless.  The destruction of all vital capitals resulting in there being no one left or nothing left to buy in the market.  The market, as prime mover, turns everything into profits no matter the impact on the planet because things get made because they get bought not because they get useful things done. 

Under a demand driven model of distribution, provided the price is right, everything becomes theoretically consumable. Moreover, the crisis of usefulness that follows is not an anomaly giving rise to deep self reflection. The ”paradigm induced expectations that govern normal science” (Kuhn, 1970).

The problem is the baseline.

Neoclassical economics continues "works" and has explanatory power as long as there are more than one and that one thing is wanted. The "facts" hold true for economics irrespective of a declining biophysical baseline. This is in no small part why economists commonly prefer objective empirical evidence over unverifiable reports of affected individuals ( Bebchuk, 2013). In every other “science” empirical evidence is used to discover anomalies. In economics, there is no expectations of usefulness, and therefore a collapse in their number or variety is not a crisis for economics or economists. Rather, it’s an opportunity.

Next up, I consider the instrumental role that my profession, corporate law, has played in the ongoing crisis in usefulness and the disappearance of things with value in use.