MC 28 - The Vulgar Theory of Value
“he DID say anus?” murmured someone to my right.
Admittedly, it’s not a word typically associated with corporate governance. Jokes aside, what do butt holes have to do with corporations and the work of boards?
But, on a pleasant October day overlooking London’s Finsbury Circus, the theory proposed by my fellow Australian Grahan Logan, that all that was going on in the city below owed it’s existence to the evolution of the anus and poo, seemed an apropriate introduction to vulgar economics.
Claire Fargeot, Managing Director of Grant Thornton's Governance and Sustainability practice, had invited me to present my novel work to a select group. Central to coprorate governance and the UK governance code, the word value , like the word shit, is spoken about endlessly but seldom the object of serious thought. That was about to change for those gathered.
The connection between excrement and value is not new. Apparently the Babylonians thought gold was “the feces of Hell.” “Freud had an idea that in the unconscious mind, that money and perhaps gold in particular, was equivalent to some kind of shit” according to psychoanalyst Steven Poser. There’s even the “shitter of ducats”. A statue of the Dukaten-Scheißer in Goslar, the figure of a little man that apperently produces one coin every 30 seconds.
According to Logan’s theory, life’s complexity may have begun with poop. The Cambrian explosion and sudden burst in the varieties of life traced back to the appearance of the first food consuming, feces-excreting organisms.
Vulgar economics explores similar subject matter - was the evolution of capitalist society triggered by individuals and firms each producing, exchanging and using the metaphoric equivalent of each others bodily waste or poo - products, services and money?
Something that is more or less useless to the producer and useful to someone else.
Though my academic friends seem more comfortable describing my work in terms of a scatalogical theory of value, it is unashamedly, a poo theory of value. Once you allow yourself to see it, there is no getting around the similarities between cash, commodities and kaka.
Not that this is a bad thing. In the economics of value in use, shit is not a perjorative term.
Rather shit maybe the key to understanding how society is provisioned with useful things. The generation of value in use or usefulness, based on the counter-intutive production of the exact opposite - things the producer can’t use - useless waste that must be voided. The shining muck of commerce that has little to no value in use to the producer.
To understand the mechanism by which value is generated, consider that when I purchased my last car I put to this question to the dealer:
How much do you not want that car.
It took a moment for the question to register, but it turns out he didn’t want the car as much as he thought. And far less than the price indicated. In fact, the more I encouraged him to think about it the more he wanted to get rid of it.
In a world of wants, we have forgotten that unwants make the market go around:
Apple doesn’t want it’s latest iphone, BHP doesn’t want the ore it mines and McKinsey doesn’t want its AI powered “advice”.
No company really wants what it produces. From the producer’s perspective their product as useless to them as scat is to a dog.
A key tenet of vulgar economics is the existence of an immutable law of supply. A secret and ancient economic organising principle that compels the dispatch of “disposable” products, services and even money to the market in the same way that a bear is compelled by nature to dispatch it’s shit to the woods. A primordial force that triggers the mutual flow of things from where they are unusable to where they are useful and more likely to be used to perfom socially useful work.
Grounded in Aristotle’s concept of value in use, vulgar economics can also be described as a proto-classical theory of value.
Humanity’s most embarrassing organ and most reviled, worthless and terminal product, the more apt metaphors for the unseen market forces that govern economies and the supply of useful things in it.
Overwhelmed by the urge to purge what they have created but cannot use, producers of commodities and incomes have little choice but to export the unwanted product of their industry in the hope that someone else has done the same, but in reverse. The market bringing the least valued (the unwant or refuse) and the most valued (the want or desire) into the intimate relationship of exchange.
The less something is valued by the producer the more value is created for the producer by its dispatch in exchange. The same applies in the other direction.
Countless “invisible ani” guided by the “call of nature” drawing individuals and corporations into market relations, which in turn, means that the things that each has no use for, but the other does, flows to where it can be put to use. Mistaken by Adam Smith for a hand, do we have the providential butt hole to thank for capitalism?
Though unknown to the sanitised, and thus wholly impoverished, neoclassical theory of exchange value, this dirty theorem has the power to explain how value in use is generated and distributed. The never ending need to separate ourselves from our useless shit promoting social purpose through the dissipation of energy in its social form - value in use - without social responsibility or obligation. Society benefiting from the collective imperative to metaphorically poo, more so than the psychology of individual greed.
This is economics returned to the dirt and to its elemental and practical purpose - to realistically explain how societies are continually supplied with all the resources required to live well. The time has long past where econmoics could concern itself just with the allocation of scarce resource. Allocation being juest another word for the substitution between counterparties, it tells us nothing as to whether the exchange of one thing for another left either party better off.
Not that you will see this entropic mechanism for the socially efficient distribution of usefulness described in any economic textbook.
Attracted to the sterile, linear and methodologically infallible idea that all value is value in exchange, the virtuous similarity between kaka, cash and commodities has long gone unnoticed and unexamined. A decade or more of policy implications waiting to be discovered. Findings that I predict will directly connect global crisis with the universalised practice of taking the exchange of unwants to it’s modern day extreme .
By focusing on demand, wants and equilibrium, I believe economists have missed the fundamental and practical truth that all exchange is based on the double co-incidence of the supply of unwanted things or unwants. In other words, the deliberate manufacturing of disequilibrium. We must all produce things we don’t want or can’t keep, in order for exchange to occur and for capitalism to continue to function. Fated, in the extreme and by excess, to never be satiated by what we produce ourselves and to only be satisfied by consuming the unwanted product of another.
A mechanism predicted by Sadi Carnot in 1824. He said that where there is a difference, motive power can be produced. What he could not imagine is that this same principle applied in the markets of Paris as did a heat engine.
Buyers and sellers hacking into the second law of thermodynamics understood as a motive force for change. Each deliberately manufacturing their own entropy, in the form of an unwanted baguette and franc, to generate disequilibrium. The pre-requisite condition for market exchange. Exploiting the principle that markets abhor a gradient, the thing that was useless to one flowed to the other where it was useful and could be used and the opposite flow of usefulness in the other direction.
And so the vulgar theory of value starts here. Not with a sound. There are no trumpets. But with a smell. The faintest scent of something poetically familiar and disturbingly grand. Imperceptible to all but those who are willing to put aside what they think they know and follow their nose.
Next up in the Millennia Challenge I return to the Friedman Paradox, examining why maximising exchange value does not maximise value in use, and consider the implications of making the sole purpose of a company the accumulation of unwants or excremental value in the form of profits.