Ünsal Özdilek...Ünsal Özdilek montreal, january 30, 2015 v table of contents introduction........
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Ünsal Özdilek
© Guérin, éditeur ltée, 2015
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PHOTOCOPYING KILLS BOOKS
© Guérin, éditeur ltée, 2015
4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514 842-3481 Fax: 514 842-4923 E-mail: [email protected] www.guerin-editeur.qc.ca
All rights reserved.No part of this book may be reproduced, recorded or transmitted in any form by any means, whether electronic, mechanical, photographic, sonor, magnetic or other, in whole or in part, without prior permission in writing from the publisher.
Legal deposit ISBN 978-2-7601-7519-8 Bibliothèque et Archives nationales du Québec, 2015 Bibliothèque et Archives Canada, 2015 PRINTED IN CANADA
We acknowledge the financial support of the Government of Canada through the Canada Book Fund (CBF) for our publishing activities.
«Government of Québec – Tax Credit Program on books edition – SODEC»
Cover Model Guérin, éditeur ltée Cover Photo Shutterstock © XYZ
Distribution ADG (Agence de distribution Guérin) 4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514-842-3481 Fax: 514-842-4923
PHOTOCOPYING KILLS BOOKS
Sevgili dedemin (Kahraman Yanar - Karo) ve nenemin (Güley Çantay - Gule)
anilarina…
Foreword
As value is at the centre of human intelligence and existence, it is unreasonable to confine it only to the science of economics, because it has meanings and ramifications as well in other sciences like phil-osophy, history, sociology, psychology and politics. Every one of these gives rise to its own explanations and sense, providing evidence about the universality of value.
Despite intuitively feeling its vital function, we clearly have difficulty in explaining what value really means. This is not because of some coincidence or ignorance, but of the unforeseen pre-set nature of value in the human mind. Value appears to be a sort of ethereal substance predisposed to inducing humans to action, but predestined to decay in the fulfilling of the action. Value has in itself a cipher hosting these two powers, one self-constructive and the other self-destructive, in a con-tinuous relation from which energy feeding human action emanates. On the one side, value attracts us to action, on the other; action is already an expression of its consumed substance. Both forces of value are mounted in bootstrap for the realisation of actions during the lifetime of every individual; in the absence of one, value would not exist and, in consequence, any human action would be impossible.
If value is set in the mind, it does not mean much that its substance there is limitless, accessible right away. Value is internally attached to something that is external to the mind system, definable as a tangible/intangible event. The essence of value is human expectation in disclosure of information, attached to events by desire. Expectation exists if and only if desired events hold unknown the information about the probable outcome, which might be good or bad, arising from the consumption of value. The more uncertain the outcome is, the greater is the attractive power, and consequently, the magnitude of value in desired events. In contrast, i.e., when the outcome is certain, there is no expectation, but only information.
II DESTRUCTIVE CREATION
Information is in fact the consumed form of value. This assumption is important because it suggests that information is harmful; in reality it destroys the expectation and, consequently, the value. This is in quasi-contradiction with the enthusiastic welcome and extensive rise of information in society. I even believe that what is launched as big data (and big opportunities) may turn out to be a big problem for the human race. The manner of harm I signalise is not related to the futuristic thoughts on technological/information singularity despite their realistic scenarios described for the future. The idea is quite subtle and connected to the permanently shrinking human state of expectation due to soon-to-be achievable higher levels of certainty or the scarcity of novelty in the information of desired events, notably with big data, the technological evolution and acceleration of progress. Yet, in the bio-paradoxical property of value, the expectation permanently melts down into information. That progressively and cumulatively affects individuals, contributing to building on average a state of social epilepsy. Without expectation and value, would our civilisation be at risk, up to the point of collapse? I intentionally do not respond to that question, but the description of value in this work intuitively provides some assenting elements of thought.
Value is classically seen from two main perspectives. From a collective, psychological or moral perspective, chiefly a diffuse and idealistic qual-ity is seen in value. The other perspective is obviously economic utility. Over the years there has been a clear interest in trying to understand and define the properties of value, notably by classical authors; how-ever this does not seem to be the case with most of the contemporary economists, who are preoccupied with the practical issues of the “real world” and, because of that, have almost eliminated the value on which, ironically, economics rests. I do not know precisely why, with whom or when such a planned (or maybe unplanned) agenda started, but it has been possible to notice an intense use of price instead of value since the beginning of the 20th century. In the latter years, especially with the monetisation of a globally organised economy, value is just discussed symbolically in a few paragraphs at the beginning of some economics handbooks.
III Foreword
Mainstream economics suffers today from a deficiency in conceptual and practical foundations, mainly because of that omission of value. Elsewhere, there is obviously permanent confusion about the mean-ings and the distinctions between the concepts of value, price, cost and income. Those who are interested in the subject will easily notice various definitions of and attempts to clarify these concepts from both practical and academic perspectives, without any coherent structure. One may also find an arbitrary use of one notion for another, even in the same phrase, and the general construct would degenerate if the definitions in different fields were to be compared. It gets even more puzzling when we realise that inadequate definitions were used for the application of various methods to explain/estimate the value of different types of capital.
Along with any attempts to describe value, there should also be some clarification of the other important concepts of price, cost and income. With that objective in mind, at the beginning, I tried to sketch out some explanations, but this effort soon made me realise sometimes that I was reinventing what had already been done countless times. I was often disappointed by the challenging ambiguities in the main concepts and I could not face revisiting the related heavy works, going back to Aristotle (and even earlier). However, the tortuous questions that came in cycles, my focus on the issue and my regular thoughts on value analysis gave me sufficient energy and determination to delve into the mountainous substance of those works. It ended up here with an anatomy of value and its critical consumption mechanisms, which, I believe, reflect the general idea within the title Destructive creation.
It is clear that value is connected to many scientific fields that offer appreciable basics and explanations. In economics alone, acknow-ledging what has been said about value historically and in main languages is a complex task. In addition to the difficulty in presenting an appropriate synthesis of value, there is a risk of causing confusion (and being confused) as the existing explanations are multiple and often contradictory. I could have decided to impartially regroup and synthesise that existing content of value, but this would have required several volumes. Getting in and around the conceptions of, for example,
IV DESTRUCTIVE CREATION
classical authors and trying to decode what has already been decoded, many times before (and sometimes wrongly), could be impressive, but it would risk simply further confusing our understanding of value.
I then thought it would be good to focus directly on value starting with a different perception, sometimes with unusual pieces, leading occasionally to imprecisions to the point of even changing the direction of the project. However, right or wrong in comparison to the existing conceptions, a few rare moments of key discernments indicated that I was on the right track leading to the domain of value. This work is actually different and subsequently has several contradictions/consequences not only to our “standard” understanding of value, but also to the main foundations of leading socio-economic systems resting on value.
This is not so bad considering that the attempts to clarify value usually tend towards different directions/interpretations, which do not make a consensus anyway on the common basis of demystifying value. It would probably have been safer and less painful to work with the interpretations of existing material than directly inquiring about the sui generis of value. It is only with progress and the achievement of the manuscript that I have realised that I went for the most austere choice, because elaborating something different from the existing basis on value has consequences in challenging/modifying in succession other subtle concepts, at the same time imposing strict clarifications. I went positively through this intense work on value, comparing and evaluating the main concepts to which it was related. I introduce here a presentable version of the manuscript, but should admit there might be some rough pieces that basically could have been elegantly shaped with more work.
Ünsal Özdilek
Montreal, January 30, 2015
V
Table oF ConTenTs
Introduction ............................................................................................... XIX
Chapter 1 ESSENTIALS OF VALUE .......................................................................... 1
1. Utility law .................................................................................................... 91.1 Corridors of utility ........................................................................ 91.2 Domain of utility ......................................................................... 111.3 Maximisation of utility ............................................................. 13
2. Uncertainty order .................................................................................. 152.1 Absolute uncertainty .................................................................. 152.2 Relative uncertainty .................................................................... 172.3 Decreasing uncertainty ............................................................. 19
3. Information disclosure ........................................................................ 213.1 Emerging information ............................................................... 213.2 Growing information ................................................................ 233.3 Analysing information .............................................................. 253.4 Shannon’s information ............................................................ 27
4. Time awareness ...................................................................................... 294.1 Awareness of time ....................................................................... 294.2 Role of time .................................................................................... 314.3 Mental time ................................................................................... 334.4 Rationality in time ...................................................................... 34
5. Space friction .......................................................................................... 375.1 Awareness of space ..................................................................... 385.2 Role of space ................................................................................. 405.3 Mental space ................................................................................. 43
6. Comparison propensity ...................................................................... 476.1 Act of comparison....................................................................... 476.2 Mirrors of comparison .............................................................. 50
7. Evaluation process ................................................................................ 537.1 Act of evaluation ......................................................................... 537.2 Agents of evaluation .................................................................. 56
Conclusion ...................................................................................................... 61
References ....................................................................................................... 65
VI DESTRUCTIVE CREATION
Chapter 2 ANATOMY OF VALUE ............................................................................ 73
1. Science of value ....................................................................................... 81
2. Theories of value ................................................................................... 85
3. Meaning of value .................................................................................... 91
4. Uncertain value ...................................................................................... 994.1 Relative uncertainty .................................................................... 994.2 Measurable uncertainty .......................................................... 106
4.2.1 Probability formation ............................................... 1064.2.2 Empirical error ............................................................. 108
5. Exchangeable value.............................................................................. 1115.1 Use vs. exchange ........................................................................ 1125.2 Abundance vs. scarcity ............................................................ 116
6. Paradoxical value ................................................................................. 1196.1 Classical paradox ...................................................................... 1196.2 Biological paradox .................................................................... 125
6.2.1 Biological existence .................................................... 1266.2.2 Biological wisdom ...................................................... 129
7. Adaptable value .................................................................................... 1337.1 Technological convergence ................................................... 1337.2 Information convergence....................................................... 1357.3 Social convergence ................................................................... 1377.4 Market convergence ................................................................. 139
8. Consumable value .............................................................................. 1418.1 Happiness satiation ................................................................. 1428.2 Relative satiation ....................................................................... 145
Conclusion ................................................................................................... 149
References ..................................................................................................... 153
VII Table of Contents
Chapter 3 EXPRESSIONS OF VALUE ............................................................... 157
1. Price expression.................................................................................... 1651.1 Price definition .......................................................................... 1651.2 Direct expression ....................................................................... 1681.3 Composite expression ............................................................. 1701.4 Past expression ........................................................................... 1711.5 Conjoint expression ................................................................. 1721.6 Statistical expression ................................................................ 175
2. Cost expression .................................................................................... 1792.1 Cost definition ........................................................................... 1792.2 Quantitative agents .................................................................. 1832.3 Opportunity cost ....................................................................... 1852.4 Cost depreciation ...................................................................... 1862.5 Business value ............................................................................ 1892.6 Actual expression ...................................................................... 191
3. Income expression .............................................................................. 1933.1 Income definition ..................................................................... 1943.2 Income stabilisation ................................................................ 1983.3 Income determinants .............................................................. 1993.4 Income actualisation ............................................................... 201
4. Discerning value .................................................................................. 203
5. Market value .......................................................................................... 209
6. Surplus value ......................................................................................... 2136.1 Surplus definition ..................................................................... 2136.2 Price equilibrium ...................................................................... 2156.3 Joint equilibrium ...................................................................... 2186.4 Value equilibrium .................................................................... 221
7. Commoditised value ......................................................................... 225
Conclusion ................................................................................................... 229
References ..................................................................................................... 233
VIII DESTRUCTIVE CREATION
Chapter 4 MEASURE OF VALUE .......................................................................... 237
1. Unit measure ......................................................................................... 2451.1 Types of evaluation .................................................................. 2461.2 Value determinants................................................................... 2471.3 Classical evaluation .................................................................. 249
1.3.1 Price method ................................................................ 2521.3.2 Cost method ................................................................. 2541.3.3 Income method ........................................................... 256
1.4 Modern evaluation ................................................................... 2571.5 Value reconciliation ................................................................. 260
2. Overall measure ................................................................................... 2632.1 Basic model ................................................................................. 263
2.1.1 Value components ...................................................... 2642.1.2 Paradoxical effect ........................................................ 2682.1.3 Adjustment signals ..................................................... 270
2.1.3.1 Rationality signal ....................................... 2712.1.3.2 Reaction signal ............................................ 274
2.2 Entropy model ........................................................................... 2772.2.1 Binary entropy .............................................................. 2782.2.2 Value entropy ................................................................ 280
3. Data measure ........................................................................................ 2833.1 Stock market ............................................................................... 2853.2 Housing market ......................................................................... 288
4. Offsetting measure .............................................................................. 291
5. Analysing measure .............................................................................. 2975.1 Basic model ................................................................................. 2975.2 Entropy model ........................................................................... 304
Conclusion ................................................................................................... 307
References ...................................................................................................... 311
IX Table of Contents
Chapter 5 AGONY OF VALUE ................................................................................. 315
1. Civilisation collapse ........................................................................... 3231.1 Traditional perspective............................................................ 3241.2 Futuristic perspective ............................................................... 330
2. Value perspective ................................................................................. 3352.1 Common law .............................................................................. 3352.2 Information society .................................................................. 3372.3 Complexity levels ...................................................................... 3402.4 Information similarity ............................................................ 3442.5 Value forecasting ....................................................................... 348
3. Value effects ........................................................................................... 3513.1 Artificial experimentation ...................................................... 3513.2 Destructive creation ................................................................. 3543.3 Value commoditisation .......................................................... 358
4. Selective creation ................................................................................. 3634.1 Watch the value.......................................................................... 3644.2 Watch the money ...................................................................... 3664.3 Watch the information ........................................................... 370
Conclusion ................................................................................................... 375
References ..................................................................................................... 381
Conclusion ................................................................................................... 385
Index ................................................................................................................. 399
XI
List of Tables
Table 1.1 Summary of some land and building characteristics ..... 39
Table 2.1 Value and PCI entries’ counts in Google Scholar............. 92
Table 2.2 Value paradox seen by Wieser ................................................ 121
Table 2.3 Value paradox in pizza .............................................................. 122
Table 2.4 Classical paradox ........................................................................ 126
Table 3.1 Cost depreciation example ..................................................... 188
Table 5.1 Dating of long war cycles ......................................................... 325
Table 5.2 Generational types and periods ............................................ 327
XIII
List of Figures
Figure 1.1 Mirror effects of the market ..................................................... 51
Figure 2.1 Cognitive system of value ........................................................ 94
Figure 2.2 Uncertainty of value ................................................................. 100
Figure 2.3 Uncertainty and error in State 1 .......................................... 103
Figure 2.4 Uncertainty and error in State 2 .......................................... 104
Figure 2.5 Uncertainty and error in State 3 .......................................... 105
Figure 2.6 Use and exchange values of an event ................................ 113
Figure 2.7 Use and exchange values relations ..................................... 115
Figure 2.8 Value habituation and satiation .......................................... 141
Figure 3.1 Definition of price .................................................................... 168
Figure 3.2 Position of price in time ......................................................... 171
Figure 3.3 Price expression of value ........................................................ 173
Figure 3.4 Variations in price expressions............................................. 176
Figure 3.5 Definition of cost ...................................................................... 182
Figure 3.6 Position of cost in time........................................................... 191
Figure 3.7 Definition of income ............................................................... 196
Figure 3.8 Position of income in time ................................................... 202
Figure 3.9 Expressions of value ................................................................. 204
Figure 3.10 Coexistence of price, cost and income ........................... 206
Figure 3.11 Spatio-temporal coexistence of PCI ................................. 207
Figure 3.12 Market value definition ......................................................... 210
Figure 3.13 Value equilibrium ................................................................... 222
Figure 3.14 Evolution of exchange mediums ...................................... 226
XIV DESTRUCTIVE CREATION
Figure 4.1 Spatio-temporal coexistence of methods ........................ 261
Figure 4.2 Use and exchange values relation ....................................... 269
Figure 4.3 Mental state in function of use value ................................ 276
Figure 4.4 Entropy and probability distribution ............................... 280
Figure 4.5 Evolution of PCI ........................................................................ 287
Figure 5.1 Risk evaluation method .......................................................... 324
Figure 5.2 Transistor Counts and Moore’s Law .................................. 331
Figure 5.3 Differences becoming ordinary ........................................... 346
Figure 5.4 Expectation vs. information .................................................. 356
416 DESTRUCTIVE CREATION
Value measure, XXVII, XXIX, 39, 49, 58-60, 83, 108, 114, 171, 179, 211, 242, 245, 246, 250, 268
Value mechanisms, 364Value of information, 340Value omission, IIIValue origin, XXIV, XXV, 5, 40, 41, 88,
113, 165, 179, 180, 277Value perspective, IX, XIX, XXVI, XXXI,
21, 317, 355, 376, 377Value powers, XIII, XIV, 206, 207, 261Value prediction, 22, 62, 115, 264, 378Value quantification, XIX, XXVIII, 58,
84, 85, 176, 231, 242, 245, 250Value source, XIX, XXIII, 9, 87, 88, 388Value space, XXVIII, 263Value substance, I, XX, XXIII, XXV,
XXXII, 11, 13, 15, 17, 18, 21, 56, 57, 61, 62, 96-99, 103, 104, 108, 111-113, 115, 116, 119, 123, 124, 128, 133, 142, 149, 150, 161, 165, 177, 206, 212, 222, 243, 265, 266, 276, 304, 337, 367, 371, 375, 386, 389, 393
Value system, XXIII, XXIV, 102, 106, 133, 320, 351, 355, 357
Value theory, XXIII, 86, 87, 89, 157, 180, 311, 385
Volatility, XXIX, 65, 275, 283, 365Vulnerability, 15
W
Want, 5, 6, 11, 13, 18, 53, 58, 63, 109, 194, 319, 360, 397
Wave cycles, 324, 325Waves, XXX, 277, 324-326, 328, 329,
335, 336, 350, 375-377, 381, 382Wealth, XXXIII, 54, 57, 81, 82, 85- 87,
117, 118, 120, 142, 143, 145, 146, 154, 179, 234, 277, 319, 355, 369, 374
75198
ISBN 978- 2- 7601-7519-89 782760 175198