From Cambridge to Eternity: “Potentiality to Actuality”

 

Utility and Value. In economic life, “value” means the utility to be appreciated at consumption; such utility (M∙U in dimensions) is the energy that keeps us living on. In the public life, utility is measured with the legal tender (U∙m, “m” for legal numeraire). More specifically, the market price (U∙m) is the proxy of utility and value (M∙U) of the object traded, expectedly, virtually or practically.

The Asset. The stock of asset represents the penitential to become a creative power when hired and “animated.” In other words, the stock stands still until employment. Only those units up to the job  has the actual creative power.

            There are two arch-categories of assets, namely, human and physical. The land was originally a “natural” endowment but is in modern times not different at all from the “capital stock” (K in macroeconomics) as tradable asset.

            In a sense, the asset is the consequence of accumulated time spent on its creation. Such accumulation is sometime called “investment.”

The Power. The employed unit must run for a while (T¹) at certain efficiency (M∙U∙T^-1) before performing a defined job of creating utility (M∙U). The efficiency, or “power,” is usually different across stocks and additionally depends on the total number of stocks adopted before the marginal unit. The difference across units depends on historic investment therein; that’s a matter of quality. To the difference on the the total number employed, we will come back later.  

            Apparently from the economy-wide perspective, there are two types of investment, that is, quantitative (M) and qualitative (U∙T^-1). No wonder “economy” sometimes means “efficiency.”

The Job. In physical sciences, job, work and energy are similar. However, the work in economics must be effective to be a job (of creating something utile). In that regard, there was in 1990s the buzzword “reengineering,” defined to be efforts to “save the work without reducing the job.”

Accounting for Performance. We need accounting because our time is limited. Moreover, the accounting needs to be periodic because we intake utilities as energy of indefinite kinds and because our bodily capacity is limited.

The Attractive Force. The right potential (M∙U) must move to the right site before doing the job effectively. We call as “force” what can move a thing across a distance. “Incentive” is to the force in economics what “gravity” Isaac Newton talked about is to the force in physics. On the flipside of incentive does “self-interest” Adam Smith talked about reside.  

            The economic incentive comes in various disguises. Home, it can be a benefit per hour (M∙U∙T^-1) of goods, services or assets. It can also be a cost avoided per hour of nuisances, pains or liabilities. The domestic accounting is as per PAAP, where the first P is for “particularly.” Away in the general public, the force is of monetary income per hour  (U∙m∙T^-1). The public accounting is according to GAAP.

            Now, take a unit of human asset aka a laborer for example. In public where free competition prevails, the incentive will most probably be equal to the performance, as revealed in the market per period. More straightforwardly, the wage rate as the incentive equals to performing efficiency.

            Incidentally, the gravity works across the space (L) while the incentive runs over the time (T). All of us are not really literally supposed to take one for the other.