From Cambridge to Eternity: “Potentiality to Actuality 02”

 

To begin, we might in various regards replace the term GDP (gross domestic products) with something like ADW (aggregate domestic welfare, excluding assets) or AVC (aggregate value created, including assets). Here again, “value” in economics means utility (M∙U) as revealed in the market and stated in terms of sovereign currency bill (U∙m).  

Economy vs Industries. Adam Smith refers to the butcher, brewer and baker rather than the farmer, miner and fisher. To double-check, the former group represent the supplier  of a  final good while the latter industrialists preceding the supplier.   

             In the first place, “intermediate goods” are out of question in economics. The reason is that they represent value created through the so-called “supply chain” ante the final distributor. After all, “the market” is for economy only of final goods.

             Not to mention, the whole process of supplying is the same whether to the final good, final service or final asset, as long as freshly created in the respective accounting period.

“Supply Chain Management” (SCM). As a matter of fact, the value of the final is nothing other than the sum total of partial values created step-wise through the supply chain. Take the steel table for example. The supply process in the chain would be as follows:

             Probably because value creation is stage-wise, we often use the term “value added” at each stage. Think of the VAT most everywhere but for the US.

Nature of Profit. Some of us may suggest that profits be missing. In return, we may ask whose incomes they are. The answer: All incomes accrue to the households in the commonwealth, directly or indirectly. For instance, "business profits" and "corporate net incomes" belong to the households named proprietors or shareholders.

             In substance, the gross national incomes (GNI  in nominal) equals to the aggregate value created (AVC), both per annum. We in this era of D.E.I might choose the latter of the two.

Value Proposition. The key to competition in the market is, after all, going for the “bang for the buck,” so to speak. For that purpose, we shall always think at the margin on either side of “the equation.”

             Suppliers, please mind your VCM (for value creation management)!