Problems with the exchange

The exchange is the fundamental activity in a system of exchange like a market, and we engage with lots of them every day in one form or another. But I think the exchange is also the cause of some economic problems - problems that cause poverty, inefficiency, stress, unsustainability, and more.

I want to start with a, hopefully, very intuitive look at two of the problems of the exchange, and then from there examine them a little more thoroughly with a theory of value.

Under-signalling

Let's say that you are a person who needs food - I think this is most people. One way to get food is to grow it yourself, and another way is to get it from someone else. In a market economy, where resources are transferred through exchanges, if you're going to get food from someone else you'll need to exchange something for it. You need some sort of exchange cpacity. The most common thing to exchange is money, but, of course, you would need to get money. Perhaps you have some in your savings, perhaps you can sell something that you own for money, or perhaps you can work for money. These three things - labour, assets and savings - are the basis for almost all exchange capacity.

For a lot of people - maybe even most people - this is theoretically not too much of a problem. But there are many people who don't have access to these three things: they don't have savings, they don't have things to sell, and they don't have the capacity to labour. Lots of people fall into this category: children, the elderly, the ill, the injured, the differently abled, and more. It isn't even necessarily the case that these people can't labour, but that they can't labour enough to satisfy their basic needs.

There's a relatively complicated question here about how different types of labour are valued, or what constitutes labour, and I will address some of this later, but we can stick to a very basic and simplified version here (and one that is still reality for a lot of people): there are people who do not have enough exchange capacity to meet their basic needs.

This is a situation I call under-signalling. That is, there are people with needs, and, because those people don't have sufficient exchange capacity, resources aren't allocated from the market to those needs.

Under-signalling is a pretty basic problem for the exchange. If every person were identical, then they could all labour the same and they would all have the same needs. But people are different. They have different capacities for labour, and different needs.

Let's imagine that everyone has some amount of labour they can transform into income, and some set of expenses to satisfy their basic needs. I won't try and articulate what constitutes basic needs here, but let's say that it is some set of needs that meet a minimum quality of life or allow them a minimum of human dignity. Different people might draw the line in different places, but the fact is that it doesn't matter where the line is drawn, the problem of under-signalling remains.

If a persons income is more than their expenses, then things will be okay: they can signal to the market for enough things to satisfy their needs. But people are different from each other. Some people will have lower incomes, and some people will have higher expenses. There are therefore going to be people whose expenses exceed their income. And in those cases the market is going to fail to meet their basic needs for human dignity and quality of life.

Counter-signalling

The other very intuitive issue with the exchange is that there is a correlation between lower exchange capacity and higher needs.

For example, consider a person who is born with a rare disease that makes it difficult for them to move around, and which needs to be treated with medicine. Imagine, not unrealistically, that in this case the person is unable to do as much work as their twin, who was not born with the disease. This person has a lower exchange capacity than their twin (because they can't work as much), and a higher set of needs (because they need medicine). The two things are not independent of each other, but are correlated.

Or imagine a person who has been a healthy worker for a long time and then becomes sick. They see the doctor and are told they need rest and medicine. They cannot go to work because they are contagious. Now they have increased needs (medicine) and reduced exchange capacity (they can't work). Similarly, if someone needs to drive for work and their car breaks down, now they cannot perform as much work, and they also need to pay for repairs on their car. They have a lowered exchange capacity, and higher needs. The same would apply if their house burnt down, or they became injured, or something similar.

On the other hand, consider a person who earns enough to satisfy all their immediate needs, plus a little more. Once their immediate needs are satisfied, they can choose what they do with the extra money. Perhaps they will put it into savings. Or perhaps they will buy something new. Perhaps they will invest it.

In any case, it is easier for this person to end up with extra if they have less needs - if they don't have a weekly medicine cost, for example. And that allows them the oppotunity to save. It will make it more likely that they can buy a new tv, or a car, or a house, or an investment, or just tuck the money away. And in all of these cases the person has increasing exchange capacity. If a disaster befalls them, they have a bit of flexibility, and could dip into their savings, sell their tv or car, or downsize their house.

The trend is this: that people with more needs have less resources directed their way by the market, and that people with less needs have more resources directed their way by the market. I call this trend counter-signalling.

And this is one, hopefully simply and intuitive, reason that I propose the market suffers from an epistemic problem. The general impact of the exchange - the general idea of "market forces" - don't allocate things toward needs, but away from them.