Origins of the general theory of value

How we see things is a product of what we are looking for and what we are looking for is a product of what we learnt to look for.

Usually in economics we are looking for some measure of goods made available and services provided over a period of time in a particular area. It is usually an annual, national measure. We then look for growth in what is measured over the same period.

This conceptual framework has persisted since the subject had its origins in post-war reconstruction when it closely reflected the desperate needs for all products. Students of Piaget will see its development as an example of genetic epistemology with the development of economies going hand in hand with development of the understanding of how they function.

There is no doubting the economic post-war miracle has been accompanied by an increasing understanding of how economies can be influenced to produce the desired results. From John Maynard Keynes came the acceptance of a role of government in manipulating total demand to a level of full employment. Both fiscal and monetary policies were to be used. Later economists have successfully argued the case to deregulate markets in order to expand innovative economic activities.

However it seems that economic theory is no longer reflecting economic realities.

Over time the role of markets has come to dominate economic theory so much that the subject could have been renamed the Market Theory of Value.

Today, however, there is increasing pressure to incorporate ecological, social and cultural values into those market-dominated theories of economics.

There is some urgency in the task because the gap between economic theory and economic, social and ecological reality is such that the current wisdom on economic problems often states the problem as if it were the solution.

Three examples are:

• we need economic growth to survive;
• markets are the fundamental source of value; and
• global markets must be limitless.

This article explores these problems and in doing so the concept of a General Theory of Economics is introduced.

But first a further comment on economic epistemology. Fundamental to economic epistemology are statements of purpose and field. In this area two statements have dominated the subject like catechisms. One is that the economic problem is to “satisfy unlimited wants with limited resources” and the second is that “value is competitive market price”.