Economics from First Principles

Intro

The major economic theories all share the common problem that they are founded in human conceptions of value and trade, rather than on anything concrete. Whether the “dictatorship of the proletariat” or “precious metals backed currency”, the core principles of these theories are unprovable and unmeasurable in real terms. What is needed is to use Carl Sagan’s apple pie recipe - first we must invent the universe. We can do this by starting with the first principles that all systems, people, and cultures have in common - namely space, time, and energy. We must also reckon with the states of this economic matter - its creation and its use. Practically this means we can describe the creation of any resource using values on three axes, a vector; then we can transform those vectors based on their use. By being able to accurately describe resources and their use we can build a more complete economic theory from the ground up. Better still, we can link the reasonable or ideal vector of human wellbeing directly to resources across a system by defining a reasonable standard of living with a certain amount of space for a person to occupy with enough energy to sustain healthy living over a period of time. An important note is that energy in this conversation, just as in physics, will relate to physical matter - for example, the material of a meal and an amount of vitamins required to digest it equates to a certain amount of energy. This will be further explored below.

All of this vectorizing of resources will help us ultimately arrive at a very human concept - value. Arguments over economics often revolve around disconnects between the perceived value of resources being exchanged - an hour’s work for an hour’s pay for instance. However those values are often driven by purely conditional factors, like relative social power or momentary scarcity. That conception of value needs constant negotiation, and moreover will always favor the bigger predator, in natural terms. Humanity has exceeded the time scale of natural evolution by stepping beyond relying on mere predation and survival of the fittest by preserving a greater diversity of resources and insights than nature itself would keep, and ideal economics will also move past that evolutionary drive. By working to define value from these first principles we can create better systems to encourage further human development.

Each measure of a resource’s vector represents a state of being, but to be useful they must be used, transformed, or in economic terms, exchanged. One might strike a rock on another rock to create a stone hand axe, then trade the hand axe for someone’s firewood. Each of those actions involves a resource (a stone, hand axe, wood) being used or exchanged, thus changing state [mention ownership meta-axis here?]. Each transformation takes some energy from the resources’ prior states and occurs in the spatial and temporal axes. These transformations can be measured by their efficiency to get at their final value, calculated by reducing the vectors to a simple (scalar) value [math to be determined].

A Word on Process

Reducing all economic activity to just three dimensions may come off as, well, reductive. After all, what about art, what about entertainment and culture? We will build up to the heights of human living, but first we have to start with the base - we must climb Maslow’s ladder before we can start on Jacob’s. In this frame of analysis we need to first establish how to understand and build up the basics of life, food, shelter, and the rest; then we can look at how those contribute to the finer things. We will come to see that even culture and creativity serve physical purposes in human life, like creating trust and connections to allow complicated work to happen (cultural cohesion) and even working different parts of the physical brain to allow the body to heal and improve others (rest). So while this will start very simplified and narrow, the case will be made that each block is building up the larger system that will include all the more profound concerns.

Time

The most fundamental axis, the value of the temporal axis defines the scale over which the other axes should be measured. A common example is the hourly wage, but could also be viewed in terms of crop growth cycles or fuel use per minute. From a measurement perspective this is the most straightforward of axes, despite cultural differences around use or value of time the physical process of the clock ticking happens the same1. The greater challenge is that many interconnected resources have magnitudes of such difference between their relevant scales that translation becomes a challenge to conceive and can be misleading. For instance, knowing the fuel per minute required to fly a plane 100km is very important to a pilot, but calculating which part that is of the hundreds of millions of years that transformed 370 tons of organic matter to a liter of crude oil is not something we should expect of them.

We can use this axis to understand the resource value within a given time frame, or by taking the resource as it exists and working backwards to better plan its use. Hourly wages are a core example of period-based thinking, but another useful measure is tons of food per year. Resource-based thinking would be things like how long a liter of crude oil can be used for or considering the amount of space a picked apple required as it grew from seedling to tree to individual fruit.

Space

Everything needs space. Not only the space it actually occupies, but also the space required to operate - the depth of an cave to mine or the size of a bed for rest. When accounting for the economic reality of a resource the total spatial impact of its creation (mining) or use (a street lamp) is the value of the spatial axis for a given period of time. There is a sort of compression that commonly happens, where initial resources are subdivided and the derivative resources have a lower spatial axis value than what came before. Also, this axis is itself three dimensional, a fact which can be handled in the initial evaluation by reckoning it in cubic meters, then unpacking the specifics as relevant (housing, cargo shipping, etc). Unlike the temporal axis, the scale of spaces relevant to economics is much smaller, as long as human activity is limited to one planet. Another dissimilarity is more challenging - whereas one minute is physically the same as another, spaces can be very different from each other. A square kilometer of desert and jungle represent very different conditions, and should be well understood. Generally this adjustment should actually be made in the energetic axis, as differing conditions require different energy outputs on a use by use basis, but it should be understood from the start.

Energy

Energy and matter are inter-related, in physics and in economics. All economic matter requires raw materials and input energy, and some of the resources created will themselves be used in creating others and can change their calculation. Creating a clay pot involves the resource vectors for gathering, shaping, and heating the clay, but once crafted reduces walks to the river, decreasing the resource vector of potable water. Along the same lines the value of the energy axis may reduce the value of other axes - for instance, heating food hotter reduces the time it takes to cook a meal (up to a point).

Though energy can be broadly measured in kilocalories, the different forms of energy (heat, light, movement, matter) may represent crucial resources themselves. A key to this axis is that energy is never transformed 100% efficiently, so there is a certain one-way-ness (called entropy) to transformations. This is similar to the temporal axis since it too operates in one direction, while spatial dimension values have no such limitation. It is different than time though in the way that it decreases per transformation, whereas one minute is still one minute after any number of transformations.

Human Impact

Understanding these resource vectors will help to clarify and create a health economy grounded in reality. Using this approach we can define the resource vector for potential human thriving and work to establish social systems to efficiently transform existing resources like oil and farmland into health and creativity. There is no system that will ever guarantee human thriving for all without also compromising the freedom of people to choose their own resources and transformations, but systems can be created to help ensure the potential for thriving is maximized. For instance, if we can set the threshold for thriving to something like { time: 1 hour, space: 2 m^3, energy: 300 kc }, then we can begin to look at how we can structure our food systems to supply the energy, how we can build our buildings to make sure there is enough room, how we can set daily schedules to make sure the resources match.

Examples

all numbers very rough estimates

Sitting on a stump

Tree, State a: A tree grows in a friendly climate and environment, then ages and falls over, resulting in a resource that can be used for sitting.

Person, State a: Person walking through forest

State change: person sits on stump

Tree, State b: portion of the tree supporting person’s weight

Person, State b: person sitting

Final value: should be a (in this case negative) scalar resolution maybe? or a final vector representing the change (try out different options)

basically need to check the relation of the time and space to the energy use

If the only thing that tree was used for was this one person sitting on it for an hour, it would be a very poor value indeed

Notes

Everyone needs three things - a place to stand, time to be there, and something to eat.

Footnotes

1 For a given relativistic time frame. Accurate physics will be elided as we go for the sake of clarity