Directions of economic research

1. Construct a theoretical economic model incorporating in a satisfactory way the concept of value, that is construct a useful axiom based theory of value. The Thomistic idea that links value to cost of production, or to fair service supplied, does not lead to a useful model. In fact, in general, the production cost of an object is not well defined. In a multi-product factory there is no such thing as intrinsic unit cost.  Those who think that it exists but "it is difficult to compute, except approximately" are mistaken. The best ideas on value are just varieties of discounted cash flow analysis developed by Williams at the end of the 1930s, and are full of paradoxes. It is possible that the concept of "intrinsic value" that most economists and finance people are after, and use either explicitely or implicitely, will have to be abandoned ; there are several examples in Physics where apparently indestructible concepts had to be relinquished.

2. Model economic exchange between two agents not as the exchange of two identical values but as a transaction with two movements beneficial to both. This implies systems of personal values. The concept of utility is far from the end word on it. There is a social morphogenesis stemming from transactions. Transaction-like exchanges in a community lead to the emergence of shapes, organs, sub-organisations, that make the whole community more efficient along some measurements. Exchange actually is the engine of life seen from a biological view point. It explains the emergence of prokaryotic cells, of eukariotic cells, of organisms, of superior life, and of human communities. This is not philosophy, it is "mathematical biology".

3. Model the activity of a set of economic agents, that is an economic community, as a dynamical system. Show that it may evolve toward configurations that are neither optimal nor stable, and certainly not intuitive.

4. Construct an axiom based economic theory that represents in a convincing way the specific role of money. It will have to be a theory jointly of money and credit. It will present the role of the banking system, the central bank and the secondary banks. It will explain in a definitively convincing way why government bonds of rich countries, or paper from strong borrowers, are not exactly money, a question that at present concerns Japan, China and other U.S. Treasury bondholders. Or, more likey, it will profoundly modify what we mean by money. Any transaction-like exchange involves some sort of counterpart money if it isn't barter. A promise is the beginning of money. Money gets corrupted only when the promise it represents becomes doubtful ; that is exactly the case of the US Government Bonds, that are a money, and a money that is increasingly doubtful.

5. We believe that for an economic community to function satisfactorily its elementary agents must always have the option of autarky (at least partially). That was still the case of half of the French population in the middle of last century. If the elementary agents of an economic community do not have the option of autarky they are lead into relationships of strength and exploitation. By "elementary agents" we mean individuals, families, and small communities. Within the latter there may exist a local money either explicit or implicit. These ideas can be generalized to the community of countries. The possibility of autarky, or partial autarky, may be, in a mathematical sense, a necessary condition for economic stability and efficiency within and between communities - the exact opposite to Ricardo like theses.

6. Determine whether a community can display optimal prosperity and fairness without collaborative selfless contribution from its members. Such ideas of "solidarity" begin to play a fundamental role in the modern understanding of biological systems.

A.C.

February 2005