Hi Rakesh, What I forgot in my discussion about equilibrium as regards value theory is, that there is a simple way to defend the importance of an economic theory of value in equilibrium theory, as distinct from price, which occurred to me as a Phd student in 1988 reading a book by the Japanese scholar Kozo Uno.
This defence consists in saying: (premise 1) suppose that I take the prices of N number of heterogenous product units A and B, and add them up to arrive at price P. (premise 2) Now it is clear, that price P does not "exist in the real world" in a sense, it is the sum of a number of different prices which I have added up, not the physical price tags. It is a sort of ""theoretical price". Yet, this abstraction has a certain reality, because it refers to real prices; it is not arbitrary. (premise 3): But even although price P does not exist in the real world, you could not do any accounting without calculating P-type price aggregates, and the accounting aggregate which P represents, let us call it Q, has a real effect on business decisions and human behaviour. (premise 4): thus, when P is transformed into Q, it leads to definite economic and non-economic actions, which I will call S for convenience. (premise 5): the occurrence of S can have an objective effect on the respective price of A and B and therefore on N, as economic actors, whom I will call J and F, adjust their behaviour and prices change as a result, let's call the change C. (premise 6): if 5) occurs, then we can say that, although supposedly the calculation of P resulted in an entity which did not exist in the real world, namely Q, P through Q has nevertheless had a real effect in the real world, let us call that effect C. (premise 7): therefore a value referent, namely P, has become objectified in the sense that it has acquired an independent existence, it is an independent datum which, although it is not itself the price of anything in particular, nevertheless exerts a real effect on the real world of economic life, namely C. (premise 8): but since P and Q are in this sense real abstractions, we are dealing with entities influencing decisions and actions by economic actors which go beyond prices, i.e. economic behaviour is not simply influenced by direct prices but by derived prices which do not refer to specific priced goods A and B. (premise 9): but the real price of A and B may not be known, it may be possible to know that price only in the future, therefore we may only be able to estimate P, or establish its precise magnitude through negotiation, which I will call an X situation and I will call the estimate P'. (premise 10): therefore if X occurs, and we do wish to make a transaction involving A and B, then we must apply a valuation referent which is not reducible to any existing price, although it may be derived from existing prices, but if X holds, this valuation referent affects the magnitude of P', when P' is finally settled. (premise 11): if X occurs, but P' cannot equate to P in a finite real time (perhaps it can only be estimated or predicted without a sufficient likelihood of accuracy or occurrence), then market uncertainty occurs, which I will call situation Y. (premise 12): if Y occurs, then even although P' does not equate to P, P' may still affect the magnitude of the prices of A, B and C, because J and F can either withdraw from the market, affecting prices, or they will be using another valuation referent in order to find P, referring to a different set of prices, let's call that referent Z, where Z is subject to exactly the same conditions as P, such that Z' may also occur, causing X and C. (premise 13): if there are these competing valuation referents P and Z, neither of which can be found, when X occurs (so we are left with P' and Z'), then J and F are forced to make rational choices between P' and Z', but in order to do so rationally, they need an external criterion L with which to evaluate the choice of P' or Z', let us call that situation M. (premise 14:) if M occurs, it is clear that to find L, we must go beyond P' or Z' or any other entity in the same ontological class, in other words, we must refer to something which has nothing to do with prices. Well I could continue through the whole alfabet, but I guess you can complete the story. Regards Jurriaan
