Economic dynamics is an empirical science that studies emergences, motion and disappearance of value—a specific concept that is used for description of the processes of creation and distribution of wealth. Any economic theory deals with the interpretation of economic processes based on the law of production of value, and various scientific approaches differ in the choice of factors of production that determine, in the end, the creation of wealth. Marxists insist that only labor creates value, neoclassicists believe that, in addition to labor, capital must also be taken into account as the important source of value. Econodynamics demonstrates that the statement about the productive power of capital is a hoax that hides the real role of labor and energy in the production of value. Econodynamics offers a more adequate interpretation of economic growth and other phenomena. Econodynamics is based on the achievements of classical political economy and neo-classical economics and has been using the methods of phenomenological science to investigate evolution of economic system. Econodynamics has been proposing methods of analysis and forecasting of economic processes. The comprehensive review of the problems of econodynamics is given recently by Vladimir Pokrovskii.^[1]

The Fundamentals

Value and production factors

Economic events are considered as processes of creation, motion and distribution of value that is firstly measured as exchange value. The factor interpretation of the exchange value, accepted by Econodynamics, is based on the Smith-Marx's labour theory of value, according to which efforts of workers ${\displaystyle L}$ are the most essential production factor. The theory is completed by the law of substitution, which states that the workers efforts in production of value could be substituted by work of production equipment driven with outer sources of power. Econodynamics introduces a concept of substitutive work ${\displaystyle P}$, which is true work of production equipment, to characterize the functional role of machinery in production processes. The amount of production equipment is treated as physical capital ${\displaystyle K}$, measured by its value; the variable ${\displaystyle P}$ can be considered as a capital service, a concept that was discussed by Robert Solow.^[2] Production of value ${\displaystyle Y}$ can be considered as a function of the three production factors

${\displaystyle Y=Y(L,P,K).}$

(1)

Note that, in contrast to the conventional neoclassical theory, capital service ${\displaystyle P}$ is considered to be an independent production factor, while labour efforts ${\displaystyle L}$ are replaced with work of production equipment ${\displaystyle P}$, not with the passive production factor -- capital ${\displaystyle K}$.

The technological description assumes that work ${\displaystyle P}$ and labor ${\displaystyle L}$ should be considered as substituting each other, and the amount of production equipment, universally measured by its value ${\displaystyle K}$, should be considered complementary to the work (${\displaystyle L}$ and ${\displaystyle P}$) of production equipment. Considering that the description should be valid for any starting point of time (the principle of universality), and assuming also that production is homogeneous, that is, the law of production of value does not change when the scale of production changes, we write the production function (1), which is the expression for production of value, in the form of two alternative relations

${\displaystyle Y=\left\{{\begin{array}{lll}\xi K,&\quad &\xi >0\\\displaystyle {Y_{0}\,{\frac {L}{L_{0}}}\left({\frac {L_{0}}{L}}{\frac {P}{P_{0}}}\right)^{\alpha }},&\quad &0<\alpha <1\end{array}}\right.,}$

(2)

where ${\displaystyle L_{0}}$ and ${\displaystyle P_{0}}$ factors. Time-dependent values of ${\displaystyle \alpha }$ and ${\displaystyle \xi }$ are interrelated internal characteristics of the production system.

The function of production equipment ${\displaystyle K}$ is to provide various means to attract labor ${\displaystyle L}$ and substitutive work ${\displaystyle P}$ to production. The characteristic of this ability of capital is the amount of labor and energy per unit (by value) of production equipment

${\displaystyle \lambda ={\frac {\Delta L}{\Delta K}},\quad \varepsilon ={\frac {\Delta P}{\Delta K}}.}$

(3)

These quantities determine the necessary amounts, respectively, of labor and productive energy consumption per unit (in value measure) of the equipment introduced, and, therefore, are universal technological characteristics of the production equipment. Note that the combination of technological coefficients (3) (in dimensionless form) determines the index ${\displaystyle \alpha }$ in the relations (2)

${\displaystyle \alpha ={\frac {1-{\overline {\lambda }}}{{\overline {\varepsilon }}-{\overline {\lambda }}}}.}$

(4)

The technological index ${\displaystyle \alpha }$ in equation (2) appears to be connected with technological characteristics, which can be evaluated independently, and, therefore, in contrast to the neoclassical theory, the production function (2) does not contain arbitrary parameters.

In is known that an increase in the main production capital leads to an increase in output, as it is reflected by the first line of the relations (2), and this gave rise to the myth of the productive power of capital in a broad sense. If you have production shares, you get dividends, if the money is in the bank, you get interest. However, money and stocks are only symbols that do not bring anything without a huge amount of work on the production of value within the framework of the capitalist organization of the national economy. The mystical power of capital to bring profit follows from the rules of distribution of the social product created by workers and substitute work. Only the efforts of people (taking into account the law of substitution) lead to the increase in value, that is, to the creation of wealth.

The absolute measure of value

The extension of the labour theory of value with the law of substitution allows us to generalize the Smith-Marx's labour theory of value.^[3][4][5] and to provide a better correspondence with empirical evidence.^[6][7]

In the Smith-Marx's theory of value, it is postulated that estimate of the efforts of workers ${\displaystyle L}$ is an ultimate source of all created wealth (products), an absolute measure of value. When one accounts the effect of substitution of workers' efforts with the true work of the production equipment, one could expect, that the total amount of work on the production of value, which is the sum of properly accounted work of humans ${\displaystyle L}$ and work of production equipment (substitutive work) ${\displaystyle P}$, both measured in power units, could be an absolute measure of value, and one can write

${\displaystyle Y\sim P+L}$

(5)

This relation allows one to estimate the work needed for creation of wealth worth of one monetary units (energy content of monetary unit), which was done for different cases.^[5] For example, the mean value of 'energy content' of dollar of year 1996 in years 1960 - 2000 is ${\displaystyle 1.4\times 10^{5}}$ J. The values of the 'energy content' of monetary units that are used for accounting change during the time, which shows that the used units of money do not present constant amounts of 'true' value. The absolute measure of value can be introduced as some amount of energy.

The direct methods of estimation of the substitutive work ${\displaystyle P}$ are developing for both past and future situations. For example, it is found that the total amount of substitutive work in the U.S. economy in 1999 can be estimated as ${\displaystyle 10^{18}}$ J per year. It is approximately one hundred times less than total (primary) consumption of energy, which was about ${\displaystyle 97\cdot 10^{18}}$ J in 1999. However, the amount of primary energy (energy carriers), which is needed to provide this amount of substitutive work, is about ${\displaystyle 25\cdot 10^{18}}$ J. It is about 26% of total primary consumption of energy. Although one can easily find estimates of the total amount of primary energy carriers in the past, the biggest interest is caused by possible assessments of the future quantity of energy going to the substitution of workers' efforts in processes of the production. This is a problem, which has been considered specially.^[8]

Value, Utility and Entropy

Econodynamics establishes relationship between the real wealth and abstract concepts of value, utility and entropy. The artificial products created by humans: buildings, machines, vehicles, sanitation, clothes, home appliances and so on, can be sorted and counted, so that one consider the amounts of quantities in natural units of measurement ${\displaystyle Q_{1},Q_{2},...,Q_{n}}$ and the prices of all products ${\displaystyle p_{1},p_{2},...,p_{n}}$ to be given, so that one can define increase in value of a stock of products as

${\displaystyle dW=\sum _{j=1}^{n}p_{j}\,dQ_{j}.}$

(6)

Due to dependence of prices on the amounts of products $$Zdroj:https://en.wikipedia.org?pojem=Econodynamics
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