Don,
Again, this is not a profit, but the result of attempting to reduce the injury inflicted by an ever inflating FED.
The arbitrage and trading profits that are available on market traded exchange goods have both high risk and minuscule percentage margins. Everyone starts from essentially the same position and the system is largely, but not completely, zero sum.
When subjectively valued use-value goods are exchanged, the wide differences between the desired ends of individuals always start with large potential psychic profits to be realized.
Intuitively I 'feel' that you are correct, but I don't like to 'feel', so I am trying to use Austrian axioms to 'prove' it or 'disprove' it.
Every action is an exchange - an attempt to exchange a less pleasing state of affairs for a more pleasing state of affairs. Thus, with every action, there is either a profit or loss. I think you are incorrect in saying that I do not receive a psychic profit when I obtain $1 FRNs in my wallet.
However, when you say this...
The end point of this discussion is eventually going to be the relationship between the two types of economic goods and their interaction with the concept of marginal utility.
...I think back to your example of the eggs and the slices of ham (http://www.siliconinvestor.com/readmsg.aspx?msgid=16741402), I can see how this type of exchange has a 'large' amount of psychic profit. I think it relates to the marginal utilities of direct-use goods vs. exchange-use goods.
If I may venture a hypothesis:
The marginal utility for a direct-use good falls rapidly with each additional unit obtained. This is most likely because any particular direct-use good serves to potentially achieve only a limited number of ends. With the steep drop in utility, marginal units can potentially be almost valueless to one party (the party with 'many' units in possession), while at the same time be almost infinitely valuable to the other party (the party with no/few units in possession). For example, to the man dying of thirst in the desert, an additional glass of water is almost infinitely valuable, whereas to you and me, it is almost without value. It is the very nature of diminishing marginal utility that makes psychic profit possible.
In contrast, the marginal utility for an exchange-use good (money) falls much less rapidly with each additional unit obtained. This is most likely because money is anticipated to achieve potentially any realistic end through future exchange.
Thus, the exchange of direct-use goods can yield a large psychic profit on both sides of the exchange, due to the steep dropoff in marginal utility with addional units.
However, the exchange of exchange-use goods yields a minimal psychic profit on both sides of the exchange, as they are essentially interchangable for future exchanges.
Am I close?
Wildstar |
