VI. The Transactional System of Money and Value
The overall objective of this section is to understand money and its role and relationship to economic value in the institutional economics of John R. Commons. Commons writes that, "It is because Value is a two-dimensional concept (omitting futurity)—with two different causations, the one being the scarcity-value, or price, determined by supply and demand, the other being the greater or smaller output of use-value which will be created in the labor process that follows the transaction. " (Commons, pg. 517, 1934). The point here is again Commons is fighting against what he observes are the limits of other definitions of economic value such as simply individual utility or the classical case of exchange value only.
In this section, Commons make an important move on pages 520 and 521. He states that for a thing to be objective it needs to be independent of any objective will as opposed to other competing definitions. He will continue to emphasize this point throughout this section. This is important because it gives us something to hang on to in analysis. Value is a collective exercise in bargaining transaction that is independent of any individual will. This is in contrast to the so called psychological economists who focus on the individual will and individual preferences.
The notion of collective valuing also impacts Commons notion of futurity. The future value of a thing can be base don what we as a community believe it is worth. Commons writes that, "The subject-matter of institutional economy, distinguished from engineering and home economy, is not commodities, nor labor, nor any physical thing—it is collective action which sets the working rules for proprietary rights, duties, liberties, and exposures; and these are the present expectations of bargainers that the community will see to it that their bargaining valuations are carried out in the future by themselves and others, respecting commodities, labor, money, or anything now expected to have future usefulness and Scarcity. " (Commons, pg. 523-524, 1934). Their is on emphasis on how we believe what the future will look like will directly shape the value we place on items or services today. The longer the period of time in the the more discounting that may occur due to the risk of waiting.
What Commons missed here were the potential problems form the myopia of the participants in the bargaining process. We have seen with items that are particularly long lived in nature that human beings will not correctly value risks
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