The concept of time-price states that the true price of something is the time it takes to earn the money to buy that something.
So if I earn $20 an hour and want to buy a pair of Nordigene sneakers with a price of $200, the true price of these sneakers is 10 hours- since I need to work 10 hours to pay the price of this sneakers.
This concept is brilliant because in reality the only truly scarce commodity for living things in the universe is time. The universe exists for eternity but living things and especially humans have finite existence measured by time- i.e. the time of our existence.
The best case scenario of a human’s lifetime existence is 120 years or 1,051,200 hours (just over 1M hours of living). We have this limited time to make sense of our existence. To pursue our goals before we exit the world.
Time in reality is the only truly valuable asset available to all humans.
Money in its various forms e.g gold, currency notes, commodities etc. is only a wholly human measure of time value. Only humans of all living creatures use it. And it only has value because we as humans say so. Once we stop believing in the value of some form of money, that money loses value. Hence why the West championed by the US will do all they can to sustain global belief in the value of the US dollar and its supporting financial system. Countries like North Korea whose citizens are not yet embedded in this system are a loss and risk to this belief system. Hence why West pushes the democracy vehicle to gain new converts for its financial system- thus increasing its value and ensuring preservation of its money stock value and dominance across the world.
Money is destructible but time is not. Hence time is the only true valuable asset in world.
In this sense, measuring a society’s stock of money by GDP (i.e. money price x volume of goods/services) is not a very accurate measure. A society’s stock of money is the average hourly price of time sold multiplied by the number of people in that society i.e.
True GDP of Society A= True Stock of Money in Society A= Average (avg.) hour price of time sold (hrpt) of society’s A citizens * Number of people (#ppl) in Society A
So a society with falling population will face a reduction in true GDP. Hence the concern about falling birth rates in parts of the western world.
Also a society with low or falling average hour price of time sold of its citizens will face a fall in true GDP.
Average hour price of time sold of a society is directly proportional to the level of knowledge in that society. Knowledge can only grow by learning. Therefore hour price of time sold can only increase by learning and therefore true GDP can only grow by learning.
Since avg. hrpt= level of knowledge (k)= level of learning (l)
Therefore True GDP= avg hrpt *#ppl
Therefore True GDP= k * #ppl
Therefore True GDP= l * #ppl
This concludes that avg hrpt can only increase if the citizens of a society increase their level of knowledge by increasing their rate of learning new things/skills.
It makes sense because they can sell/export their new knowledge in the form of services and goods that solves problems for other people who do not have this new knowledge. This is how the west built its stock of money in the renaissance age by exchanging new knowledge in the forms of goods for commodities across the world. It is also why China is doing all it can to bring about knowledge (tech) transfers into China- through JVs etc.
It is however important to note that money is not the same as wealth. Wealth is the sum total of a person’s or society’s knowledge. While money requires social belief to retain value, wealth is valuable so long as the person with it is able to transfer it to rest of society through new goods and services that embodies that knowledge or through educating others on that knowledge. Hence the emphasis on anti-ageing/wellness, R&D and education in developed countries as means to extend the wealth creation capacities of a society’s individuals. Because wealth is embodied in people able to transfer it, a society collapses when its intellectual and entrepreneurial class is destroyed. Intellectuals are engines for new knowledge creation while entrepreneurs are engines for its transfer in form of goods and services.
Money stock grows through the use of time in driving velocity of transactions/exchanges of knowledge between those with knowledge and those without- essentially in using time to conduct trade. On other hand, wealth stock grows through the use of time to drive velocity of research and education. The more people in a society use their time to create new knowledge by research and to get educated on the new knowledge generated from research, the greater the wealth stock of that society grows.
While money value is destroyed by destroying social trust in that particular money currency as a measure of value; actual wealth of a society is destroyed by killing people or taking them away because it is embodied in the existing knowledge people contain as a result of their education as well as in all new knowledge they can create from using their time to conduct research. This is why the African slave trade and mass emigration today is responsible for Africa’s dearth of wealth. Although rich in commodity stock, it needs its people’s knowledge increased and retained on the continent to convert its commodity stock into money.
Through the foregoing, the money/income a Person A earns through trade/sale/work is essentially the time that someone else is willing to pay (time price) that Person A for some measure of his wealth or knowledge as contained in a service received or goods offered.
Money Price (mp) of Goods or Service sold (as stated by Producer)= Income (i) of producer = % proportion of wealth/knowledge (%k) sold of producer = Time Price (tp) for the consumer
So assume that a Person A has spent a total of 20 years or 175,200 hours getting educated. Assuming the cost of education is $5000/year or $0.57/hour, we can estimate Person A’s wealth as = 20 years *$5,000 = 175,200 hours * $0.57 = $100,000.
If this person was to become an entrepreneur and develop and produce a phone that he then sells for $800 a unit. Assuming he sold 1 unit, we can rewrite the aforementioned Formula 3 as follows:-
mp of Phone sold by Person A = $800 = i = %k= 0.8% i.e. ( ($800/$100,000) %)
Assuming a 10% profit margin, this Person A needs to sell only 1250 units of his phone to generate the money equivalent of his wealth. The more he sells at higher prices, the more money can be accumulated faster. If he is wise he will invest this accumulated money equivalent into new knowledge/wealth so that he can continue to increase his income into the far future.
Wealth only becomes money when it is sold. Selling is the currency that converts wealth into money. The more sales velocity, the more money can be created. Increase in money does not equal increase in wealth. But money can be be used to buy time of other humans to invest into new wealth/knowledge creation by R&D. So there is this virtuous cycle between knowledge creation, its sales for money and reinvesting of money into new knowledge creation. Some people, families and societies rest on their laurels and stop learning. Their knowledge and therefore wealth stagnates. The value of the time price people are willing to exchange for it for money falls. And the person, family and society recedes.
In addressing inequality through the concept of time price (tp) lets assume the following transaction occurs in 1979 in the USA-
A middle-class household consumer B who wants to buy the phone and who earns $20 an hour, would need to work 40 hours in order to be able to pay for the phone.
Therefore Formula 3 is restated as
mp of Phone sold by Person A= $800 = i = %k= 0.8% i.e. ( ($800/$100,000) %) = tp of Consumer B= 40 hours
A top 1% household consumer C who is able to sell his stock of knowledge at a greater price of $40 per hour probably due to being better trained or assuming similar knowledge stock as consumer B benefits from connections/nepotism/favoritism/not facing discrimination/being in a higher priced market will have a tp of 20 hours
mp of Phone sold by Person A= $800 = i = %k= 0.8% i.e. ( ($800/$100,000) %) = tp of Consumer C= 20 hours
Over a period of time, average tp falls for the overall society because mp’s fall due to scale economies and incomes rise due to more education/re-education even after adjusting for inflation.
The real issue of inequality arises when tp for certain groups falls way more than that for other groups especially when the differences in education/knowledge stock is not as wide.
In the USA, the top 1% household income grew 312% vs. 36% for the middle 20% between 1979 and 2007 . This is an income growth differential of ~7x .
Let us then consider what the aforementioned transaction will look like in 2007.
For middle class household consumer B, assuming mp stays same and his income increased 36% to $27.2 per hour
mp of Phone sold by Person A= $800 = tp of Consumer B= 29 hours
The tp for Consumer B has reduced from 40 hours to 29 hours. So he has extra 11 hours to use for something else.
Let us then consider what the aforementioned transaction will look like in 2007, for 1% household consumer C, assuming mp stays same and his income increased 312% to $164.8 per hour
mp of Phone sold by Person A= $800 = tp of Consumer C = 5 hours
The tp for Consumer C has reduced from 20 hours to 5 hours. So he has extra 15 hours to use for something else. Relative to consumer C, he has an extra 24 hours to use for something else.
Usually consumer C tends to use the extra time in learning and thus increases his wealth and the mp he earns as a result of the increase in his knowledge.
Consumer C often also tends to be Producer A. They tend to become entrepreneurs skilled at creating and selling new goods and services from their increased stock of knowledge.
The root of inequality not accounting for historic wealth inheritance, nepotism, connections and discrimination lies in the time scarcity for learning and selling that the middle class and poor face vs. the rich. The rich simply have more time to learn new, create and sell new knowledge.
Inequality is not one of income or wealth ( although these compound it). It is one of time.
Taxing income or money stock of the wealthy as is often proposed can be only be effective in reducing income inequality only if the proceeds gained is reinvested into creating wealth for the left behind through education in new learning and entrepreneurship of the poor and middle class.
The income gap has widened because the rich have more time to learn, know how to create and sell their new knowledge as goods and services for higher money prices (mps) or proportions of their wealth.
The Wealth Creation Formula
>tl= >l = >k = %k = >mp = <tp = >tl
i.e. >time to learn = increase learning = increase wealth/knowledge = increase % knowledge sold = increase price charged for knowledge sold = less time required to exchange to buy goods and services = >time to learn
The wealth of the poor and middle class can be increased through learning to increase their knowledge stock. It is also important to teach them entrepreneurship especially how to create and sell goods and services at higher prices and volumes so they can increase their incomes and accumulate money stock (capital) while increasing their time to learn new things. They must then be taught how to reinvest this capital into new learning and preserving the cycle into future generations.
This is how income and wealth inequality can be addressed in a free market using the concept of time-price.