We acknowledge the financial support of the Government of Canada through the Canada Book Fund (CBF) for our publishing activities.

Ünsal Özdilek

Guérin, éditeur ltée, 2015 4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514 842-3481 Fax: 514 842-4923 E-mail: francel@guerin-editeur.qc.ca www.guerin-editeur.qc.ca All rights reserved. No part of this book may be reproduced, recorded or transmitted in any form by any means, whether electronic, mechanical, photographic, sonor, magnetic or other, in whole or in part, without prior permission in writing from the publisher. Legal deposit ISBN 978-2-7601-7519-8 Bibliothèque et Archives nationales du Québec, 2015 Bibliothèque et Archives Canada, 2015 PRINTED IN CANADA We acknowledge the financial support of the Government of Canada through the Canada Book Fund (CBF) for our publishing activities. «Government of Québec Tax Credit Program on books edition SODEC» Cover Model Cover Photo Guérin, éditeur ltée Shutterstock XYZ Distribution ADG (Agence de distribution Guérin) 4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514-842-3481 Fax: 514-842-4923 PHOTOCOPYING KILLS BOOKS

Guérin, éditeur ltée, 2015 4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514 842-3481 Fax: 514 842-4923 E-mail: francel@guerin-editeur.qc.ca www.guerin-editeur.qc.ca All rights reserved. No part of this book may be reproduced, recorded or transmitted in any form by any means, whether electronic, mechanical, photographic, sonor, magnetic or other, in whole or in part, without prior permission in writing from the publisher. Legal deposit ISBN 978-2-7601-7519-8 Bibliothèque et Archives nationales du Québec, 2015 Bibliothèque et Archives Canada, 2015 PRINTED IN CANADA We acknowledge the financial support of the Government of Canada through the Canada Book Fund (CBF) for our publishing activities. «Government of Québec Tax Credit Program on books edition SODEC» Cover Model Cover Photo Guérin, éditeur ltée Shutterstock XYZ Distribution ADG (Agence de distribution Guérin) 4501, Drolet Street Montreal (Quebec) H2T 2G2 Telephone: 514-842-3481 Fax: 514-842-4923 PHOTOCOPYING KILLS BOOKS

Sevgili dedemin (Kahraman Yanar - Karo) ve nenemin (Güley Çantay - Gule) anilarina

Foreword As value is at the centre of human intelligence and existence, it is unreasonable to confine it only to the science of economics, because it has meanings and ramifications as well in other sciences like philosophy, history, sociology, psychology and politics. Every one of these gives rise to its own explanations and sense, providing evidence about the universality of value. Despite intuitively feeling its vital function, we clearly have difficulty in explaining what value really means. This is not because of some coincidence or ignorance, but of the unforeseen pre-set nature of value in the human mind. Value appears to be a sort of ethereal substance predisposed to inducing humans to action, but predestined to decay in the fulfilling of the action. Value has in itself a cipher hosting these two powers, one self-constructive and the other self-destructive, in a continuous relation from which energy feeding human action emanates. On the one side, value attracts us to action, on the other; action is already an expression of its consumed substance. Both forces of value are mounted in bootstrap for the realisation of actions during the lifetime of every individual; in the absence of one, value would not exist and, in consequence, any human action would be impossible. If value is set in the mind, it does not mean much that its substance there is limitless, accessible right away. Value is internally attached to something that is external to the mind system, definable as a tangible/ intangible event. The essence of value is human expectation in disclosure of information, attached to events by desire. Expectation exists if and only if desired events hold unknown the information about the probable outcome, which might be good or bad, arising from the consumption of value. The more uncertain the outcome is, the greater is the attractive power, and consequently, the magnitude of value in desired events. In contrast, i.e., when the outcome is certain, there is no expectation, but only information.

Information is in fact the consumed form of value. This assumption is important because it suggests that information is harmful; in reality it destroys the expectation and, consequently, the value. This is in quasi-contradiction with the enthusiastic welcome and extensive rise of information in society. I even believe that what is launched as big data (and big opportunities) may turn out to be a big problem for the human race. The manner of harm I signalise is not related to the futuristic thoughts on technological/information singularity despite their realistic scenarios described for the future. The idea is quite subtle and connected to the permanently shrinking human state of expectation due to soon-to-be achievable higher levels of certainty or the scarcity of novelty in the information of desired events, notably with big data, the technological evolution and acceleration of progress. Yet, in the bio-paradoxical property of value, the expectation permanently melts down into information. That progressively and cumulatively affects individuals, contributing to building on average a state of social epilepsy. Without expectation and value, would our civilisation be at risk, up to the point of collapse? I intentionally do not respond to that question, but the description of value in this work intuitively provides some assenting elements of thought. Value is classically seen from two main perspectives. From a collective, psychological or moral perspective, chiefly a diffuse and idealistic quality is seen in value. The other perspective is obviously economic utility. Over the years there has been a clear interest in trying to understand and define the properties of value, notably by classical authors; however this does not seem to be the case with most of the contemporary economists, who are preoccupied with the practical issues of the real world and, because of that, have almost eliminated the value on which, ironically, economics rests. I do not know precisely why, with whom or when such a planned (or maybe unplanned) agenda started, but it has been possible to notice an intense use of price instead of value since the beginning of the 20th century. In the latter years, especially with the monetisation of a globally organised economy, value is just discussed symbolically in a few paragraphs at the beginning of some economics handbooks. II DESTRUCTIVE CREATION

Mainstream economics suffers today from a deficiency in conceptual and practical foundations, mainly because of that omission of value. Elsewhere, there is obviously permanent confusion about the meanings and the distinctions between the concepts of value, price, cost and income. Those who are interested in the subject will easily notice various definitions of and attempts to clarify these concepts from both practical and academic perspectives, without any coherent structure. One may also find an arbitrary use of one notion for another, even in the same phrase, and the general construct would degenerate if the definitions in different fields were to be compared. It gets even more puzzling when we realise that inadequate definitions were used for the application of various methods to explain/estimate the value of different types of capital. Along with any attempts to describe value, there should also be some clarification of the other important concepts of price, cost and income. With that objective in mind, at the beginning, I tried to sketch out some explanations, but this effort soon made me realise sometimes that I was reinventing what had already been done countless times. I was often disappointed by the challenging ambiguities in the main concepts and I could not face revisiting the related heavy works, going back to Aristotle (and even earlier). However, the tortuous questions that came in cycles, my focus on the issue and my regular thoughts on value analysis gave me sufficient energy and determination to delve into the mountainous substance of those works. It ended up here with an anatomy of value and its critical consumption mechanisms, which, I believe, reflect the general idea within the title Destructive creation. It is clear that value is connected to many scientific fields that offer appreciable basics and explanations. In economics alone, acknowledging what has been said about value historically and in main languages is a complex task. In addition to the difficulty in presenting an appropriate synthesis of value, there is a risk of causing confusion (and being confused) as the existing explanations are multiple and often contradictory. I could have decided to impartially regroup and synthesise that existing content of value, but this would have required several volumes. Getting in and around the conceptions of, for example, Foreword III

classical authors and trying to decode what has already been decoded, many times before (and sometimes wrongly), could be impressive, but it would risk simply further confusing our understanding of value. I then thought it would be good to focus directly on value starting with a different perception, sometimes with unusual pieces, leading occasionally to imprecisions to the point of even changing the direction of the project. However, right or wrong in comparison to the existing conceptions, a few rare moments of key discernments indicated that I was on the right track leading to the domain of value. This work is actually different and subsequently has several contradictions/ consequences not only to our standard understanding of value, but also to the main foundations of leading socio-economic systems resting on value. This is not so bad considering that the attempts to clarify value usually tend towards different directions/interpretations, which do not make a consensus anyway on the common basis of demystifying value. It would probably have been safer and less painful to work with the interpretations of existing material than directly inquiring about the sui generis of value. It is only with progress and the achievement of the manuscript that I have realised that I went for the most austere choice, because elaborating something different from the existing basis on value has consequences in challenging/modifying in succession other subtle concepts, at the same time imposing strict clarifications. I went positively through this intense work on value, comparing and evaluating the main concepts to which it was related. I introduce here a presentable version of the manuscript, but should admit there might be some rough pieces that basically could have been elegantly shaped with more work. Ünsal Özdilek Montreal, January 30, 2015 IV DESTRUCTIVE CREATION

Table of Contents Introduction... XIX Chapter 1 ESSENTIALS OF VALUE... 1 1. Utility law... 9 1.1 Corridors of utility... 9 1.2 Domain of utility... 11 1.3 Maximisation of utility... 13 2. Uncertainty order... 15 2.1 Absolute uncertainty... 15 2.2 Relative uncertainty... 17 2.3 Decreasing uncertainty... 19 3. Information disclosure... 21 3.1 Emerging information... 21 3.2 Growing information... 23 3.3 Analysing information... 25 3.4 Shannon s information... 27 4. Time awareness... 29 4.1 Awareness of time... 29 4.2 Role of time... 31 4.3 Mental time... 33 4.4 Rationality in time... 34 5. Space friction... 37 5.1 Awareness of space... 38 5.2 Role of space... 40 5.3 Mental space... 43 6. Comparison propensity... 47 6.1 Act of comparison... 47 6.2 Mirrors of comparison... 50 7. Evaluation process... 53 7.1 Act of evaluation... 53 7.2 Agents of evaluation... 56 Conclusion... 61 References... 65 V

Chapter 2 ANATOMY OF VALUE... 73 1. Science of value... 81 2. Theories of value... 85 3. Meaning of value... 91 4. Uncertain value... 99 4.1 Relative uncertainty... 99 4.2 Measurable uncertainty... 106 4.2.1 Probability formation... 106 4.2.2 Empirical error... 108 5. Exchangeable value... 111 5.1 Use vs. exchange... 112 5.2 Abundance vs. scarcity... 116 6. Paradoxical value... 119 6.1 Classical paradox... 119 6.2 Biological paradox... 125 6.2.1 Biological existence... 126 6.2.2 Biological wisdom... 129 7. Adaptable value... 133 7.1 Technological convergence... 133 7.2 Information convergence... 135 7.3 Social convergence... 137 7.4 Market convergence... 139 8. Consumable value... 141 8.1 Happiness satiation... 142 8.2 Relative satiation... 145 Conclusion... 149 References... 153 VI DESTRUCTIVE CREATION

Chapter 3 EXPRESSIONS OF VALUE... 157 1. Price expression... 165 1.1 Price definition... 165 1.2 Direct expression... 168 1.3 Composite expression... 170 1.4 Past expression... 171 1.5 Conjoint expression... 172 1.6 Statistical expression... 175 2. Cost expression... 179 2.1 Cost definition... 179 2.2 Quantitative agents... 183 2.3 Opportunity cost... 185 2.4 Cost depreciation... 186 2.5 Business value... 189 2.6 Actual expression... 191 3. Income expression... 193 3.1 Income definition... 194 3.2 Income stabilisation... 198 3.3 Income determinants... 199 3.4 Income actualisation... 201 4. Discerning value... 203 5. Market value... 209 6. Surplus value... 213 6.1 Surplus definition... 213 6.2 Price equilibrium... 215 6.3 Joint equilibrium... 218 6.4 Value equilibrium... 221 7. Commoditised value... 225 Conclusion... 229 References... 233 Table of Contents VII

Chapter 4 MEASURE OF VALUE... 237 1. Unit measure... 245 1.1 Types of evaluation... 246 1.2 Value determinants... 247 1.3 Classical evaluation... 249 1.3.1 Price method... 252 1.3.2 Cost method... 254 1.3.3 Income method... 256 1.4 Modern evaluation... 257 1.5 Value reconciliation... 260 2. Overall measure... 263 2.1 Basic model... 263 2.1.1 Value components... 264 2.1.2 Paradoxical effect... 268 2.1.3 Adjustment signals... 270 2.1.3.1 Rationality signal... 271 2.1.3.2 Reaction signal... 274 2.2 Entropy model... 277 2.2.1 Binary entropy... 278 2.2.2 Value entropy... 280 3. Data measure... 283 3.1 Stock market... 285 3.2 Housing market... 288 4. Offsetting measure... 291 5. Analysing measure... 297 5.1 Basic model... 297 5.2 Entropy model... 304 Conclusion... 307 References... 311 VIII DESTRUCTIVE CREATION

Chapter 5 AGONY OF VALUE... 315 1. Civilisation collapse... 323 1.1 Traditional perspective... 324 1.2 Futuristic perspective... 330 2. Value perspective... 335 2.1 Common law... 335 2.2 Information society... 337 2.3 Complexity levels... 340 2.4 Information similarity... 344 2.5 Value forecasting... 348 3. Value effects... 351 3.1 Artificial experimentation... 351 3.2 Destructive creation... 354 3.3 Value commoditisation... 358 4. Selective creation... 363 4.1 Watch the value... 364 4.2 Watch the money... 366 4.3 Watch the information... 370 Conclusion... 375 References... 381 Conclusion... 385 Index... 399 Table of Contents IX

List of Tables Table 1.1 Summary of some land and building characteristics... 39 Table 2.1 Value and PCI entries counts in Google Scholar... 92 Table 2.2 Value paradox seen by Wieser... 121 Table 2.3 Value paradox in pizza... 122 Table 2.4 Classical paradox... 126 Table 3.1 Cost depreciation example... 188 Table 5.1 Dating of long war cycles... 325 Table 5.2 Generational types and periods... 327 XI

List of Figures Figure 1.1 Mirror effects of the market... 51 Figure 2.1 Cognitive system of value... 94 Figure 2.2 Uncertainty of value... 100 Figure 2.3 Uncertainty and error in State 1... 103 Figure 2.4 Uncertainty and error in State 2... 104 Figure 2.5 Uncertainty and error in State 3... 105 Figure 2.6 Use and exchange values of an event... 113 Figure 2.7 Use and exchange values relations... 115 Figure 2.8 Value habituation and satiation... 141 Figure 3.1 Definition of price... 168 Figure 3.2 Position of price in time... 171 Figure 3.3 Price expression of value... 173 Figure 3.4 Variations in price expressions... 176 Figure 3.5 Definition of cost... 182 Figure 3.6 Position of cost in time... 191 Figure 3.7 Definition of income... 196 Figure 3.8 Position of income in time... 202 Figure 3.9 Expressions of value... 204 Figure 3.10 Coexistence of price, cost and income... 206 Figure 3.11 Spatio-temporal coexistence of PCI... 207 Figure 3.12 Market value definition... 210 Figure 3.13 Value equilibrium... 222 Figure 3.14 Evolution of exchange mediums... 226 XIII

Figure 4.1 Spatio-temporal coexistence of methods... 261 Figure 4.2 Use and exchange values relation... 269 Figure 4.3 Mental state in function of use value... 276 Figure 4.4 Entropy and probability distribution... 280 Figure 4.5 Evolution of PCI... 287 Figure 5.1 Risk evaluation method... 324 Figure 5.2 Transistor Counts and Moore s Law... 331 Figure 5.3 Differences becoming ordinary... 346 Figure 5.4 Expectation vs. information... 356 XIV DESTRUCTIVE CREATION

Value measure, XXVII, XXIX, 39, 49, 58-60, 83, 108, 114, 171, 179, 211, 242, 245, 246, 250, 268 Value mechanisms, 364 Value of information, 340 Value omission, III Value origin, XXIV, XXV, 5, 40, 41, 88, 113, 165, 179, 180, 277 Value perspective, IX, XIX, XXVI, XXXI, 21, 317, 355, 376, 377 Value powers, XIII, XIV, 206, 207, 261 Value prediction, 22, 62, 115, 264, 378 Value quantification, XIX, XXVIII, 58, 84, 85, 176, 231, 242, 245, 250 Value source, XIX, XXIII, 9, 87, 88, 388 Value space, XXVIII, 263 Value substance, I, XX, XXIII, XXV, XXXII, 11, 13, 15, 17, 18, 21, 56, 57, 61, 62, 96-99, 103, 104, 108, 111-113, 115, 116, 119, 123, 124, 128, 133, 142, 149, 150, 161, 165, 177, 206, 212, 222, 243, 265, 266, 276, 304, 337, 367, 371, 375, 386, 389, 393 Value system, XXIII, XXIV, 102, 106, 133, 320, 351, 355, 357 Value theory, XXIII, 86, 87, 89, 157, 180, 311, 385 Volatility, XXIX, 65, 275, 283, 365 Vulnerability, 15 W Want, 5, 6, 11, 13, 18, 53, 58, 63, 109, 194, 319, 360, 397 Wave cycles, 324, 325 Waves, XXX, 277, 324-326, 328, 329, 335, 336, 350, 375-377, 381, 382 Wealth, XXXIII, 54, 57, 81, 82, 85-87, 117, 118, 120, 142, 143, 145, 146, 154, 179, 234, 277, 319, 355, 369, 374 416 DESTRUCTIVE CREATION

75198 9 782760 175198 ISBN 978-2- 7601-7519-8