By Giacinto Auriti
In order to eliminate the confusion between the various species of value judgements, within which also to include the value of money, we should use the expression of mathematical logic of the following hypothesis.
a) Act useful to the only operative subject
If we denote by t' the first phase (instrumental) of the value, with t" the second phase (hedonistic), with U the utility and with X the operative subject, we can express the useful act with the formula
t' U X
b) Act of liberality
If the act is designed useful as well as its own behalf and also on behalf of another entity Y, the case can be expressed in the formula
t' U X
t" (X + Y)
in which both parties participate in the hedonistic moment of the act in place of X.
c) Contract of corresponding performance
When considering a swap contract between the two entities X and Y, since each is acting on its own behalf and others, the act can be expressed in the contract as sum of the following elements:
t' U X t' U' Y
__________ + ___________ + U"
t "(X + Y) t" (X + Y)
It is in fact carried in the contract an additional utility (U") that emerges from the following consideration. If you speculate two acts of reciprocal donation is obtained ex post an identical result to that of a swap contract. It is obvious that if, the parties instead of establishing two acts of donation, establish a mutual agreement, it means that there is a reason for doing the obvious consideration that everyone is willing to give his performance only and when they are getting the counter-performance by the other party. This prediction of the behaviour of others as a condition of it therefore, the conventional element of the contract. This means that in a contract resides different and superior utility to that of the services and of the consideration. That's why the utility of performance and counter-performance - that are credit values - must be added the further conventional utility U" with the participation of both parties.
Therefore, the swap contract may be expressed in the formula
t' U + U' + U" (X + Y)
t" (X + Y)
where t' and t" are, respectively, the phase of the instrumental and the hedonistic value; U and U' are respectively the values of performance and counter-performance and U" the usefulness of the contract that - as stated above – is in addition to those traded.
d) Conventional monetary value. The induced value
In the monetary issuing it is established a convention that produces mere utility without creating exchange.
Being here the convention in order to measure the value of goods and having each unit of measure the quality corresponding to that of the object to be measured, such as the meter has the quality of the length measurement because it measures the length, so the currency has the quality of the value because it measures the value.
Thus it was born the monetary value embedded in the symbols of legal tender, without any other cost that the mere activity of mental group (which is precisely the Convention) and its formal manifestation (paper money).
If you then expresses Um with the conventional monetary value and with A, B, C, D, ... N the individuals who accept the currency, the monetary agreement may be expressed in the following formula:
t' Um (A + B + C + ... N)
t" Um (A + B + C + ... N)
tn Um ....... etc..
It occurs in this case, the persistence of the value incorporated in monetary symbol Um because the unit of measurement is in itself a comodity at repeat-use.
That's why - we repeat - there is a clear distinction between the own conventional value of the currency and the credit value own of the promissory note. The promissory note is extinguished by the payment, the currency continues to circulate after each transaction indefinitely.
Because this value is independent from compulsory inter-subjective relationships, it binds in such way to the symbol in which is embodied to look like even a property of matter: the so-called intrinsic value of gold or gold paper. That is that the currency despite being a legal case - because an intangible asset recorded of conventional value (currently unduly burdened with debt) – it is the subject of property rights in all jurisdictions.
We can therefore conclude that the element defined in the formula Um is an induced value that was born in the monetary symbol similarly to what happens in the creation of electricity which arises in the dynamo.
In the dynamo energy source is the magnetic field produced by the electrodes, similarly to what happens in creation of the monetary values caused by a field of conventional relationships, ie by a set of expectation for others' behaviour as a condition of, which binds all citizens. Everyone is in fact willing to accept the currency against commodity because expected to give money against goods.
Since the currency is conventional measure of the value, and then the value of the measure (and each unit of measure is conventionally established), in a symbol born the induced value that is the value of the measure that determines the birth of a new commodity.
As with the dynamo - for induction physical - mechanical energy is transformed into electrical energy, so with the currency - for legal induction - turns the conventional value, a fumus iuris (prima facie[A]), in the real value of an asset to be property rights: the currency.
Extract from The international regulation of monetary system by Giacinto Auriti