There are actually three economies operating simultaneously;
Malthusian, which reduces to the analytical observation that we are all, in the long run, working for food. The glories of Rome and Byzantium were merely episodes in the long march to the dinner table.
Ricardan, which holds that differences in returns are rents or a kind of opportunity cost. Although he believed in a labor theory of value, the value of a product lies in the amount of labor it takes to produce it, we have obviously reduced that to value=scarcity (x)utility, scarcity of labor, land, and/or capital as a much more powerful and elegant construct.
Smithian, which holds that markets, through arbitrage, move plenty to scarcity. Refining that concept, arbitrage harvests windfalls, windfalls of labor, land, or capital, and in so doing creates windfalls of different types recursively until macro events disrupt the cycle.
These three dynamics operating in coincidence certainly make life interesting as they move in and out of equilibrium and analysis difficult.
Do Well and Be Well
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