In the first instalment of this set of posts on the conception of economic commodities, I discussed the standard economic market approach to commodities: Commodities are determined fully by their market properties. This is rather limiting view of the important concept of economic commodities. It seems more logical and productive to have a property-based conception of the commodity notion that is based on much more general perspectives than a narrow market perspective.
In this second part I discuss such an approach to economic commodities from a more generalised perspective based on their (economic) properties which in turn determine their respective roles in the economic wealth creation processes in the economy. This builds and extends on the Marxian and Lancasterian approaches. It is recognised that commodities not only include consumption goods, but also a wide variety of other bearers of economic properties.
Categorising economic goods
A useful starting point is to recognise that in principle all commodities have to be viewed as only being involved in production processes: All economic commodities are bearers of economic wealth creation processes in the broadest sense. The only economically recognised or of wealth is that of use value: The usefulness of economic commodities.
I propose to define an economic good as a direct or indirect bearer of economic use value. Substances that are not bearers (directly or indirectly) of economic use value should not be considered to be an economic good. So, use value differentiates the economic realm from other realms.
This definition of the notion of an economic good immediately introduces a dichotomy of all economic goods in two categories: (i) Goods are directly useful and, therefore, directly lead to use value. And (ii) goods that indirectly lead to use value. The first category is that of consumption goods and the second category is that of intermediary inputs.
Consumption goods
A consumption good is defined as a direct bearer of use value. This implies that consumption goods are useful by themselves for consumptive purposes. Lancaster refers to these economic goods as “bearers of consumption properties”. Standard examples are food substances that directly consumed (fruits) or can be consumed using certain kitchen devices (most other food substances). For example, milk can be consumed using a glass. A glass is an intermediary input for the creation of use value from the consumption of this milk.
This implies that consumption goods actually act as inputs to the process of creating use value directly. As such, consumption goods are direct inputs to the creation process of use value itself. This is executed directly through interaction with the “consumer” him- or herself. This means that we adhere to the principle that only the consumption or the use of a consumption good leads to the creation of economic wealth in the specific form of use value. So, only through the act of eating an apple we recreate nutritious value, taste, smell, and the pleasure of eating, all of which are commonly accepted consumption properties.
All other economic goods are to be categorised as intermediary inputs. Hence, milk itself is a consumption good, but the glass that is used in its consumption is an intermediary input for the creation of this milk’s use value. Similarly, cooking a cut of beef in an oven and eating it on a plate requires the intermediary inputs of an oven, the energy used in that oven, as well as the plate and utensils used in the consumption of the cooked beef.
Intermediary inputs
All economic goods that are not consumption goods are necessarily intermediary inputs to processes of economic wealth creation. The variety of intermediary inputs is very wide-ranging from raw inputs such as iron ore and crude oil to advanced tools such as kitchen appliances, robots and computers. Intermediary goods satisfy and fulfil many uses in economic wealth creation processes.
In fact, intermediary inputs determine actually the architecture of the global supply chains in our economy. The more broken-up the production process of a certain economic good is, the more intermediary inputs are involved, each representing a stage in the production of that economic good. For example, to produce bread one can break up its production through the intermediary goods of grain, flour, dough, and ultimately a loaf of bread. Each production stage is borne by the corresponding intermediary good and also refers to one or more roles in the corresponding social division of labour that supports the production of bread. Grain is produced by a farmer; flour is milled by a miller; dough is produced by a baker, who also executes the final stage in this production process, namely the baking of the loaf of bread.
Intermediary inputs can therefore also be viewed as bearers of the architecture of the production network in the global economy, being the conglomeration of all global supply chains. The more complex this architecture, the more intermediary goods are present in the economy to bear this complex architecture. Economic complexity is, thus, directly linked to the variety and complexity of the intermediary goods in the economy. Economic history can be viewed through this tense as a process of proliferation of intermediary goods, signifying the deepening of the social division of labour by extending supply chains through more and more productive stages borne by these intermediary goods.
Defining economic commodities
Thus far I only categorised economic commodities into two natural categories as direct or indirect bearers of economic use value. For an economic good to an economic commodity it is required that the economic good in question has the socio-economic institutional support to be traded. Hence, there is a supply chain that is able to generate quantities of the economic good under consideration and the good is collectively recognised as tradable in an institutional trade infrastructure. This implies that there is an aspect of collectiveness attached to an economic commodity, differentiating it from any economic good.
This also refers to certain social or common aspects that can be attached to the production and consumption of economic goods. This refers in particular to the distinction between private and collective economic goods and commodities. This is discussed in the next instalment of these posts.