Cost of Living Value Theory

The experiment continues, about 45% complete so ar. So Im having to go a little off track, for content for this specific site. Today, I would like to discuss the concept, one that I developed. Im an amatuer economist, so this has no basis in anything I've read so far, but I wouldn't be surprised if this theory is out there already.

I think, all value, and by extension, all price, is a result of the value or price that is placed on food. I believe that there is a very strong correlation between the price of food and the price of anything on the market. At the very minimum, it determines the cost of production, and for the vast majority of Americans, it also helps to determine the amount that is saved and what is considered disposable income. So, in truth, the cost of living determines both the minimum price to break even, and 99% of the time, the maximum price for an object. Even for large purchases, which would be expected to be financed, the maximum price is also dependent upon what a person can afford to pay.

Okay, so where does this stem from? Food is the key ingredient in all products in society, as it is the fuel for labor, which is the universal ingredient in all economic activity. Whether you work from home, at the office, or at a construction site, you must eat. And in the very begginning of society, our ability to support a complex economy is dependent on the fact that on a day-by-day basis a person can produce more food than they need to survive, otherwise, our economy wouldn't even be existant.

Its a pretty simple concept, and in my opinion, hard to defeat. But as is my nature, I even got in a fight over it. And when trying to point out, and explain my view to the person I brought inflation into the mix.

And he made the classic point that I was confusing inflation with purchasing power, and at the same time I would be confusing price with value. However, upon further examination, the concepts are tied to each other. He made the point that all inflation really does, is reduce purchasing power.

While this is certainly true at the beginning of the cycle, assumably labor prices will inflate as well. Not to mention, value can be used as a means of exchange. So whether I get a loan, get a raise, or become more productive, Im going to try to balance out the exchange, even if there is technically not enough money.

Opinions?