Professor Baumol has ably expressed the unease economists have with the supply and especially the demand schedules at the heart of so much economic theory:

Demand functions, as they are defined in economic analysis, are rather queer creatures, somewhat abstract, containing generous elements of the hypothetical, and, in general, marked by an aura of unreality. The peculiarity of the concept is well illustrated by the fact that only one point on a demand curve can ever be observed directly with any degree of confidence because by the time we obtain data with which to plot a second point, the entire curve may have shifted without our knowing it. A more fundamental but related source of our discomfort with the idea is the fact that the demand relationship is defined as the answer to the set of hypothetical questions which begin "What would consumers do if price (or advertising outlay, or some type of marketing effort) were different than it is in fact?" We are, then, dealing with information about potential consumer behavior in situations which consumers may never have experienced. And, since we have very little confidence in the constancy of consumer tastes and desires, all of these data are taken to refer to possible events at just one moment of time — e.g., consumer reactions to alternative possible prices if any one of them were to occur tomorrow at 2:47 p.m. In view of all this, there should be little wonder that people with an orientation toward applied economics occasionally become somewhat impatient with the economic theorist's demand function.

Yet no matter how ingenious the circumlocutions which may have been employed, they have been unable to find an acceptable substitute for the concept. For the demand function must ultimately play a critical role in any probing marketing decision process, and there is really no way to get away from it.¹

In further specification of the obvious, we note that the two primary indicia of the shapes of an economy’s underlying technical tradeoffs, viz.: ‘marginal cost of production’, and ‘marginal value in production’, tend to identify with transaction prices. Indeed, two of the more laden implications of neoclassical economics are that 1) a commodity J’s price should/will/must somehow align with J’s marginal cost of production, and 2) the marginal value of J in the production of other goods must be constantly reconditioned by the price of J’s acquisition.

Where familiar conceptualizations of marginal costs and values make critical references to prices, the SFEcon system has these indicia of value calculated by direct references to the economy’s current state variables and parameters. Our cost and value calculations do not reference prices; and, being ‘conceptually prior’ to prices, they are available to assist in the computation of prices. Having made prices subordinate to the gradients of sectors’ underlying technical tradeoffs, we effectively reject supply/demand schedules as the prime mover unmoved of economic causality.

Our supply and demand schedules will be constructed on references to what we conceive as the more primal indicia of prices, i.e.: marginal costs and values. The equilibrium price inferred via the intersection of these schedules will be examined in terms of what it can tell us about how such a price reacts back upon the marginal costs of production and marginal values underlying price creation in order to unify all these notions of value.