Constructed Value

Every major school of economic thought has a center of gravity—a single variable that serves as the lens through which all economic phenomena are understood, diagnosed, and treated. This is not a weakness of economic thinking; it is how paradigms work. A school without a central organizing principle would be a collection of observations rather than a framework for understanding.

Consider what each school places at its center:

Modern Monetary Theory elevates inflation. For MMT theorists, a sovereign currency issuer faces no financial constraint—it can always create more money. The only real constraint is inflation: the point at which money creation outpaces the economy’s capacity to absorb it. Policy, in this view, should push spending to the edge of inflationary pressure and no further.

Keynesian economics centers aggregate demand. Recessions occur when total spending falls short of what the economy could produce. Unemployment persists because demand is insufficient. The solution is always some form of stimulus—government spending, monetary easing, anything that puts money in hands that will spend it.

Austrian economics focuses on time preference and capital structure. Sustainable growth comes from genuine savings channeled into productive investment. Boom-bust cycles arise when credit expansion distorts the structure of production, creating malinvestment that must eventually liquidate. Sound money and non-intervention allow the market to coordinate across time.

Classical economics privileges production. Wealth is created by making things and trading them. Markets tend toward equilibrium. The path to prosperity is removing obstacles to production and exchange.

Marxist economics centers labor. All value derives from work, and capitalism is a system for extracting surplus value from workers. The fundamental economic question is who controls the means of production and how the fruits of labor are distributed.

Each of these frameworks offers genuine insight. Each captures something real about economic life. And each, by centering one variable, necessarily de-emphasizes others.

Why Schools Have Centers

This pattern—one school, one central variable—emerges for identifiable reasons.

Historical context shapes theory. Keynesianism was forged in the Great Depression, when the central problem was idle workers and idle factories. Austrian economics developed in response to the inflationary chaos of interwar Europe and the boom-bust cycles of credit expansion. MMT emerged from debates about sovereign debt and the observation that currency-issuing governments don’t go bankrupt the way households do. Schools are answers to the dominant problems of their era.

Explanatory power requires simplification. A framework that treated every variable as equally central would offer no guidance. By privileging one variable, a school can offer clear diagnoses: the problem is insufficient demand, or malinvestment, or exploitation. And it can offer clear prescriptions: stimulate, tighten, redistribute.

Ideological commitments predispose. Each school carries, often implicitly, a set of values. Austrian economics presumes the primacy of individual choice and spontaneous order. Keynesianism presumes that collective action through government can improve on market outcomes. MMT presumes that the state’s monetary power should be deployed for public purposes. These commitments are not derived from the theory; they are prior to it, shaping which variables seem most important.

Graeber’s Breakthrough: Value as Verb

Before introducing our own framework, we must acknowledge a crucial precursor. The anthropologist David Graeber, in his work on the theory of value,¹ made a move that brings us closer to what we are attempting than any of the economic schools just surveyed.

Graeber’s insight was grammatical: value is not a noun but a verb. The question is not “What is value?” but “What is valuing?” Value is not a substance residing in objects (as the labor theory would have it) or in minds (as subjective utility theory claims). Value is a process—an activity, a doing.

For Graeber, valuing is social action. It is what happens when people coordinate, when they engage in ritual, when they create and exchange meaning. Markets are one site of valuing, but so are gift economies, religious ceremonies, political movements, and artistic communities. Wherever humans act together in ways they consider important, valuing occurs.

This move dissolves certain puzzles. We no longer need to locate the essence of value—in labor, in utility, in marginal preference—because value has no location. It is enacted, not discovered. It emerges from what people do, not from properties hidden in things or minds.

Graeber’s critique of both Marxist and marginalist traditions is devastating. The labor theory reifies value as crystallized work-time embedded in commodities. The utility theory reifies value as subjective states lodged in individual psychology. Both treat value as a substance to be found. Both are looking for a noun when they should be watching a verb.

Where Graeber Stops

For all its power, Graeber’s framework remains at the level of social abstraction. Valuing, in his account, is ritual, symbol, collective meaning-making. It is what anthropologists observe when they study gift exchange in Melanesia or cargo cults in the Pacific or the symbolic dimensions of market behavior in industrial societies.

But Graeber does not ground the verb in the body.

He tells us that valuing is action, but not whose action, not what kind of body is acting, not how the action registers in flesh and nervous system. The organisms doing the valuing remain abstract social actors—persons, agents, participants—not sensory-motor beings with interoceptive states, physiological needs, and embodied constraints.

This abstraction has consequences:

No physical substrate. Where do the traces of valuing go? In Graeber’s account, into culture, into social memory, into the patterns of ongoing practice. But culture and social memory are themselves abstractions. There is no thing you can point to, no material record you can measure.

No measurability. If valuing is social ritual, how do we count it? How do we compare valuing across societies, across time, across different contexts? Graeber offers interpretation, not measurement. Rich interpretation—but interpretation nonetheless.

No mechanism. What connects one act of valuing to the next? What explains why organisms value at all? Graeber has no theory of motivation grounded in the body, no account of why valuing happens beyond the observation that humans are meaning-making creatures.

Graeber moved from noun to verb. But the verb floats in social space, unanchored to flesh.

From Social Verb to Embodied Trace

Constructed value theory takes Graeber’s verb and grounds it in the body.

The sequence is:

Interoception. The organism senses its internal state. Hunger, thirst, cold, fatigue, desire, fear, anticipation, discomfort. These are not abstract preferences; they are physiological signals, proprioceptive and interoceptive data that the nervous system continuously monitors.

The intuitive case is reactive: the organism knows, in a pre-reflective way, that something is off, that action is required, that the current state is not the desired state. This is homeostasis—error-correction in real time.

But interoception also includes prediction. The brain continuously evaluates the match between current resources and anticipated demands. The organism knows, equally pre-reflectively, that something will be off, that preparation is required, that the future state will not be the desired state unless action is taken now. This is allostasis—anticipatory adjustment before need arises.²

Alliesthetic motivation. The internal state modulates the organism’s disposition toward external stimuli. Water is valuable when thirsty, aversive when satiated. This is alliesthesia—the same stimulus, different response, depending on internal state.³ What Graeber calls “valuing” has a physiological basis.

Here too, both reactive and anticipatory modes operate. Water is valuable when thirsty now (reactive). Water is valuable when thirst is anticipated (anticipatory). The grocery run, the insurance policy, the savings account—these are anticipatory valuings, driven not by current deficit but by predicted future deficit.

Action. The organism acts. It reaches, grasps, moves, speaks, clicks, signs. It comes into contact with the environment, including the economic scaffolds that structure exchange. This is sensory-motor engagement—not abstract choice, but physical movement through space and time.

Transaction. If friction permits, the action completes as a transaction. Goods change hands. Money moves. The ledger updates. This is the site of value construction—not the internal state that preceded it, not the social meaning that may follow, but the moment of exchange itself.

Trace. The transaction leaves a trace. In barter, the trace is memory—fallible, contested, fading. In traditional ledgers, the trace is ink on paper—more durable, but still local and manipulable. In Bitcoin, the trace is electromagnetic state—electrons configured in flash memory across thousands of nodes, secured by accumulated thermodynamic work, practically immutable.

Stratigraphy. Traces accumulate. The ledger grows. What was the chain tip becomes buried depth. The history of valuing is inscribed in physical substrate, readable and verifiable.

This is what Graeber was reaching for but could not grasp: a theory where valuing is action, but action grounded in bodies, producing traces in matter, accumulating into history that can be measured rather than merely interpreted.

The anticipatory dimension is crucial. The ledger is not merely a record of organisms restoring equilibrium. It is predominantly a record of organisms positioning themselves for anticipated futures—buying groceries before hunger, insurance before loss, warm clothes before winter. Most transactions are anticipatory, not reactive. The ledger captures predictions as much as corrections.

The Radical Empiricism

The consequence of this grounding is methodological. Constructed value theory is not a new interpretation of economic phenomena. It is a different method of analysis—one that deals in real signals and measurable behaviors rather than inferred preferences and theoretical constructs.

Consider the contrast:

Subjective value theory asks: What do people prefer? This cannot be directly observed. Preferences are inferred from behavior, but the inference requires assumptions about rationality, consistency, and the relationship between internal states and external action. The data is behavior; the explanandum is an unobservable mental state.

Constructed value theory asks: What transactions occur? This can be directly observed. The ledger records them. The chain preserves them. The data is the trace; the explanandum is the pattern of traces.

We do not need to know why an organism transacted—what internal state motivated it, what meaning it attributed to the exchange, what preferences it was satisfying. We observe that it transacted, and we study the consequences of that transaction as recorded in physical substrate.

This is not behaviorism, which denies the relevance of internal states. Internal states matter—they are why organisms act at all. But we do not need to directly access or accurately model internal states to study value construction. The transaction is the sufficient statistic. Whatever complexity is happening inside the organism, it expresses itself through observable action that leaves measurable traces.

The interoceptive states are upstream of the transaction. The traces are downstream. Constructed value theory works at the level of traces, treating interoception as the cause of valuing without requiring that we measure the cause directly. We measure the effect: the transaction, the trace, the stratigraphy.

Why Bitcoin Makes This Possible

Graeber lacked a substrate. Traditional economics lacked observable value-in-action. Both were forced into abstraction—interpreting social meaning or inferring hidden preferences—because there was nothing physical to point to.

Bitcoin provides the substrate.

The ledger is not a metaphor. It is electromagnetic configuration of matter, distributed across thousands of machines, synchronized through cryptographic protocols, secured by thermodynamic work. Every transaction is recorded. Every record persists. The stratigraphy is public, verifiable, immutable for practical purposes.

When an organism’s interoceptive state motivates action, and that action completes as a Bitcoin transaction, the consequence of interoception becomes electromagnetic trace. The internal state—unknowable, private, evanescent—produces an external record—observable, public, permanent.

This is what makes constructed value theory radically empirical. Not interpretation of social ritual. Not inference of mental states. Measurement of physical traces left by embodied organisms acting in the world.

Graeber gave us the verb. Bitcoin gives us the ledger where the verb leaves its mark.

The Variable We Propose

For the framework we are developing—constructed value economics—the central variable is friction.

Friction is the resistance encountered when economic actors attempt to enact value through interaction with their environment. It is what stands between the intention to transact and the completed transaction. It is what makes some economic actions easy and others difficult, some instantaneous and others slow, some cheap and others expensive.

This choice is not arbitrary. It emerges from the physical, embodied framework we have established. If value is constructed through the interaction of sensory-motor organisms with economic scaffolds, then friction is the variable that governs whether and how that construction can occur.

What Friction Includes

Friction is a broad concept, encompassing multiple dimensions of resistance:

Transaction friction is the cost and effort required to complete an exchange. This includes fees, paperwork, time spent, and the cognitive load of navigating processes. When you wire money internationally, the fees are transaction friction. When you spend an hour on hold with your bank, that is transaction friction. When you abandon a purchase because the checkout process is too cumbersome, transaction friction has prevented value construction.

Temporal friction is delay. The time between initiating an action and seeing its effect. In traditional finance, settlement can take days. In Bitcoin, it takes roughly ten minutes for a transaction to be included in a block, and longer for practical finality as confirmations accumulate. This is friction by design—a deliberate trade-off between speed and security.

Cognitive friction is the mental effort required to understand and act. Complex tax codes create cognitive friction. Opaque financial products create cognitive friction. Interfaces that require expertise to navigate create cognitive friction. When an economic actor cannot understand their options, friction has reduced their ability to construct value.

Regulatory friction is imposed by institutions. Licensing requirements, compliance obligations, reporting mandates, and outright prohibitions all constitute friction. Some of this friction serves legitimate purposes—preventing fraud, ensuring safety. Some of it is rent-seeking by incumbents or bureaucratic accretion. But all of it affects the ease with which value can be constructed.

Access friction is the barrier to participation. If you cannot open a bank account, you face access friction. If you live in a country where certain financial services are unavailable, you face access friction. If you lack the credentials, connections, or capital required to enter a market, you face access friction.

Liquidity friction is the difficulty of converting assets. An illiquid asset—a house, a private company stake, a rare collectible—cannot be quickly exchanged for other goods. This friction constrains economic action, limiting how readily value can be mobilized.

Each of these dimensions of friction affects the ability of organisms to enact value through economic interaction. And each can be measured, at least in principle—unlike abstract concepts like utility or aggregate demand, friction leaves observable traces.

Why Friction Has Been Overlooked

Given its ubiquity, it is striking that no major economic school has placed friction at its center. Several factors explain this oversight.

Theoretical convenience. Neoclassical economics explicitly assumes frictionless markets to achieve mathematical tractability. Agents are assumed to have perfect information, transactions are costless, and adjustments are instantaneous. These assumptions make models solvable but disconnect them from reality. Friction is assumed away rather than analyzed.

Focus on equilibrium. Much economic theory concerns itself with equilibrium states—where supply equals demand, where markets clear, where optimal allocation is achieved. Friction is what prevents or delays the approach to equilibrium. By focusing on the destination rather than the journey, economists have de-emphasized the resistance that shapes the path.

Friction as nuisance. When friction is acknowledged, it is typically treated as an imperfection to be minimized. Transaction costs are inefficiencies. Regulatory burdens are obstacles. Cognitive limitations are biases. The implicit assumption is that less friction is always better—that the ideal economy would be frictionless.

This assumption is wrong.

The Productive Function of Friction

Friction is not merely an obstacle. It is a structuring force that enables certain kinds of value construction while preventing others.

Consider Bitcoin’s proof-of-work mechanism. Mining requires the expenditure of real energy—electricity converted to heat, entropy exported to the environment. This is friction. It is deliberate. And it is what makes Bitcoin secure.

Without this friction, anyone could add blocks to the chain. The ledger would fork continuously, consensus would be impossible, and the scaffold would be useless. The energy expenditure—the friction—is what creates the asymmetry that makes the ledger reliable. Reversing a confirmed transaction would require re-expending all the energy that went into the blocks built on top of it. The friction is the security.

Or consider the ten-minute block time. Bitcoin could have been designed with faster blocks. Some cryptocurrencies have chosen this path. But faster blocks mean more frequent reorganizations, less time for propagation across the network, greater advantage to miners with low-latency connections. The ten-minute interval is friction that creates fairness and stability.

More broadly, friction prevents certain failure modes:

Friction prevents reckless speed. A frictionless market would react instantaneously to every signal, amplifying volatility and enabling manipulation. Some friction—settlement delays, position limits, circuit breakers—dampens oscillations that would otherwise destabilize the system.

Friction forces deliberation. When action is costly, actors think before acting. This reduces errors, prevents impulsive decisions, and creates space for information to propagate. A world where every thought could be instantly executed as a trade would be a world of constant regret.

Friction protects against exploitation. Access friction, while often harmful, can also prevent predatory actors from entering markets they would distort. Regulatory friction, while often excessive, can exclude fraud. The question is not whether friction should exist but what friction serves which purposes.

The insight is that friction is a design variable, not merely an obstacle. The question is not “how do we eliminate friction?” but “what is the optimal friction for the function we want to enable?”

Friction and the Construction of Value

With friction as the central variable, we can reframe core economic questions.

Why do people transact? Not because they have preferences that must be satisfied, but because they are organisms with internal states—hunger, desire, fear, ambition—that create pressure toward action. Some of this pressure is reactive: current deficit demanding current correction. But most is anticipatory: predicted future deficit motivating present preparation. They transact when the expected benefit exceeds the friction cost. Value is constructed when friction is low enough to permit enaction—whether that enaction restores current equilibrium or positions the organism for anticipated futures.

Why does economic growth occur? Not because of abstract forces like technological progress or capital accumulation, but because friction is reduced, enabling more transactions, more interactions, more value construction. When the printing press reduced the friction of information transmission, knowledge spread. When container shipping reduced the friction of moving goods, trade expanded. When the internet reduced the friction of coordination, new forms of economic organization emerged.

Why does economic suffering occur? Because friction prevents organisms from resolving their internal states through economic action. When someone cannot access banking, cannot find work, cannot afford healthcare, cannot escape a bad situation—friction is the mechanism of their suffering. They see what they need, but friction stands between them and it.

Crucially, friction that is chronic imposes costs beyond the friction itself. Poverty is not merely lack of resources—it is the cumulative wear of perpetual adjustment, the allostatic load of navigating scarcity day after day. Chronic friction degrades the organism’s capacity to transact effectively, creating a vicious cycle where the friction itself impairs the ability to overcome friction.

What should policy optimize? Not demand, not inflation, not the capital structure—but friction. The role of the state, in this framework, is to calibrate friction: reducing it where it impedes beneficial value construction, maintaining it where it provides necessary stability or protection, and never pretending that frictionless is the goal.

Friction Across Scales

The friction framework operates at multiple scales, connecting the individual to the systemic.

At the individual level, friction determines whether a specific organism can enact a specific transaction. Can this person send money to their family abroad? Can this entrepreneur access capital? Can this worker find employment that matches their skills? Individual economic fate is largely a matter of which frictions apply to which actors.

At the market level, friction shapes price discovery, liquidity, and efficiency. High-friction markets have wide bid-ask spreads, slow adjustment, and limited participation. Low-friction markets are tight, responsive, and accessible. The character of a market is substantially determined by its friction profile.

At the systemic level, friction determines the overall capacity for value construction. A high-friction economy is one where potential interactions go unrealized, where organisms cannot reach the scaffolds that would enable them to enact value. A low-friction economy is one where value construction is fluid, where organisms can readily interact with their economic environment. Economic development is, in large part, the progressive reduction of friction across all levels.

Bitcoin as Friction Laboratory

Bitcoin provides an unprecedented opportunity to study friction because it makes friction explicit and measurable.

In traditional finance, friction is often hidden—embedded in spreads, obscured by intermediary structures, imposed by regulations whose costs are difficult to quantify. In Bitcoin, friction is visible:

The block time is a known, fixed temporal friction
The transaction fee is a market-priced friction that responds to demand
The confirmation depth required for practical finality is a measurable security parameter
The energy expenditure of mining is tracked and debated publicly

Moreover, Bitcoin allows friction to be studied across jurisdictions. The same protocol operates in countries with vastly different regulatory environments, different levels of financial infrastructure, different degrees of monetary stability. Comparing Bitcoin adoption and usage across these contexts reveals how friction—both on-chain and off-chain—shapes economic behavior.

Finally, Bitcoin demonstrates that friction can be a feature rather than a bug. The very properties that make Bitcoin slow and energy-intensive compared to centralized systems are what make it trustworthy and resistant to manipulation. Bitcoin is a case study in productive friction.

From Friction to Constructed Value

The move to friction as the central variable is not a rejection of other economic insights. Demand matters. Inflation matters. Capital structure matters. Labor matters. But these are downstream of friction—manifestations of how organisms interact with their environment under various friction conditions.

If we want to understand why value is constructed in certain ways and not others, we must attend to friction. If we want to enable more value construction, we must reduce unproductive friction. If we want to prevent value destruction, we must maintain productive friction.

The theory of constructed value is, at its core, a theory of friction and its effects on the interactions between sensory-motor organisms and economic scaffolds. The value that emerges from these interactions is constructed—not discovered, not subjective, not objective, but enacted through physical engagement with the world.

And the variable that governs this construction is friction.

David Graeber, Toward an Anthropological Theory of Value: The False Coin of Our Own Dreams (Palgrave Macmillan, 2001).↩︎
Peter Sterling and Joseph Eyer, Allostasis: A New Paradigm to Explain Arousal Pathology, (New York, NY), Wiley, 1988, 629–49; Peter Sterling, “Allostasis: A Model of Predictive Regulation,” Physiology & Behavior 106, no. 1 (2012): 5–15.↩︎
Michel Cabanac, “Physiological Role of Pleasure,” Science 173, no. 4002 (1971): 1103–7.↩︎

--- title: "Constructed Value" --- Every major school of economic thought has a center of gravity---a single variable that serves as the lens through which all economic phenomena are understood, diagnosed, and treated. This is not a weakness of economic thinking; it is how paradigms work. A school without a central organizing principle would be a collection of observations rather than a framework for understanding. Consider what each school places at its center: **Modern Monetary Theory** elevates inflation. For MMT theorists, a sovereign currency issuer faces no financial constraint---it can always create more money. The only real constraint is inflation: the point at which money creation outpaces the economy's capacity to absorb it. Policy, in this view, should push spending to the edge of inflationary pressure and no further. **Keynesian economics** centers aggregate demand. Recessions occur when total spending falls short of what the economy could produce. Unemployment persists because demand is insufficient. The solution is always some form of stimulus---government spending, monetary easing, anything that puts money in hands that will spend it. **Austrian economics** focuses on time preference and capital structure. Sustainable growth comes from genuine savings channeled into productive investment. Boom-bust cycles arise when credit expansion distorts the structure of production, creating malinvestment that must eventually liquidate. Sound money and non-intervention allow the market to coordinate across time. **Classical economics** privileges production. Wealth is created by making things and trading them. Markets tend toward equilibrium. The path to prosperity is removing obstacles to production and exchange. **Marxist economics** centers labor. All value derives from work, and capitalism is a system for extracting surplus value from workers. The fundamental economic question is who controls the means of production and how the fruits of labor are distributed. Each of these frameworks offers genuine insight. Each captures something real about economic life. And each, by centering one variable, necessarily de-emphasizes others. ## Why Schools Have Centers This pattern---one school, one central variable---emerges for identifiable reasons. **Historical context shapes theory.** Keynesianism was forged in the Great Depression, when the central problem was idle workers and idle factories. Austrian economics developed in response to the inflationary chaos of interwar Europe and the boom-bust cycles of credit expansion. MMT emerged from debates about sovereign debt and the observation that currency-issuing governments don't go bankrupt the way households do. Schools are answers to the dominant problems of their era. **Explanatory power requires simplification.** A framework that treated every variable as equally central would offer no guidance. By privileging one variable, a school can offer clear diagnoses: the problem is insufficient demand, or malinvestment, or exploitation. And it can offer clear prescriptions: stimulate, tighten, redistribute. **Ideological commitments predispose.** Each school carries, often implicitly, a set of values. Austrian economics presumes the primacy of individual choice and spontaneous order. Keynesianism presumes that collective action through government can improve on market outcomes. MMT presumes that the state's monetary power should be deployed for public purposes. These commitments are not derived from the theory; they are prior to it, shaping which variables seem most important. ## Graeber's Breakthrough: Value as Verb Before introducing our own framework, we must acknowledge a crucial precursor. The anthropologist David Graeber, in his work on the theory of value [@graeber_value], made a move that brings us closer to what we are attempting than any of the economic schools just surveyed. Graeber's insight was grammatical: value is not a *noun* but a *verb*. The question is not "What is value?" but "What is valuing?" Value is not a substance residing in objects (as the labor theory would have it) or in minds (as subjective utility theory claims). Value is a process---an activity, a doing. For Graeber, valuing is social action. It is what happens when people coordinate, when they engage in ritual, when they create and exchange meaning. Markets are one site of valuing, but so are gift economies, religious ceremonies, political movements, and artistic communities. Wherever humans act together in ways they consider important, valuing occurs. This move dissolves certain puzzles. We no longer need to locate the essence of value---in labor, in utility, in marginal preference---because value has no location. It is enacted, not discovered. It emerges from what people do, not from properties hidden in things or minds. Graeber's critique of both Marxist and marginalist traditions is devastating. The labor theory reifies value as crystallized work-time embedded in commodities. The utility theory reifies value as subjective states lodged in individual psychology. Both treat value as a substance to be found. Both are looking for a noun when they should be watching a verb. ## Where Graeber Stops For all its power, Graeber's framework remains at the level of social abstraction. Valuing, in his account, is ritual, symbol, collective meaning-making. It is what anthropologists observe when they study gift exchange in Melanesia or cargo cults in the Pacific or the symbolic dimensions of market behavior in industrial societies. But Graeber does not ground the verb in the body. He tells us that valuing is action, but not *whose* action, not *what kind* of body is acting, not *how* the action registers in flesh and nervous system. The organisms doing the valuing remain abstract social actors---persons, agents, participants---not sensory-motor beings with interoceptive states, physiological needs, and embodied constraints. This abstraction has consequences: **No physical substrate.** Where do the traces of valuing go? In Graeber's account, into culture, into social memory, into the patterns of ongoing practice. But culture and social memory are themselves abstractions. There is no *thing* you can point to, no material record you can measure. **No measurability.** If valuing is social ritual, how do we count it? How do we compare valuing across societies, across time, across different contexts? Graeber offers interpretation, not measurement. Rich interpretation---but interpretation nonetheless. **No mechanism.** What connects one act of valuing to the next? What explains why organisms value at all? Graeber has no theory of motivation grounded in the body, no account of why valuing happens beyond the observation that humans are meaning-making creatures. Graeber moved from noun to verb. But the verb floats in social space, unanchored to flesh. ## From Social Verb to Embodied Trace Constructed value theory takes Graeber's verb and grounds it in the body. The sequence is: **Interoception.** The organism senses its internal state. Hunger, thirst, cold, fatigue, desire, fear, anticipation, discomfort. These are not abstract preferences; they are physiological signals, proprioceptive and interoceptive data that the nervous system continuously monitors. The intuitive case is *reactive*: the organism knows, in a pre-reflective way, that something is off, that action is required, that the current state is not the desired state. This is homeostasis---error-correction in real time. But interoception also includes *prediction*. The brain continuously evaluates the match between current resources and anticipated demands. The organism knows, equally pre-reflectively, that something *will be* off, that preparation is required, that the future state will not be the desired state unless action is taken now. This is allostasis---anticipatory adjustment before need arises [@sterling_allostasis; @sterling_allostasis_2012]. **Alliesthetic motivation.** The internal state modulates the organism's disposition toward external stimuli. Water is valuable when thirsty, aversive when satiated. This is alliesthesia---the same stimulus, different response, depending on internal state [@cabanac_alliesthesia]. What Graeber calls "valuing" has a physiological basis. Here too, both reactive and anticipatory modes operate. Water is valuable when thirsty *now* (reactive). Water is valuable when thirst is *anticipated* (anticipatory). The grocery run, the insurance policy, the savings account---these are anticipatory valuings, driven not by current deficit but by predicted future deficit. **Action.** The organism acts. It reaches, grasps, moves, speaks, clicks, signs. It comes into contact with the environment, including the economic scaffolds that structure exchange. This is sensory-motor engagement---not abstract choice, but physical movement through space and time. **Transaction.** If friction permits, the action completes as a transaction. Goods change hands. Money moves. The ledger updates. This is the site of value construction---not the internal state that preceded it, not the social meaning that may follow, but the moment of exchange itself. **Trace.** The transaction leaves a trace. In barter, the trace is memory---fallible, contested, fading. In traditional ledgers, the trace is ink on paper---more durable, but still local and manipulable. In Bitcoin, the trace is electromagnetic state---electrons configured in flash memory across thousands of nodes, secured by accumulated thermodynamic work, practically immutable. **Stratigraphy.** Traces accumulate. The ledger grows. What was the chain tip becomes buried depth. The history of valuing is inscribed in physical substrate, readable and verifiable. This is what Graeber was reaching for but could not grasp: a theory where valuing is action, but action grounded in bodies, producing traces in matter, accumulating into history that can be measured rather than merely interpreted. The anticipatory dimension is crucial. The ledger is not merely a record of organisms restoring equilibrium. It is predominantly a record of organisms *positioning themselves for anticipated futures*---buying groceries before hunger, insurance before loss, warm clothes before winter. Most transactions are anticipatory, not reactive. The ledger captures predictions as much as corrections. ## The Radical Empiricism The consequence of this grounding is methodological. Constructed value theory is not a new interpretation of economic phenomena. It is a different method of analysis---one that deals in real signals and measurable behaviors rather than inferred preferences and theoretical constructs. Consider the contrast: **Subjective value theory** asks: What do people prefer? This cannot be directly observed. Preferences are inferred from behavior, but the inference requires assumptions about rationality, consistency, and the relationship between internal states and external action. The data is behavior; the explanandum is an unobservable mental state. **Constructed value theory** asks: What transactions occur? This can be directly observed. The ledger records them. The chain preserves them. The data is the trace; the explanandum is the pattern of traces. We do not need to know *why* an organism transacted---what internal state motivated it, what meaning it attributed to the exchange, what preferences it was satisfying. We observe *that* it transacted, and we study the consequences of that transaction as recorded in physical substrate. This is not behaviorism, which denies the relevance of internal states. Internal states matter---they are why organisms act at all. But we do not need to directly access or accurately model internal states to study value construction. The transaction is the sufficient statistic. Whatever complexity is happening inside the organism, it expresses itself through observable action that leaves measurable traces. The interoceptive states are upstream of the transaction. The traces are downstream. Constructed value theory works at the level of traces, treating interoception as the *cause* of valuing without requiring that we measure the cause directly. We measure the effect: the transaction, the trace, the stratigraphy. ## Why Bitcoin Makes This Possible Graeber lacked a substrate. Traditional economics lacked observable value-in-action. Both were forced into abstraction---interpreting social meaning or inferring hidden preferences---because there was nothing physical to point to. Bitcoin provides the substrate. The ledger is not a metaphor. It is electromagnetic configuration of matter, distributed across thousands of machines, synchronized through cryptographic protocols, secured by thermodynamic work. Every transaction is recorded. Every record persists. The stratigraphy is public, verifiable, immutable for practical purposes. When an organism's interoceptive state motivates action, and that action completes as a Bitcoin transaction, the consequence of interoception becomes electromagnetic trace. The internal state---unknowable, private, evanescent---produces an external record---observable, public, permanent. This is what makes constructed value theory radically empirical. Not interpretation of social ritual. Not inference of mental states. Measurement of physical traces left by embodied organisms acting in the world. Graeber gave us the verb. Bitcoin gives us the ledger where the verb leaves its mark. ## The Variable We Propose For the framework we are developing---constructed value economics---the central variable is **friction**. Friction is the resistance encountered when economic actors attempt to enact value through interaction with their environment. It is what stands between the intention to transact and the completed transaction. It is what makes some economic actions easy and others difficult, some instantaneous and others slow, some cheap and others expensive. This choice is not arbitrary. It emerges from the physical, embodied framework we have established. If value is constructed through the interaction of sensory-motor organisms with economic scaffolds, then friction is the variable that governs whether and how that construction can occur. ## What Friction Includes Friction is a broad concept, encompassing multiple dimensions of resistance: **Transaction friction** is the cost and effort required to complete an exchange. This includes fees, paperwork, time spent, and the cognitive load of navigating processes. When you wire money internationally, the fees are transaction friction. When you spend an hour on hold with your bank, that is transaction friction. When you abandon a purchase because the checkout process is too cumbersome, transaction friction has prevented value construction. **Temporal friction** is delay. The time between initiating an action and seeing its effect. In traditional finance, settlement can take days. In Bitcoin, it takes roughly ten minutes for a transaction to be included in a block, and longer for practical finality as confirmations accumulate. This is friction by design---a deliberate trade-off between speed and security. **Cognitive friction** is the mental effort required to understand and act. Complex tax codes create cognitive friction. Opaque financial products create cognitive friction. Interfaces that require expertise to navigate create cognitive friction. When an economic actor cannot understand their options, friction has reduced their ability to construct value. **Regulatory friction** is imposed by institutions. Licensing requirements, compliance obligations, reporting mandates, and outright prohibitions all constitute friction. Some of this friction serves legitimate purposes---preventing fraud, ensuring safety. Some of it is rent-seeking by incumbents or bureaucratic accretion. But all of it affects the ease with which value can be constructed. **Access friction** is the barrier to participation. If you cannot open a bank account, you face access friction. If you live in a country where certain financial services are unavailable, you face access friction. If you lack the credentials, connections, or capital required to enter a market, you face access friction. **Liquidity friction** is the difficulty of converting assets. An illiquid asset---a house, a private company stake, a rare collectible---cannot be quickly exchanged for other goods. This friction constrains economic action, limiting how readily value can be mobilized. Each of these dimensions of friction affects the ability of organisms to enact value through economic interaction. And each can be measured, at least in principle---unlike abstract concepts like utility or aggregate demand, friction leaves observable traces. ## Why Friction Has Been Overlooked Given its ubiquity, it is striking that no major economic school has placed friction at its center. Several factors explain this oversight. **Theoretical convenience.** Neoclassical economics explicitly assumes frictionless markets to achieve mathematical tractability. Agents are assumed to have perfect information, transactions are costless, and adjustments are instantaneous. These assumptions make models solvable but disconnect them from reality. Friction is assumed away rather than analyzed. **Focus on equilibrium.** Much economic theory concerns itself with equilibrium states---where supply equals demand, where markets clear, where optimal allocation is achieved. Friction is what prevents or delays the approach to equilibrium. By focusing on the destination rather than the journey, economists have de-emphasized the resistance that shapes the path. **Friction as nuisance.** When friction is acknowledged, it is typically treated as an imperfection to be minimized. Transaction costs are inefficiencies. Regulatory burdens are obstacles. Cognitive limitations are biases. The implicit assumption is that less friction is always better---that the ideal economy would be frictionless. This assumption is wrong. ## The Productive Function of Friction Friction is not merely an obstacle. It is a structuring force that enables certain kinds of value construction while preventing others. Consider Bitcoin's proof-of-work mechanism. Mining requires the expenditure of real energy---electricity converted to heat, entropy exported to the environment. This is friction. It is deliberate. And it is what makes Bitcoin secure. Without this friction, anyone could add blocks to the chain. The ledger would fork continuously, consensus would be impossible, and the scaffold would be useless. The energy expenditure---the friction---is what creates the asymmetry that makes the ledger reliable. Reversing a confirmed transaction would require re-expending all the energy that went into the blocks built on top of it. The friction is the security. Or consider the ten-minute block time. Bitcoin could have been designed with faster blocks. Some cryptocurrencies have chosen this path. But faster blocks mean more frequent reorganizations, less time for propagation across the network, greater advantage to miners with low-latency connections. The ten-minute interval is friction that creates fairness and stability. More broadly, friction prevents certain failure modes: **Friction prevents reckless speed.** A frictionless market would react instantaneously to every signal, amplifying volatility and enabling manipulation. Some friction---settlement delays, position limits, circuit breakers---dampens oscillations that would otherwise destabilize the system. **Friction forces deliberation.** When action is costly, actors think before acting. This reduces errors, prevents impulsive decisions, and creates space for information to propagate. A world where every thought could be instantly executed as a trade would be a world of constant regret. **Friction protects against exploitation.** Access friction, while often harmful, can also prevent predatory actors from entering markets they would distort. Regulatory friction, while often excessive, can exclude fraud. The question is not whether friction should exist but what friction serves which purposes. The insight is that friction is a design variable, not merely an obstacle. The question is not "how do we eliminate friction?" but "what is the optimal friction for the function we want to enable?" ## Friction and the Construction of Value With friction as the central variable, we can reframe core economic questions. **Why do people transact?** Not because they have preferences that must be satisfied, but because they are organisms with internal states---hunger, desire, fear, ambition---that create pressure toward action. Some of this pressure is reactive: current deficit demanding current correction. But most is anticipatory: predicted future deficit motivating present preparation. They transact when the expected benefit exceeds the friction cost. Value is constructed when friction is low enough to permit enaction---whether that enaction restores current equilibrium or positions the organism for anticipated futures. **Why does economic growth occur?** Not because of abstract forces like technological progress or capital accumulation, but because friction is reduced, enabling more transactions, more interactions, more value construction. When the printing press reduced the friction of information transmission, knowledge spread. When container shipping reduced the friction of moving goods, trade expanded. When the internet reduced the friction of coordination, new forms of economic organization emerged. **Why does economic suffering occur?** Because friction prevents organisms from resolving their internal states through economic action. When someone cannot access banking, cannot find work, cannot afford healthcare, cannot escape a bad situation---friction is the mechanism of their suffering. They see what they need, but friction stands between them and it. Crucially, friction that is *chronic* imposes costs beyond the friction itself. Poverty is not merely lack of resources---it is the cumulative wear of perpetual adjustment, the allostatic load of navigating scarcity day after day. Chronic friction degrades the organism's capacity to transact effectively, creating a vicious cycle where the friction itself impairs the ability to overcome friction. **What should policy optimize?** Not demand, not inflation, not the capital structure---but friction. The role of the state, in this framework, is to calibrate friction: reducing it where it impedes beneficial value construction, maintaining it where it provides necessary stability or protection, and never pretending that frictionless is the goal. ## Friction Across Scales The friction framework operates at multiple scales, connecting the individual to the systemic. At the **individual level**, friction determines whether a specific organism can enact a specific transaction. Can this person send money to their family abroad? Can this entrepreneur access capital? Can this worker find employment that matches their skills? Individual economic fate is largely a matter of which frictions apply to which actors. At the **market level**, friction shapes price discovery, liquidity, and efficiency. High-friction markets have wide bid-ask spreads, slow adjustment, and limited participation. Low-friction markets are tight, responsive, and accessible. The character of a market is substantially determined by its friction profile. At the **systemic level**, friction determines the overall capacity for value construction. A high-friction economy is one where potential interactions go unrealized, where organisms cannot reach the scaffolds that would enable them to enact value. A low-friction economy is one where value construction is fluid, where organisms can readily interact with their economic environment. Economic development is, in large part, the progressive reduction of friction across all levels. ## Bitcoin as Friction Laboratory Bitcoin provides an unprecedented opportunity to study friction because it makes friction explicit and measurable. In traditional finance, friction is often hidden---embedded in spreads, obscured by intermediary structures, imposed by regulations whose costs are difficult to quantify. In Bitcoin, friction is visible: - The **block time** is a known, fixed temporal friction - The **transaction fee** is a market-priced friction that responds to demand - The **confirmation depth** required for practical finality is a measurable security parameter - The **energy expenditure** of mining is tracked and debated publicly Moreover, Bitcoin allows friction to be studied across jurisdictions. The same protocol operates in countries with vastly different regulatory environments, different levels of financial infrastructure, different degrees of monetary stability. Comparing Bitcoin adoption and usage across these contexts reveals how friction---both on-chain and off-chain---shapes economic behavior. Finally, Bitcoin demonstrates that friction can be a feature rather than a bug. The very properties that make Bitcoin slow and energy-intensive compared to centralized systems are what make it trustworthy and resistant to manipulation. Bitcoin is a case study in productive friction. ## From Friction to Constructed Value The move to friction as the central variable is not a rejection of other economic insights. Demand matters. Inflation matters. Capital structure matters. Labor matters. But these are downstream of friction---manifestations of how organisms interact with their environment under various friction conditions. If we want to understand why value is constructed in certain ways and not others, we must attend to friction. If we want to enable more value construction, we must reduce unproductive friction. If we want to prevent value destruction, we must maintain productive friction. The theory of constructed value is, at its core, a theory of friction and its effects on the interactions between sensory-motor organisms and economic scaffolds. The value that emerges from these interactions is constructed---not discovered, not subjective, not objective, but enacted through physical engagement with the world. And the variable that governs this construction is friction.