--- MAPPING: natural price of commodities-to-S3 Control ---

# Natural Price of Commodities -> S3 Control

## Economic Entity Reference

--- ENTITY: natural price of commodities ---

# Natural Price of Commodities

## Definition

The price of a commodity that exactly covers the rent of land, wages of labour, and profits of stock required to bring it to market, representing the central or equilibrium price toward which market prices continually gravitate.

## Source Chapter

Book I, Chapter 7

## Context

The central concept of this chapter, introduced as the price that "leaves him this profit" and is "the lowest at which he is likely to sell them for any considerable time" under conditions of perfect liberty.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S3 Control ---

# System 3 (S3) — Control / Operational Management

## Definition

The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.

## Key Functions

- Internal regulation
- Resource allocation
- Accountability
- Synergy extraction
- Performance management

## VSM Framework Reference

---

## Mapping Rationale

Natural price functions as an internal regulatory mechanism that establishes the equilibrium conditions for market operations, analogous to how S3 Control sets rules and constraints for operational units. Just as S3 optimises the internal environment by establishing performance parameters and resource allocation rules, natural price determines the minimum viable price that covers all production costs (rent, wages, profit) and thus regulates what constitutes sustainable market operation. This regulatory function ensures that producers can continue operations while preventing destructive price competition that would drive prices below sustainable levels.

## Mapping Strength

Strong

---

--- MAPPING: market price of commodities-to-S2 Coordination ---

# Market Price of Commodities -> S2 Coordination

## Economic Entity Reference

--- ENTITY: market price of commodities ---

# Market Price of Commodities

## Definition

The actual price at which any commodity is commonly sold, which may be above, below, or exactly the same as its natural price, determined by the proportion between quantity brought to market and the effectual demand.

## Source Chapter

Book I, Chapter 7

## Context

Distinguished from natural price as the "actual price at which any commodity is commonly sold," with its fluctuations explained through the dynamics of supply and demand.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Market price serves as the primary coordination mechanism between producers and consumers, analogous to how S2 Coordination facilitates communication and resolves conflicts between operational units. The price mechanism coordinates supply and demand through information signals, dampening the oscillations between oversupply and undersupply. Just as S2 prevents destructive competition between operational units by establishing communication channels, market prices coordinate the activities of numerous independent producers and consumers without central direction, allowing the system to self-organise around equilibrium conditions.

## Mapping Strength

Strong

---

--- MAPPING: effectual demand-to-S4 Intelligence ---

# Effectual Demand -> S4 Intelligence

## Economic Entity Reference

--- ENTITY: effectual demand ---

# Effectual Demand

## Definition

The demand of those willing and able to pay the whole value of rent, labour, and profit required to bring a commodity to market, sufficient to effectuate its bringing to market, as distinguished from mere desire or absolute demand.

## Source Chapter

Book I, Chapter 7

## Context

Introduced as the key determinant of market price, contrasting with "absolute demand" through the example of a poor man's desire for a coach and six.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S4 Intelligence ---

# System 4 (S4) — Intelligence / Adaptation

## Definition

The bodies and processes that look outward to the environment to monitor how the organisation needs to adapt to remain viable. System 4 captures all relevant information about the outside-and-then environment. It is responsible for strategic responses.

## Key Functions

- Environmental scanning
- Future orientation
- Strategic planning
- Modelling
- Research and development

## VSM Framework Reference

---

## Mapping Rationale

Effectual demand represents the system's intelligence gathering about actual market conditions and consumer capacity, analogous to how S4 Intelligence scans the environment for strategic information. By distinguishing between mere desire and actual purchasing power, effectual demand provides the organisation with realistic intelligence about what the market will bear, similar to how S4 filters environmental signals to identify viable opportunities. This intelligence function determines whether production efforts should be undertaken based on real market capacity rather than theoretical demand.

## Mapping Strength

Moderate

---

--- MAPPING: ordinary rates of wages, profit, and rent-to-S3 Control ---

# Ordinary Rates of Wages, Profit, and Rent -> S3 Control

## Economic Entity Reference

--- ENTITY: ordinary rates of wages, profit, and rent ---

# Ordinary Rates of Wages, Profit, and Rent

## Definition

The average or typical rates of wages, profit, and rent that prevail in a society or neighbourhood, regulated partly by general circumstances of the society and partly by the particular nature of each employment.

## Source Chapter

Book I, Chapter 7

## Context

Presented as the foundation for understanding natural prices, with these ordinary rates being "naturally regulated" by both societal conditions and employment-specific factors.

## Economic Domain

Distribution

---

## VSM Concept Reference

--- VSM SYSTEM: S3 Control ---

# System 3 (S3) — Control / Operational Management

## Definition

The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.

## Key Functions

- Internal regulation
- Resource allocation
- Accountability
- Synergy extraction
- Performance management

## VSM Framework Reference

---

## Mapping Rationale

Ordinary rates of wages, profit, and rent function as internal regulatory parameters that establish the baseline conditions for economic operations, analogous to how S3 Control sets operational parameters and resource allocation rules. These rates represent the system's internal calibration of what constitutes fair compensation across different economic activities, similar to how S3 establishes performance standards and resource distribution mechanisms. The regulation of these rates by both societal circumstances and employment-specific factors mirrors S3's dual role in managing both general organisational constraints and specific operational requirements.

## Mapping Strength

Strong

---

--- MAPPING: natural rates of wages, profit, and rent-to-S3 Control ---

# Natural Rates of Wages, Profit, and Rent -> S3 Control

## Economic Entity Reference

--- ENTITY: natural rates of wages, profit, and rent ---

# Natural Rates of Wages, Profit, and Rent

## Definition

The ordinary or average rates of wages, profit, and rent at a particular time and place, which serve as the component parts of natural price for commodities.

## Source Chapter

Book I, Chapter 7

## Context

Defined as the rates that "may be called the natural rates of wages, profit and rent, at the time and place in which they commonly prevail."

## Economic Domain

Distribution

---

## VSM Concept Reference

--- VSM SYSTEM: S3 Control ---

# System 3 (S3) — Control / Operational Management

## Definition

The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.

## Key Functions

- Internal regulation
- Resource allocation
- Accountability
- Synergy extraction
- Performance management

## VSM Framework Reference

---

## Mapping Rationale

Natural rates of wages, profit, and rent function as the internal regulatory framework that determines sustainable economic operation, analogous to how S3 Control establishes the parameters within which operational units must function. These rates represent the equilibrium conditions that allow the economic system to maintain viability by ensuring that all participants receive adequate compensation for their contributions. Just as S3 Control optimises the internal environment by setting performance standards and resource allocation rules, natural rates establish the baseline conditions that prevent destructive competition while ensuring system sustainability.

## Mapping Strength

Strong

---

--- MAPPING: component parts of price-to-S1 Operations ---

# Component Parts of Price -> S1 Operations

## Economic Entity Reference

--- ENTITY: component parts of price ---

# Component Parts of Price

## Definition

The three elements that constitute the price of any commodity: rent of land, wages of labour, and profits of stock, which must be paid to bring the commodity to market.

## Source Chapter

Book I, Chapter 7

## Context

Identified as the "rent of the land, the wages of the labour, and the profits of the stock" that together determine whether a commodity is sold at its natural price.

## Economic Domain

Distribution

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

The component parts of price (rent, wages, profit) represent the fundamental operational activities that directly produce economic value, analogous to how S1 Operations are the primary value-creating activities of an organisation. These components constitute the actual work performed in bringing commodities to market: the rent represents land use operations, wages represent labour operations, and profits represent capital operations. Each component is itself a viable economic activity that directly engages with the environment to produce value, just as S1 units are autonomous operational elements that create the organisation's primary outputs.

## Mapping Strength

Strong

---

--- MAPPING: prime cost of commodities-to-S1 Operations ---

# Prime Cost of Commodities -> S1 Operations

## Economic Entity Reference

--- ENTITY: prime cost of commodities ---

# Prime Cost of Commodities

## Definition

The cost of production excluding the profit of the person who sells the commodity again, though in economic analysis this profit must be included for the seller to avoid loss.

## Source Chapter

Book I, Chapter 7

## Context

Distinguished from natural price through the observation that "what is called the prime cost of any commodity does not comprehend the profit of the person who is to sell it again."

## Economic Domain

Production

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

Prime cost represents the direct operational costs of production activities, analogous to how S1 Operations encompass the primary value-creating activities of an organisation. The prime cost captures the actual resources consumed in production (materials, direct labour) without including the profit margin of subsequent trading, similar to how S1 focuses on direct operational activities rather than secondary trading or coordination functions. This mapping reflects the recursive nature of economic operations where each production stage has its own prime costs that must be covered for viability.

## Mapping Strength

Strong

---

--- MAPPING: subsistence of the dealer-to-S1 Operations ---

# Subsistence of the Dealer -> S1 Operations

## Economic Entity Reference

--- ENTITY: subsistence of the dealer ---

# Subsistence of the Dealer

## Definition

The dealer's own maintenance and livelihood, which must be provided for through the profit from selling goods, just as the dealer advances wages to workmen during production.

## Source Chapter

Book I, Chapter 7

## Context

Explained through the analogy that "as, while he is preparing and bringing the goods to market, he advances to his workmen their wages, or their subsistence; so he advances to himself, in the same manner, his own subsistence."

## Economic Domain

Distribution

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

The subsistence of the dealer represents the direct operational requirement for maintaining the viability of trading activities, analogous to how S1 Operations must sustain themselves to continue producing value. Just as S1 units require resources to maintain their operational viability, the dealer's subsistence is a fundamental operational cost that must be covered through trading activities. This reflects the recursive principle where each economic entity, including the dealer as an operational unit, must maintain its own viability through the profits generated from its primary activities.

## Mapping Strength

Strong

---

--- MAPPING: perfect liberty in trade-to-S5 Policy ---

# Perfect Liberty in Trade -> S5 Policy

## Economic Entity Reference

--- ENTITY: perfect liberty in trade ---

# Perfect Liberty in Trade

## Definition

The condition where a dealer may change his trade as often as he pleases, allowing market prices to gravitate toward natural prices without artificial restrictions.

## Source Chapter

Book I, Chapter 7

## Context

Mentioned as the condition under which "the lowest at which he is likely to sell them for any considerable time" is the natural price.

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Perfect liberty in trade represents the fundamental policy framework that enables the economic system to function optimally, analogous to how S5 Policy defines the identity and purpose of an organisation. This policy condition of unrestricted trade allows the system to achieve its natural equilibrium state, similar to how S5 establishes the overarching principles that guide organisational behaviour. The concept of perfect liberty as a policy choice that enables natural price mechanisms reflects S5's role in balancing competing demands and establishing the conditions under which the system can achieve viability.

## Mapping Strength

Moderate

---

--- MAPPING: overstocked market conditions-to-S2 Coordination ---

# Overstocked Market Conditions -> S2 Coordination

## Economic Entity Reference

--- ENTITY: overstocked market conditions ---

# Overstocked Market Conditions

## Definition

Market situations where the quantity of a commodity brought to market exceeds the effectual demand, causing prices to fall below natural prices.

## Source Chapter

Book I, Chapter 7

## Context

Described through the dynamics of how excess supply forces prices down while insufficient supply drives prices up through competition among buyers.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Overstocked market conditions trigger the coordination mechanism that adjusts supply through price signals, analogous to how S2 Coordination dampens oscillations between operational units. When supply exceeds demand, falling prices coordinate producer behaviour by signalling reduced production, similar to how S2 resolves conflicts and prevents destructive competition between operational units. This coordination function ensures that the system self-corrects toward equilibrium without central direction, maintaining viability through market mechanisms.

## Mapping Strength

Strong

---

--- MAPPING: understocked market conditions-to-S2 Coordination ---

# Understocked Market Conditions -> S2 Coordination

## Economic Entity Reference

--- ENTITY: understocked market conditions ---

# Understocked Market Conditions

## Definition

Market situations where the quantity of a commodity falls short of the effectual demand, causing prices to rise above natural prices.

## Source Chapter

Book I, Chapter 7

## Context

Described through the dynamics of how excess supply forces prices down while insufficient supply drives prices up through competition among buyers.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Understocked market conditions activate the coordination mechanism that adjusts supply through price signals, analogous to how S2 Coordination manages system imbalances. When demand exceeds supply, rising prices coordinate producer behaviour by signalling increased production, similar to how S2 resolves conflicts and prevents destructive competition between operational units. This coordination function ensures that the system self-corrects toward equilibrium without central direction, maintaining viability through market mechanisms.

## Mapping Strength

Strong

---

--- MAPPING: competition among dealers-to-S2 Coordination ---

# Competition Among Dealers -> S2 Coordination

## Economic Entity Reference

--- ENTITY: competition among dealers ---

# Competition Among Dealers

## Definition

The rivalry between different sellers that obliges them to accept the market price but does not oblige them to accept less, helping to regulate prices toward natural levels.

## Source Chapter

Book I, Chapter 7

## Context

Identified as the force that "obliges them all to accept of this price, but does not oblige them to accept of less" when market price equals natural price.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Competition among dealers functions as a coordination mechanism that establishes market price equilibrium, analogous to how S2 Coordination manages interactions between operational units. This competitive process communicates information about supply conditions and prevents destructive price wars, similar to how S2 resolves conflicts and maintains system stability. The coordination achieved through dealer competition ensures that prices reflect actual market conditions without requiring central direction.

## Mapping Strength

Strong

---

--- MAPPING: competition among buyers-to-S2 Coordination ---

# Competition Among Buyers -> S2 Coordination

## Economic Entity Reference

--- ENTITY: competition among buyers ---

# Competition Among Buyers

## Definition

The rivalry between purchasers when quantity falls short of effectual demand, causing market prices to rise above natural prices as buyers compete to secure limited supply.

## Source Chapter

Book I, Chapter 7

## Context

Described as the mechanism that "will immediately begin among them, and the market price will rise more or less above the natural price" when supply is insufficient.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Competition among buyers serves as a coordination mechanism that signals demand conditions through price movements, analogous to how S2 Coordination manages system imbalances. When buyers compete for limited supply, rising prices coordinate producer behaviour by signalling the need for increased production, similar to how S2 resolves conflicts and prevents destructive competition between operational units. This coordination function ensures that the system self-corrects toward equilibrium without central direction.

## Mapping Strength

Strong

---

--- MAPPING: competition among sellers-to-S2 Coordination ---

# Competition Among Sellers -> S2 Coordination

## Economic Entity Reference

--- ENTITY: competition among sellers ---

# Competition Among Sellers

## Definition

The rivalry between suppliers when quantity exceeds effectual demand, causing market prices to fall below natural prices as sellers compete to dispose of excess inventory.

## Source Chapter

Book I, Chapter 7

## Context

Identified as the force that "increases more or less the competition of the sellers" when supply exceeds demand, reducing market prices.

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Competition among sellers functions as a coordination mechanism that signals oversupply conditions through price reductions, analogous to how S2 Coordination manages system imbalances. When sellers compete to dispose of excess inventory, falling prices coordinate producer behaviour by signalling reduced production, similar to how S2 resolves conflicts and prevents destructive competition between operational units. This coordination function ensures that the system self-corrects toward equilibrium without central direction.

## Mapping Strength

Strong

---

--- MAPPING: natural price as central price-to-S3 Control ---

# Natural Price as Central Price -> S3 Control

## Economic Entity Reference

--- ENTITY: natural price as central price ---

# Natural Price as Central Price

## Definition

The concept of natural price as the equilibrium or central point toward which market prices continually gravitate, though occasionally suspended above or forced below by various accidents or regulations.

## Source Chapter

Book I, Chapter 7

## Context

Explicitly described as "the central price, to which the prices of all commodities are continually gravitating."

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S3 Control ---

# System 3 (S3) — Control / Operational Management

## Definition

The structures and controls that establish the rules, resources, rights, and responsibilities of System 1 and provide an interface between Systems 1 and Systems 4/5. System 3 represents the day-to-day control of the organisation. It optimises the internal environment.

## Key Functions

- Internal regulation
- Resource allocation
- Accountability
- Synergy extraction
- Performance management

## VSM Framework Reference

---

## Mapping Rationale

Natural price as the central price represents the internal regulatory equilibrium that governs market operations, analogous to how S3 Control establishes the parameters within which operational units must function. This central price serves as the system's internal calibration point that ensures sustainable economic operation, similar to how S3 optimises the internal environment by setting performance standards and resource allocation rules. The concept of prices gravitating toward this central point reflects S3's role in maintaining system stability and preventing destructive deviations from sustainable operating conditions.

## Mapping Strength

Strong

---

--- MAPPING: annual industry employed in production-to-S1 Operations ---

# Annual Industry Employed in Production -> S1 Operations

## Economic Entity Reference

--- ENTITY: annual industry employed in production ---

# Annual Industry Employed in Production

## Definition

The total quantity of industry annually employed to bring any commodity to market, which naturally suits itself to the effectual demand through market mechanisms.

## Source Chapter

Book I, Chapter 7

## Context

Described as naturally aiming "at bringing always that precise quantity thither which may be sufficient to supply, and no more than supply, that demand."

## Economic Domain

Production

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

Annual industry employed in production represents the direct operational activities that create economic value, analogous to how S1 Operations are the primary value-creating activities of an organisation. This industry constitutes the actual work performed in bringing commodities to market, directly engaging with the environment to produce outputs. The autonomous nature of this industry, which naturally adjusts to meet effectual demand without central direction, reflects S1's principle of operational autonomy within system constraints.

## Mapping Strength

Strong

---

--- MAPPING: species of industry with variable output-to-S1 Operations ---

# Species of Industry with Variable Output -> S1 Operations

## Economic Entity Reference

--- ENTITY: species of industry with variable output ---

# Species of Industry with Variable Output

## Definition

Productive activities where the same quantity of industry produces different quantities of commodities in different years, such as agriculture producing varying amounts of corn, wine, oil, and hops.

## Source Chapter

Book I, Chapter 7

## Context

Contrasted with industries producing consistent output, explaining why agricultural prices fluctuate more than manufactured goods.

## Economic Domain

Production

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

Species of industry with variable output represents a specific type of operational activity that directly creates value but with fluctuating productivity, analogous to how S1 Operations encompass diverse value-creating activities with varying characteristics. Agricultural production exemplifies operational units that engage directly with environmental conditions (weather, soil) to produce outputs, maintaining autonomy while being subject to external variability. This mapping reflects the recursive principle where each productive enterprise is itself a viable system with its own operational characteristics.

## Mapping Strength

Strong

---

--- MAPPING: species of industry with consistent output-to-S1 Operations ---

# Species of Industry with Consistent Output -> S1 Operations

## Economic Entity Reference

--- ENTITY: species of industry with consistent output ---

# Species of Industry with Consistent Output

## Definition

Productive activities where the same quantity of industry produces the same or very nearly the same quantity of commodities each year, such as spinning or weaving producing consistent amounts of linen and woollen cloth.

## Source Chapter

Book I, Chapter 7

## Context

Contrasted with agriculture to explain why manufactured goods have more stable prices than agricultural products.

## Economic Domain

Production

---

## VSM Concept Reference

--- VSM SYSTEM: S1 Operations ---

# System 1 (S1) — Operations

## Definition

The primary activities that produce the organisation's purpose. These are the operational units that directly create value. Each operational element is itself a viable system (the principle of recursion).

## Key Functions

- Direct value creation
- Primary production
- Autonomous operation
- Direct environmental engagement

## VSM Framework Reference

---

## Mapping Rationale

Species of industry with consistent output represents a specific type of operational activity that directly creates value with predictable productivity, analogous to how S1 Operations encompass diverse value-creating activities with varying characteristics. Manufacturing production exemplifies operational units that engage directly with controlled processes to produce consistent outputs, maintaining autonomy while operating under stable conditions. This mapping reflects the recursive principle where each productive enterprise is itself a viable system with its own operational characteristics.

## Mapping Strength

Strong

---

--- MAPPING: occasional and temporary market fluctuations-to-S2 Coordination ---

# Occasional and Temporary Market Fluctuations -> S2 Coordination

## Economic Entity Reference

--- ENTITY: occasional and temporary market fluctuations ---

# Occasional and Temporary Market Fluctuations

## Definition

Short-term variations in market prices that primarily affect the wages and profit components of price, while having less impact on rent, which is more stable in both rate and value.

## Source Chapter

Book I, Chapter 7

## Context

Distinguished from permanent deviations, with the observation that "the occasional and temporary fluctuations in the market price of any commodity fall chiefly upon those parts of its price which resolve themselves into wages and profit."

## Economic Domain

Exchange

---

## VSM Concept Reference

--- VSM SYSTEM: S2 Coordination ---

# System 2 (S2) — Coordination

## Definition

The information channels and bodies that allow the primary activities in System 1 to communicate with each other and that allow System 3 to monitor and coordinate activities. System 2 dampens oscillations and resolves conflicts between operational units.

## Key Functions

- Information channels
- Communication facilitation
- Oscillation dampening
- Conflict resolution
- Standardisation

## VSM Framework Reference

---

## Mapping Rationale

Occasional and temporary market fluctuations represent the coordination mechanism's response to short-term imbalances, analogous to how S2 Coordination manages oscillations between operational units. These fluctuations communicate information about temporary supply and demand imbalances through price movements, allowing the system to self-correct without requiring permanent structural changes. The dampening effect on wages and profits while leaving rent relatively stable reflects S2's role in managing system stability while allowing operational flexibility.

## Mapping Strength

Strong

---

--- MAPPING: permanent market price enhancements-to-S5 Policy ---

# Permanent Market Price Enhancements -> S5 Policy

## Economic Entity Reference

--- ENTITY: permanent market price enhancements ---

# Permanent Market Price Enhancements

## Definition

Sustained increases in market price above natural price caused by natural causes (such as unique soil conditions) or artificial regulations (such as monopolies), which can last for many years or even centuries.

## Source Chapter

Book I, Chapter 7

## Context

Distinguished from temporary fluctuations, with examples including monopolies and unique natural productions that command premium prices.

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Permanent market price enhancements represent the outcome of long-term policy decisions or natural conditions that fundamentally alter the economic system's operating parameters, analogous to how S5 Policy establishes the overarching principles that guide organisational behaviour. These sustained price deviations reflect the system's identity and purpose as shaped by policy choices (monopolies, regulations) or unique characteristics (natural advantages), similar to how S5 defines the organisation's fundamental identity and values. The permanence of these enhancements reflects S5's role in establishing long-term strategic direction.

## Mapping Strength

Moderate

---

--- MAPPING: monopoly effects on market price-to-S5 Policy ---

# Monopoly Effects on Market Price -> S5 Policy

## Economic Entity Reference

--- ENTITY: monopoly effects on market price ---

# Monopoly Effects on Market Price

## Definition

The ability of monopolists to keep markets understocked and sell commodities above natural price by never fully supplying effectual demand, thereby raising wages and profits above natural rates.

## Source Chapter

Book I, Chapter 7

## Context

Compared to trade secrets, with the observation that "the monopolists, by keeping the market constantly understocked by never fully supplying the effectual demand, sell their commodities much above the natural price."

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Monopoly effects on market price represent the outcome of policy choices that fundamentally alter the economic system's competitive structure, analogous to how S5 Policy establishes the overarching principles that guide organisational behaviour. Monopolies reflect a policy decision about market structure and competition that defines the system's identity and operating principles, similar to how S5 establishes the organisation's fundamental identity and values. The ability of monopolists to sustain prices above natural levels reflects S5's role in determining long-term strategic direction and system boundaries.

## Mapping Strength

Moderate

---

--- MAPPING: corporation privileges and market prices-to-S5 Policy ---

# Corporation Privileges and Market Prices -> S5 Policy

## Economic Entity Reference

--- ENTITY: corporation privileges and market prices ---

# Corporation Privileges and Market Prices

## Definition

The exclusive privileges granted to corporations and similar regulations that restrain competition to a smaller number than might otherwise enter an employment, having the same tendency as monopolies to keep market prices above natural prices.

## Source Chapter

Book I, Chapter 7

## Context

Described as "a sort of enlarged monopolies" that can "keep up the market price of particular commodities above the natural price, and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate."

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Corporation privileges and their effects on market prices represent the outcome of policy decisions about market structure and competition, analogous to how S5 Policy establishes the overarching principles that guide organisational behaviour. These exclusive privileges reflect a fundamental policy choice about the nature of economic organisation and competition, similar to how S5 defines the organisation's fundamental identity and values. The sustained elevation of prices above natural levels reflects S5's role in determining long-term strategic direction and system boundaries.

## Mapping Strength

Moderate

---

--- MAPPING: statutes of apprenticeship effects-to-S5 Policy ---

# Statutes of Apprenticeship Effects -> S5 Policy

## Economic Entity Reference

--- ENTITY: statutes of apprenticeship effects ---

# Statutes of Apprenticeship Effects

## Definition

Laws that, when a manufacture is prosperous, enable workers to raise wages above natural rates, but when the trade decays, may force wages below natural rates by excluding workers from alternative employments.

## Source Chapter

Book I, Chapter 7

## Context

Described as having a more durable effect in raising wages above natural rates than in reducing them below, with the latter effect lasting only as long as the lives of workers trained during prosperity.

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Statutes of apprenticeship effects represent the outcome of policy decisions about labour markets and skill development, analogous to how S5 Policy establishes the overarching principles that guide organisational behaviour. These laws reflect a fundamental policy choice about the nature of economic organisation and labour mobility, similar to how S5 defines the organisation's fundamental identity and values. The differential effects on wages during prosperity versus decline reflect S5's role in balancing competing demands and establishing long-term strategic direction.

## Mapping Strength

Moderate

---

--- MAPPING: religious occupational restrictions-to-S5 Policy ---

# Religious Occupational Restrictions -> S5 Policy

## Economic Entity Reference

--- ENTITY: religious occupational restrictions ---

# Religious Occupational Restrictions

## Definition

Cultural or religious principles that bind individuals to follow their father's occupation, as in ancient Egypt, preventing wage or profit rates from falling below natural rates for extended periods.

## Source Chapter

Book I, Chapter 7

## Context

Cited as an example of the extreme policy needed to permanently depress wages or profits below natural rates across multiple generations.

## Economic Domain

Regulation

---

## VSM Concept Reference

--- VSM SYSTEM: S5 Policy ---

# System 5 (S5) — Policy / Identity

## Definition

The policy-making body that balances demands from Systems 3 and 4 and defines the identity, values, and purpose of the organisation. System 5 provides closure to the whole system and represents its supreme authority.

## Key Functions

- Identity definition
- Policy closure
- Balancing internal/external demands
- Supreme authority
- Purpose definition

## VSM Framework Reference

---

## Mapping Rationale

Religious occupational restrictions represent the outcome of policy decisions about social structure and economic organisation, analogous to how S5 Policy establishes the overarching principles that guide organisational behaviour. These cultural principles reflect a fundamental policy choice about the nature of economic organisation and social mobility, similar to how S5 defines the organisation's fundamental identity and values. The long-term effects on wage and profit rates reflect S5's role in establishing enduring strategic direction and system boundaries.

## Mapping Strength

Moderate