AIM Framework glossary
Price Decomposition
Canonical definition
Price decomposition is the analytical breakdown of any transaction price into three additive components: P\<sub\>A\</sub\> (the A-Functional Price, which purchases deficit correction, what would be paid for any object adequate to satisfy physiological need), P\<sub\>I\</sub\> (the I-Adequate Price, which purchases process enablement, what would be paid for any object adequate to enable intrinsic pursuit), and P\<sub\>M\</sub\> (the Mimetic Premium, the portion paid for the Status that ownership of this specific object confers, beyond A-functional or I-adequate worth), such that total price P\<sub\>total\</sub\> = P\<sub\>A\</sub\> + P\<sub\>I\</sub\> + P\<sub\>M\</sub\>.
Explanation
Price decomposition makes explicit what undifferentiated price obscures: not all spending serves the same motivational function. When someone pays for food while hungry, nearly all the price is its Appetitive component, buying calories and nutrients. When a musician buys an adequate guitar to practice mastery, nearly all the price is its Intrinsic component, purchasing the means to continue the valued process. When someone pays an additional \$400,000 for a house in a prestigious postcode beyond what shelter and space require, that premium is the Mimetic Premium, purchasing comparative position. The decomposition enables targeted policy: pure A- and I-transactions permit reciprocity because both parties can reach satisfaction, but M-contamination destroys reciprocity because the Mimetic Premium purchases comparative position which has no satiation point. This is why an M-tax targets the Mimetic Premium specifically, leaving the Appetitive and Intrinsic components lightly taxed or untaxed. The decomposition is canonical for all later economic analysis, inflation measurement, and the decomposition of GDP into Appetitive, Intrinsic and Mimetic aggregates. (Framework-Specific Construct)
Epistemic status
Framework-Specific Construct.
Derivation
Related terms
- A-Functional Price
- I-Adequate Price
- Price Shares (sA
- sI
- sM)
- Mimetic Premium (PM)
- GDPA
- GDPI
- GDPM