Part I: Unpacking the Premise—Our Theoretical Framework of the Extra-Market Loss-Gain Factor in Price Formation

1. Core Definition: How is Price Deviation Generated?

Why do prices fluctuate so violently? Why do exchange rates so often fail to conform to simple purchasing power parity (PPP) or price conversion? What on earth is the deep logic behind price deviation?

To explain these phenomena through a paradigm that is more universal, concise, and compatible with widely accepted scientific economic and social theories, we have created the concept of $F_{damage}$ (price loss-gain factor). It no longer merely focuses on "efficiency" but instead penetrates directly into the underlying rules of intra-species competition at both regional and global levels.

Its formula is as follows: $F_{damage} = S_s \times T$

Where:

• $S_s$ (Specific Structure): Intra-species structure. It refers to the niche pattern of intra-species relations. It is an organizational form and distribution rule formed through gaming, cooperation, and suppression among individuals of a species to survive in a specific ecological niche. In human society, this manifests as class, systems, and cultural inertia, which determine the flow direction of energy and resources within the population.
• $T$ (Tools): Level of tools. That is, the ability of the species to extract energy from the external environment and convert it into survival advantages. It is not only technology at the material level, but also the "metabolic level" of the population as a whole. The more powerful the tools, the higher the precision and intensity required of intra-species relations.

Definition Statement: The price loss-gain factor ($F_{damage}$) is the evolutionary cost of intra-species competition. It measures the deviation (exploitation or compensation) generated outside of even distribution and equivalent exchange by the overall or local structure of a species to maintain the dynamic homeostasis of the system when the species adopts a highly rigid intra-species relationship ($S_s$) and attempts to wield high-intensity tools ($T$).

Economy studies the issue of efficiency, while $F_{damage}$ studies the issue of fairness.

2. Cross-Species Evolutionary Patterns: From Natural Selection to Intra-Species Instrumentalization

This loss and gain is not just an economic phenomenon; it is a universal law of biological evolution.

• Low-$T$ Stage (Natural Selection): Tools are primitive, and intra-species relations ($S_s$) have not yet been alienated. At this stage, $F_{damage}$ manifests as the most primitive natural selection—the slower antelope is eaten by the lion. This is the direct screening of individuals by the external environment.

• High-$T$ Stage (Intra-Species Instrumentalization): When a species (humans) masters advanced tools ($T$), in order to wield these tools (such as industrial systems), the intra-species structure ($S_s$) begins to alienate. Conspecifics are no longer merely companions but are defined as "instrumental components" to achieve ends. This instrumentalization of intra-species relations shifts competition from "man vs. nature" to a brutal "man vs. man." Individuals must face not only the entropy increase of nature but also high-intensity compression from the conspecific structure. This is an evolutionary strategy that sacrifices the quality of survival of some individuals for the efficiency of the population as a whole (or its top layer).

3. Integration and Upgrade of Theory: Reconstructing Classical Economics

$F_{damage}$ does not patch existing theories; rather, it reduces their dimensions and integrates them into a biological framework. While respecting "value," it uses the "price loss-gain factor" to explain the formation of the ultimate "price."

The Upgrade of Interest Theory

• Classical Misinterpretation: Interest is "compensation for time" or "reward for deferred consumption."
• Restoration of Essence: Interest is the discounting of structural tension. Because $S_s$ exists and must be maintained, future returns generated by $T$ must be extracted in advance to pay for current structural operating costs. In a system where $F_{damage} \approx 1.49$, interest is not just the cost of capital, but a "survival tax" paid to combat structural loss.

Unification of Market Price and Selling Price

• Theoretical Background: Steven N. S. Cheung, in Economic Explanation, specifically mentioned the distinction between "Market Price" and "Selling Price," exploring the impacts of information costs and institutional constraints on prices.
• Restoration of Essence: $F_{damage}$ can explain the formation of price at any scale (individual, group, region). This is because price is not only a manifestation of value, but also the physical quantification of structural pressure (exploitation) or support (compensation) experienced by an individual or group when performing economic behavior. The deviation of the so-called "selling price" relative to the "market price" is precisely the $F_{damage}$ paid or retrieved by that node within the intra-species structure ($S_s$). It unifies micro-level price formation with macro-level institutional costs.

Integration of the Latecomer Disadvantage

• Classical Misinterpretation: Latecomer countries can achieve leapfrog development by imitating technology.
• Restoration of Essence: The so-called "latecomer disadvantage" is, in essence, that the transportation rate of $T$ (tools) far exceeds the optimization rate of $S_s$ (intra-species structure). When advanced tools are forcibly installed onto backward and rigid structures, this misalignment generates a massive centrifugal force. This force ($F_{damage}$) burns away all the dividends brought by technological progress, ultimately causing the system to undergo brittle fracture during high-speed motion.

The Upgrade of Transaction Cost Theory

• Classical Misinterpretation: Coase's "transaction cost" is market friction.
• Restoration of Essence: Transaction costs are merely the terminal manifestation of $F_{damage}$. The real loss stems from the instrumentalization of human beings. When a person is defined by the structure ($S_s$) as an instrumental component, the friction, internal strife, and resistance to this definition generated by their behavior constitute the irremovable real physical thermal loss in the economy.

Part II: Niche Allocation and Harvesting Mechanics

1. Population Structure and Composition

Before discussing harvesting mechanics, we must first clarify the hierarchical structure of the population. The distribution of $F_{damage}$ exhibits different forms of manifestation at different levels:

• Individual: A single biological unit. The smallest granularity that bears $F_{damage}$.
• Group: A functional collective composed of individuals (such as families, enterprises, communities).
• Regional Cluster: A geographic or functional block composed of multiple groups (such as cities, industries, ethnic groups, nations).
• Full Ecosystem: The sum of all populations and their interactions (such as civilizations, the global economic system).

The flow and allocation of $F_{damage}$ among these four levels determine who ultimately pays the price and who receives compensation.

2. The Biological Essence of Centrifugal Force: Ecological Niche Elimination

What we often call "overtaking on a bend," from the perspective of population evolution, is a violent environmental mutation. In this process, the rigidity of the intra-species structure ($S_s$) leads to an extreme directional allocation of resources, thereby generating a "centrifugal force." But this is not just a physical force; it is Ecological Niche Elimination.

• Evolutionary Mechanism: When $T$ (tools/economy) accelerates violently, the intra-species structure ($S_s$) maintains its original niche pattern due to population inertia (vested interests, path dependency). This misalignment leads to a drastic change in the flow of resources within the system.
• Elimination Outcome: The so-called "flinging out" is, in essence, the loss of ecological niche for marginal individuals. Individuals lacking resource control lose their survival space amidst violent environmental changes and are physically expelled by the system from the energy cycle (unemployment, vagrancy). If there is no other aid or support, these components will either passively perish, or alter their behavior to shock the system, breaking the old intra-species structural rules to reshape the intra-species structure.

2. The Biological Explanation of "Enduring Hardship": High-Tolerance Survival Strategy

• Definition: In essence, this is a regressive evolution where individuals actively yield and compress their own energy demands to retain the right to survive within an extremely harsh intra-species structure ($S_s$).
• Selection Mechanism: To maintain its dynamic homeostasis, the intra-species structure tends to filter for individuals with dull pain perception and high tolerance to serve as "worker ants."
• Evolutionary Cost: This is a survival strategy at the expense of reducing diversity and creativity. Whoever is most capable of enduring hardship is best suited to be burned by the structure as low-cost fuel. In the system's evolutionary algorithm, your high tolerance is the biological foundation for being selected as a "consumable."

3. "At All Costs": The Directional Excretion of Energy Loss

• Path of Least Resistance: Thermodynamics tells us that energy always flows in the direction of least resistance. In a rigid structure ($S_s$), the top layer has the strongest moat (high resistance), while the bottom layer has no protection at all (zero resistance).
• Directional Excretion: Therefore, the massive thermal loss generated by $F_{damage}$ (inflation, bad debts, environmental pollution, health overdrafts) is directionally excreted by the system to the bottom layer.
• Structural Closed-Loop: This explains why the faster the economic growth, the more painful the subjective experience of the bottom layer. Because all the system's frictional heat is ultimately converted, through this excretion mechanism, into the survival pressure of the bottom layer. This is not just unfair distribution; this is energy conservation and transfer in physics.

4. Deep Reflection: Who Pays the Price of Global Dumping?

When we see Chinese manufacturing sweeping across European, American, and global markets at extremely low prices, if we analyze it from the perspective of $F_{damage}$ studying "fairness deviation," this global niche expansion does not happen out of thin air. The deficit generated by low prices (low energy exchange) must be paid for by specific population groups.

Who is paying for this "loss and gain"?

1. The "High-Tolerance Absorption" by the Internal Bottom Layer: To maintain the absolute cost advantage required for global competition, $F_{damage}$ within the domestic intra-species structure ($S_s$) is directionally excreted to the individual level. Low wages for workers, long working hours (996/factory dormitories), and the lack of social security are, in essence, individuals hedging against the massive loss generated by the system through regressive evolution (shrinking life energy consumption, suppressing desires). Chinese workers are the original energy suppliers of global cheap commodities.

2. The "Niche Extinction" of External Competitors: When low-price products enter the global ecosystem, the "centrifugal force" they generate flings out external individuals and enterprises that cannot survive under this price system. Because legacy industrial clusters (Regional Clusters) in Europe and the United States cannot pay an equally high intensity of $F_{damage}$ (as they have higher welfare and higher fairness requirements), their ecological niches are ultimately wiped out. The cost here is the collapse of global industrial diversity.

3. Dynamic Homeostasis Risks of the System: This extreme "fairness deviation" leaves the system (the full ecosystem) in a highly unstable state. When external damaged parties begin to "alter their behavior to shock the system" (tariff barriers, industrial reshoring), and internal payers reach their "biological tolerance limits" and choose to "extinguish their desires," the old intra-species structural rules will face collapse and reshaping.

Conclusion: Dumping is not a victory, but an extreme niche-squeezing strategy. It uses the survival red line of the internal bottom layer and the stability of the external system as bargaining chips to carry out an evolutionary cost transfer on an unprecedented scale. This is not just unfair distribution; this is energy conservation and transfer in physics.

The "Ought-to-Be Exchange Rate" of the RMB Based on $F_{damage}$ Calculation

The significance of theory lies in prediction. Existing economics cannot explain China's macro data for 2025, but with the introduction of $F_{damage}$, everything becomes crystal clear.

1. Exchange Rate Verification: The Truth of Structural Undervaluation

1.1 The Paradox and Correction of Purchasing Power Parity

Foreign media often argue that the RMB is undervalued based on purchasing power parity (PPP). The deduction logic is as follows:

• China Unit Price ($P_{CN}$): approx. 25.00 CNY (actual price).
• US Unit Price ($P_{US}$): approx. 5.95 USD.
• Nominal PPP Exchange Rate: $25 \div 5.95 \approx \mathbf{4.20}$.

This calculation ignores the structural loss factor $F_{damage}$. Within China, the price we observe is the post-damage "actual price."

Restoration Formula: $\text{应然价格} = \frac{\text{实际价格}}{(1 - F_{damage})}$

1.2 Calculation of the Ought-to-Be Exchange Rate

The true equilibrium anchor after factoring in $F_{damage} = 0.33$ (loss multiplier of approx. 1.49):

• Ought-to-be Price: $25 / (1 - 0.33) \approx \mathbf{37.31 \text{ 元}}$.
• Ought-to-be Exchange Rate: $37.31 / 5.95 \approx \mathbf{6.27}$.

Comparison of Conclusions:

• 4.20 (PPP Line): An overinflated illusion based on the "damaged price," grossly exaggerating the strength of the RMB.
• 6.27 (Ought-to-Be Line): The true purchasing power equilibrium point after $F_{damage}$ correction, serving as the underlying tone of asset pricing.
• 7.20 (Nominal Line): The price further depressed by the central bank through regulation mechanisms on top of the ought-to-be line to hedge against internal loss.

2. Conclusion

All macroeconomic indicators (GDP, CPI, exchange rates, interest rates) are, in essence, caused by $F_{damage}$ (price loss-gain factor). Introducing $F_{damage}$ is the only path to seeing the truth of Chinese prices.

Part IV: Return to Essence—Explanatory Classification of Biological Nature

The end of economics is biology. We will use the two most primitive biological concepts, "desire" and "behavior," to explain the phenomenon of the "economic man" from the individual to the macro level.

1. Core Logic: The Mechanical Closed-Loop of Desire and Behavior

• Desire: The input energy to the system. It is the instinctive drive for individual survival and reproduction.
• Behavior: The displacement of energy. Individuals achieve their desires through behavior.
• $F_{damage}$: The coefficient of friction during the process of displacement.

When the tension of the intra-species structure ($S_s$), through tools ($T$), locks down individual desires and drains the returns of their behavior, the organism activates its lowest-level defense mechanism. This defense is not merely passive; it is even a forced suppression of energy output by the individual to maintain their own dynamic homeostasis in this high-tension system.

2. Explanatory Classification: The Biological Hierarchy of the Pyramid

In the field of action of $F_{damage}$, social nodes automatically differentiate into three types of biological entities:

The Top: Rule Definers and Transferrers

• Biological Characteristics: Defining rules by utilizing $T$ (tools).
• Function: They are not producers but transferrers of $F_{damage}$. By defining $S_s$, they direct the thermal loss generated by the system downward while intercepting the resulting energy flow ("harvesting").

The Middle: Imitators and Buffer Zone

• Biological Characteristics: Imitating $T$ for safety. They are the "smartest" yet most vulnerable group of people in the system (such as the middle class and intellectuals).
• Function: The primary absorption layer of $F_{damage}$ (The Zombie Layer). By imitating the lifestyle and values of the top layer, they attempt to gain a sense of security, but in fact, they become the main carriers of the pressure transferred from the top layer (mortgages, education anxiety). They are the "crumple zone" of the system.

The Bottom: Limits of Survival and Extinction of Behavior

• Biological Characteristics: Situated at the terminal end of the excretion of $F_{damage}$.
• Critical Point: When $F_{damage}$ exceeds the biological tolerance limit, a fatal formula emerges: $\text{Production (产出)} < \text{Loss (结构性损耗)}$
• Biological Reaction:
  • Extinction of Desire: No longer pursuing reproduction, consumption, or upgrades.
  • Stagnation of Behavior: Manifested as "lying flat," "non-cooperation," and "four-no youth." This is not laziness; it is the energy-saving mode of the organism in a negative-return environment, and the biophysical truth behind the macroeconomic slide into long-term stagnation.
  • Brittle Fracture: Ultimately leading to the physical disintegration of the system.

Part V: Ultimate Prediction

Based on the $F_{damage}$ theory, we make the following ultimate predictions for the future of the human economic system:

1. The Physical Fragmentation of Globalization

Globalization is, in essence, cross-regional arbitrage of $F_{damage}$. Globalization is maintained when low-$F_{damage}$ regions (developed countries) exploit the low-cost dividends of high-$F_{damage}$ regions (i.e., the "world factory"). However, as $F_{damage}$ accumulates to its biological limit in exporting countries (such as China) (manifesting as lying flat and demographic collapse), this arbitrage mechanism will physically rupture. Globalization will inevitably move toward fragmentation, and supply chains will reorganize back into low-tension regions.

2. The Trap of AI Tools: Accelerated Brittle Fracture

AI is the most powerful $T$ (tool) in human history.

• Optimistic Misjudgment: People believe that AI will enhance efficiency and save the economy.
• $F_{damage}$ Prediction: If super-tools (AI) are introduced while the rigid intra-species structure ($S_s$) remains unchanged, it will only lead to an instantaneous explosion of the product of $S_s \times T$ (i.e., $F_{damage}$). AI will be utilized to drastically intensify the capture and control of individuals, and the centrifugal force will be so immense that it will instantly fling out the vast majority of "useless" individuals. This will accelerate the brittle fracture of the system rather than bringing prosperity.

3. Imbalance and Reset of Dynamic Homeostasis

When $F_{damage}$ touches the biological survival red line, the system's dynamic homeostasis can no longer be maintained. The accumulated social inertia (the rigidity of vested interest groups, path dependency) is too massive, causing the system to lose its ability to self-regulate to adapt to new tools.

There are only two paths forward:

1. The Emergence of De-structuralizing Tools: The emergence of new tools capable of dismantling the rigid $S_s$, reducing $F_{damage}$, and establishing a new dynamic equilibrium.
2. Physical Reset: The system, unable to steer due to excessive inertia, ultimately disintegrates during high-speed motion, returning to a primitive state of low $T$ and low $S_s$.

The history of human economy is, in essence, a history of how structures hedge against system loss by instrumentalizing their conspecifics. This time, the outcome will be no exception.