RE: Thoughts on the evolution of Economic & Monetary Systems into the mid-21st century
This distorted measurement model, creates the wrong incentives. It promotes the overcharging for any basic need so that we can then show that the economy is thriving. We could overcharge for food, water, transportation, electricity, heck even breathable air, so that we can show that the economy is "thriving" and people are "rich" (GDP per capita)
So whats your theory here? That the people selling food are pricing their poduct because they want to maximize the country's GDP? Capitalists set the price of food (or indeed anything else) to maximmize their profits. Higher price means fewer people will buy and that the people that do buy will buy less.
As to your two economies, if they were using their own currency (instead of USD), the currency of society B would simply be worth less. The value of currency is nothing more than the value of the things you can buy with it.
There are two ways to look at the countries if we assume theyre using USD. They could both be in a complete vacuum, in theoretical parallel universes or alternate realities or something, in which case that would mean that in the first reality, the dollar is simply worth more (or food is worth less)
If we look at them as two societies that exist side by side, two such societies could never exist in the real world. You have one society where the USD is worth 4x more. Capitalist businessmen would simply correct the disequlibrium by buying food in society A and selling it market up (but still cheaper) to society B. The free market works.
Now you might be asking yourself, "then how come people are starving in the third world".... thats really a distribution problem, not a resources problem. No one wants to take the risk to go down there and sell them food because theyre unstable and have crappy governments.
This is done indirectly. Governments simply want "growth".
What is growth?
Growth is the increase of GDP, minus the effect of inflation. That's in theory, because all these are "estimates". If actual inflation runs at 5% and the government only reports 3% by tampering with the measuring scheme, then they can claim 2% growth.
The government essentially sets the parameters for what is acceptable in terms of monetization. Once this is done, then a market can emerge. Once the market emerges, things that used to be cheap, become more expensive. Greece, where I live, for example, had one of the cheapest electricity costs in Europe. Then we were told that the power company had to raise prices because the market would open, and no other company could operate at such low prices. So they artificially inflated our bills so that the private companies could find some kind of profitable margin in order to operate (!). When that happened, the total contribution of the power sector to the economy was a larger % of the GDP, due to its inflated costs. So, in a sense, the government was measuring overpricing as growth.
It might be lower, but not worthless. Also, in terms of trade theory, as you point out in the later example of side-by-side, lower product prices mean that the country is attractive for imports from other countries, buying their products and thus creating a trade surplus, which in turn strengthens the local currency. Exporting countries will normally have a strengthening currency (absent central intervention), while importing countries will have a weakening currency. This is a result of foreign exchange (used for international trade) flowing in or out, which is equivalent to pushing up or down the ratio of foreign currency to local currency.