- Hot
- New
- Categories...
- Producer's Lounge
- Producer's Vault
- The Gulch: Live! (New)
- Ask the Gulch!
- Going Galt
- Books
- Business
- Classifieds
- Culture
- Economics
- Education
- Entertainment
- Government
- History
- Humor
- Legislation
- Movies
- News
- Philosophy
- Pics
- Politics
- Science
- Technology
- Video
- The Gulch: Best of
- The Gulch: Bugs
- The Gulch: Feature Requests
- The Gulch: Featured Producers
- The Gulch: General
- The Gulch: Introductions
- The Gulch: Local
- The Gulch: Promotions
- Marketplace
- Members
- Store
- More...
The objective value is equivalent to cost from the perspective of the seller. Value would include a profit for the seller, else no point in business.
The subjective value is what a buyer will pay. This can vary wildly between different buyers.
In the western world (with few exceptions) we use an objective value for both sides of the transaction, there is no variance or negotiation.This is assumed as the norm in western culture.
In other cultures, haggling is the norm, so value gets very subjective quickly. And is expected as such on both sides of the transaction
In the US for instance, the only purchases where negotiation over price/value is the norm are certain big ticket items like cars and homes, or volume purchases by contract. Everything else is price as marked in our culture.
Which can result in some interesting exchanges with people from other cultures who expect price haggling as the norm.
The subjectivist theory holds that the good bears no relation to the facts of reality, that it is the product of a man’s consciousness, created by his feelings, desires, “intuitions,” or whims, and that it is merely an “arbitrary postulate” or an “emotional commitment.”
The intrinsic theory holds that the good resides in some sort of reality, independent of man’s consciousness; the subjectivist theory holds that the good resides in man’s consciousness, independent of reality.
The objective theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but an evaluation of the facts of reality by man’s consciousness according to a rational standard of value. (Rational, in this context, means: derived from the facts of reality and validated by a process of reason.) The objective theory holds that the good is an aspect of reality in relation to man—and that it must be discovered, not invented, by man. Fundamental to an objective theory of values is the question: Of value to whom and for what? An objective theory does not permit context-dropping or “concept-stealing”; it does not permit the separation of “value” from “purpose,” of the good from beneficiaries, and of man’s actions from reason.
Capitalism: The Unknown Ideal “What Is Capitalism?”
Capitalism: The Unknown Ideal, 21
How are values determined in a free market? Who determines value? Can values that fluctuate constantly, like financial instrument values, be said in any sense to be objective when that fluctuation would appear to be the result of constantly changing subjective emotions? Are such values collective "evaluations of the facts of reality by man's consciousness according to a rational standard of value?" If the answer is yes, having spent my life in financial markets, I would have to see very strong supporting evidence and arguments to invalidate my suspicion that the answer is no. Or is value in markets a separate, but perhaps related concept, to the value cited in the Rand quote? I'm sure I'll have more questions--to me it's a fascinating subject--but this is a start. Perhaps one day I'll write something on it, but it will require a great deal of thought and research before I do.
1) Did you read Rand's passage on subjective, intrinsic, and objective values? (Posted above)
2) Prices/values in a free market are determined by valuer and the object. As Rand states above Fundamental to an objective theory of values is the question: Of value to whom and for what? So the value is based on the value to the person doing the valuing based on an objective rational standard of value. The price is set by the actions of the valuers
3) No it is not a collective evaluation the facts, it is a decision by each person. The price may be set by the individual decisions.
The problem with this discussion is that it is starting in the middle of the subject, which is common for economics. Man needs to obtain a minimum number of calories (plus nutrients) to survive. Failure to do so results in death. These needs are objective and they do not disappear when we escape subsistence living nor do our choice suddenly become disconnected from reality. Just because you have enough to eat today does not mean a rational person assumes they will have enough calories tomorrow or next week or next year or next decade. Just because a man is healthy today does not mean he can ignore that people get sick and just because a person has a roof over his head does not mean he can ignore that houses can be destroyed by hurricanes, earthquakes, termites, tidal waves etc. Our needs may become more contingent or pushed into the future but as long as we mortal we have objective needs.
Now if Robinson Crusoe has three fish and he cannot preserve fish to eat more than a day later, it may make no sense to continue fishing that day. (Marginal utility) Crusoe then needs to determine what other project will provide the most return for him, such as digging a well or planting corn or building or improving his dwelling or making more fish hooks or inventing a net or inventing a way to preserve fish for more than a day.
For more see http://hallingblog.com/2016/02/29/eco...
This is a great discussion. In regards to number 3: I agree; values are decided by each individual. If both traders do not believe they are each getting more benefit from the trade, they would not follow through. Every person that trades their dollars for anything they buy at the store has done so and believes they have benefited. No one is a loser. If the dollars were worth more than the loaf of bread, one would trade them for another product or substitute. The baker values the dollars more than the bread... I do believe "market prices" (as may be on the price tag) may fluctuate and reflect an estimate of the "collective value" or a snapshot of the market. No doubt marketers or market experience regarding the price the target consumers will pay for any product is well... what the market will bear. I suppose in a way this is a "collective" value, but it is an end not a means and tomorrow it may change. If a producer does not produce a product for a price enough consumers will pay, then the product, as is, will not sell and the producer must adapt.
Now, if I was Robinson Crusoe, first I would build a fish trap/pen so the fish could be caught without my continued effort and also be kept longer thus freeing my time for more profitable pursuits. :)
Regards,
O.A.
"Now, if I was Robinson Crusoe, first I would build a fish trap/pen so the fish could be caught without my continued effort and also be kept longer thus freeing my time for more profitable pursuits. :)"
How do you know what is more worth your time than something else?
But the source of property rights is that you have created something useful. If Crusoe does not obtain property rights (make things useful), he will die.
In Defoe's story, Crusoe's resources were more limited. Thus, he needed "property." Nice point. Thanks for the insight.
If the metaphor is Crusoe alone in his environment, the concept of barter, money and property rights is irrelevant.
Money is a storage of value. In Robby's case, what value can be stored in "money" now or for the future?
If anything, the only thing of "value" to Crusoe is TIME. He can invest time in catching fish for sustenance or figuring a way to trap, cage, pen or collect them with less expenditure of TIME.
In either case, he's trading his Time between potential "investments."
His "property" is whatever he creates or collects in order to sustain his life and/or safety and comfort. He'd have the Choice of investing time in catching fish, building a holding pen for fish or building a shelter for himself to protect himself from unfriendly elements like bad storms.
Still: only One 'Commodity' to "Trade" between "investments"... His Time.
And until or unless Friday arrives, anything and everything Crusoe can touch or use is "his property" and outside of natural destructive forces like storms, for example, there's Nobody Around to challenge such "property rights."
So, I'm puzzled as to why or how that's even near, let alone IN the equation.
But thanks... it was fun thinking about this!
Unless Robinson Crusoe had someone to trade with that preferred some medium of exchange in lieu of simple bartering of wares what would he need money for?
Wouldn't any pursuit one wishes to pursue more than fishing qualify? One must look at their hierarchy of needs and desires to determine what is of more value.
Respectfully,
O.A.
So, for Crusoe, maybe a simple tally board or "abacus" drawn in the sand and marked with shells might be sufficient.(1) He has to know which of his activities are hierarchically worth more in proportion to all others. Otherwise, he is wasting his effort in sub-optimal pursuits, which for him on the island is highly consequential.
(1) The common checkerboard was a counting board in manorial management in the Middle Ages, hence the UK "treasury" is the "Exchequer."
In essence, he trades with himself, just as in thinking, he talks to himself. The primary purpose of language is to enable thought. Communication is secondary.
As you say, he must identify a hierarchy of needs, but more to the point, he needs to quantify it.
As for barter it originated in ritual gift-giving not in the calculation of economic gain, my apples for your eggs. I give you apples, you give me eggs to seal our friendship. Economics came thousands of years later. We know this because in our world, as far back as we have records, no people actually "evolved" from barter to money, but, in fact, devolved to barter when money failed. Moreover, the paleontology seems to support that the first exchanges were for useless things: shells on strings, daubed with red ochre. The giving of pretties to secure friendship was the source of exchange, not economic calculation.
One may even consider the surplus, capital, which would be a time saver/profit to him in the future.
Respectfully,
O.A.
You provided a retelling of the false story about the evolution of money from barter. That is not what happened. Barter is what happens when money fails. Money came first. It is a fact.
Debt the Seed of Civilization-- "Banking, tabs, and expense accounts existed for at least 2 thousand years before there was anything like coinage, or any other physical object that was regularly used to buy and sell things, anything that could be labeled ‘currency’."
http://necessaryfacts.blogspot.com/20...
I believe the confusion was one of semantics. "Money" vs. currency/coinage...
I have read YOUR article and its citations. Your ancient history of the development of money before barter is plausible, but is it a verifiable "fact"? It is a good theory and may well be accurate, but I was not there and place no importance on the matter either way. It is what it is; but what consequence is the origin to modern economics? What is the value of this information/attribution of origin?
When men traded voluntarily with other men that did not desire the particular goods offered, a medium of exchange was necessary and man invented it. If ancient men could be trusted with credit and others extended it, naturally some medium would be necessary to quantify the debt. Whether dollars, goats or seashells the end is the same.
What's the weather like? Will the carcass hang and freeze once gutted, cleaned and skinned? Or is it better to spend the time gathering the crops in and preparing them for the winter(s) ahead. Talking with yourself is not a bad idea it means discussing and the critical path requirements to survive. It becomes more critical when the family has expanded to two hunters, two farmers, One tanner/shoe maker etc. It becomes even more critical when some one says here comes the GD POS government dude playing Chicken Little with our work ethic results and without contributing something of value. What we should be seeing is a non stop string of recall petitions. until the Rear Echelon Mother Feathers are driven out of government and their political scammers leading the pack.
Not to intellectual I grant you but then sometimes...you have to take the bull by the scrotes until he bellers his own horn. And I do so love the smell of burning Rocky Mountain Oysters in the morning.
Aristotle thought that if it exists and it's useful then it is good. Being is the same as good, if I remember correctly.
Marking prices does not mean that the good being sold has an objective value; it is merely a style of negotiating with a large number of people, many of whom aren't comfortable with haggling. You can bet that those marked prices will decrease within days if that good fails to sell as expected, or will increase if it sells out fast.
But the belief that a good's value is objective will certainly create problems if accepted -- because it would mean that every trade has a winner and a loser, and therefore that all trading is predatory. I hadn't heard until now that Objectivists believe such a thing -- and if they do, then how can they live with themselves?
Were is the relevant portion:
Say, for example, Poorland can produce one bottle of wine with five hours of labor and one loaf of bread with ten hours. Richland’s workers, on the other hand, are more productive. They produce a bottle of wine with three hours of labor and a loaf of bread with one hour. One might think at first that because Richland requires fewer labor hours to produce either good, it has nothing to gain from trade.
Think again. Poorland’s cost of producing wine, although higher than Richland’s in terms of hours of labor, is lower in terms of bread. For every bottle produced, Poorland gives up half of a loaf, while Richland has to give up three loaves to make a bottle of wine. Therefore, Poorland has a comparative advantage in producing wine. Similarly, for every loaf of bread it produces, Poorland gives up two bottles of wine, but Richland gives up only a third of a bottle. Therefore, Richland has a comparative advantage in producing bread.
If they exchange wine and bread one for one, Poorland can specialize in producing wine and trading some of it to Richland, and Richland can specialize in producing bread. Both Richland and Poorland will be better off than if they had not traded. By shifting, say, ten hours of labor out of producing bread, Poorland gives up the one loaf that this labor could have produced. But the reallocated labor produces two bottles of wine, which will trade for two loaves of bread. Result: trade nets Poorland one additional loaf of bread. Nor does Poorland’s gain come at Richland’s expense. Richland gains also, or else it would not trade. By shifting three hours out of producing wine, Richland cuts wine production by one bottle but increases bread production by three loaves. It trades two of these loaves for Poorland’s two bottles of wine. Richland has one more bottle of wine than it had before, and an extra loaf of bread.
These gains come, Ricardo observed, because each country specializes in producing the good for which its comparative cost is lower.
They you are retracting this statement? "But the belief that a good's value is objective will certainly create problems if accepted -- because it would mean that every trade has a winner and a loser, and therefore that all trading is predatory."
The pie is now larger - positive sum gained. More suppliers, more pie makers, more customers. A large pie to divide.
At some point it reaches an equilibrium between supply and demand. Perhaps people have had their fill of apple pie. Change one ingredient and make other types of pie. Change the shape of the dough and make strudel.
ALL of that is objective including market testing. The only two parts that can possibly be subjective are the original inspiration and the death blow. Something interferes. The most common is government. "We deserve a piece of the pie because we are government." Nothing objective in that statement but it impacts the cost and perhaps the quality of the pie. Customers are dissatisfied and go elsewhere or just quit consuming.
Government ends up with a percentage of nothing.
The business moves out of Seattle and restores it's reputation in a new location.
Second death blow? Mandatory minimum $15 everywhere?
The business moves south and invents Apple Tacos.
Just a quick lesson in the difference between objectivism and State or subjective economics.
As I read about Menger, my mind rates what he says. the ratings are: Obvious, Good, Stupid, Stupider. Not one new idea that would aid a businessman.The only reason that Austrian Economics, or Objectivist Economics, or Free Market Economics exists is because the sheer unworkability of socialist economics.
Unfortunately most of economics has been asking the wrong questions. Here are the standard questions of economics
1) What goods will be produced?
2) How will the goods be produced?
3) For whom are the goods produced?
Given that you know what you need to survive, how will you decide what to produce at what time?
Robinson Crusoe faced that problem no less than General Motors. (Crusoe was more successful.) Crusoe needed money, just as he needed morality and language.
Beyond the island, in society, economics still asks and answers the same questions. The answers are more complex. Alone on an island, I could not feed myself by writing. You would have no clients with patents to be protected. We made and make conceptually complex decisions every day. But you do not produce the goods you consume. "What goods will be produced?" is beyond your control, except for the goods (services) that you produce to trade with others for what you want.
A complex society like ours is necessarily a monetized economy. At this level of abstraction, other questions are asked after those are settled.
("Numismatics: the standard of proof in economics" here: http://necessaryfacts.blogspot.com/20...
(And economics is a science. It is just that most of its practitioners are not scientists.)
2) That is a good question, but not one that can be answered (at least specifically) without more facts..
There are many more questions that must be asked before any sensible perspective can be obtained. Production is only one phase of economics whereas it cannot exist without the other questions that need to be asked.
The Austrians were most influenced by Franz Brentano (philosopher) who argued that we could not trust our senses, he also argued that our emotions were valid valid epidemiological tools.
So economics was never intended to be a science.
What that one doesn't allow for is not making the same mistakes each time. Or does it? We're fare from the Big Collapse. I don't think I'll worry much about it.
Moreover, as with "selfishness" your use of the word "subjective" is at odds with the common understanding. You need to clarify that better, as opposed to "objective." By common understanding "objective" means "independent of the observer." How is that not "intrinsic"? (I know the answer. They don't. It is your discussion, not mine. You tell them.)
Interestingly the same professor in the same lecture explains marginal utility and inherently admits that people's values are grounded in reality - it is impossible to be perfectly subjective or perfectly irrational.
C<=(A or B) is (A and B).
And that is true. If you are perfectly subjective, then you are perfectly immoral. The immediate consequence of that is being perfectly dead.