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Wednesday, February 20, 2013

Mailvox: value is not objective

Asher claims to know something of economics despite making a massive and fundamental error that requires complete ignorance of subjective value theory:
My undergrad was economics and my grad work was in philosophy focusing on theory of mind and the social sciences, prompted by investigating whether or not economics is a positive body of knowledge. Yeah, I know just a little bit about the topic.
A little bit is not enough to intelligently discuss these matters.  Other than the Mises Institute, there is not a single undergraduate economics program of which I am aware that is not based on the neoclassical assumption of objective value.  Unfortunately, the state of economic education is now such that one can possess considerable economic academic credentials while still knowing nothing of some of the most fundamental basics.  Subjective value is a proto-Austrian concept that is not taught in either Econ 101 or 301; most economics PhDs, to say nothing of undergrads, are completely unfamiliar with the scholastics and the pre-Smithian economists and genuinely believe that economics is a 200-year old discipline that began with Adam Smith.

This is where Asher demonstrated that he simply does not know what "subjective value" is:
 This is where the subjective theory of value leads. If everything of value has to be reflected in a market price then to not pay anyone for something of value is 'unjust'.
Subjective value does not lead there; it cannot lead there because it neither requires anything, (much less everything), of value to be reflected in a price nor assigns any significance beyond the immediate exchange to the exchange value.  As it happens, I've been reading Volume II of Rothbard's excellent Austrian Perspective on the History of Economic Thought, which I recommend to everyone, but especially Asher, and happened to read the following at the gym today:
In contrast to the Smith-Ricardo mainstream of Smithians who set forth the labour theory (or at very best, the cost-of-production theory) of value, J.B. Say firmly re-established the scholastic-continental-French utility analysis. It is utility and utility alone that gives rise to exchange value, and Say settled the value paradox to his own satisfaction by disposing of ‘use-value’ altogether as not being relevant to the world of exchange. Not only that: Say adopted a subjective value theory, since he believed that value rests on acts of valuation by the consumers. In addition to being subjective, these degrees of valuation are relative, since the value of one good or service is always being compared against another. These values, or utilities, depend on all manner of wants, desires and knowledge on the part of individuals: ‘upon the moral and physical nature of man, the climate he lives in, and on the manner and legislation of his country. He has wants of the body, wants of the mind, and of the soul; wants for himself, others for his family, others still as a member of society’.  Political economy, Say sagely pointed out, must take these values and preferences of people as givens, ‘as one of the data of its reasonings; leaving to the moralist and the practical man, the several duties of enlightening and of guiding their fellow-creatures, as well in this, as in other particulars of human conduct’.

At some points, Say went up to the edge of discovering the marginal utility concept, without ever quite doing so. Thus he saw that relative valuations of goods depends on ‘degrees of estimation in the mind of the valuer’. But since he did not discover the marginal concept, he could not fully solve the value paradox. In fact, he did far less well at solving it than his continental predecessors. And so Say simply dismissed use-value and the value paradox altogether, and decided to concentrate on exchange-value....

But whereas Say simply discarded use-value, Ricardo made the value paradox and the unfortunate split between use- and exchange-value the key to his value theory. For Ricardo, iron was worth less than gold because the labour cost of digging and producing gold was greater than the labour cost of producing iron. Ricardo admitted that utility ‘is certainly the foundation of value’, but this was apparently of only remote interest, since the ‘degree of utility’ can never be the measure by which to estimate its value. All too true, but Ricardo failed to see the absurdity of looking for such a measure in the first place. His second absurdity, as we shall see further below, was in thinking that labour cost provided such a ‘true’ and invariable measure of value. As Say wrote in his annotations on the French translation of Ricardo's Principles, ‘an invariable measure of value is a pure chimera’.

Smith, and still more Ricardo, were pushed into their labour cost theory by concentrating on the long-run ‘natural’ price of products. Say's analysis was aided greatly by his realistic concentration on the explanation of real market price.

- Murry Rothbard, An Austrian Perspective on the History of Economic Thought, 1.5 Utility, productivity and distribution
Not only does Asher not understand what subjective value is, he then compounds his error by leaping to an erroneous conclusion on the basis of his false understanding.  Subjective value severs any possible connection between price and justice; it specifically denies even the possibility that there is necessarily any connection between the exchange value of a particular object to two parties at one point in time and the value of that same object to those two parties at a different point in time, much less any significance to any one else of either of those two different exchange values.

Nor is subjective value theory new.  Rothbard traces it back to Democritus, a contemporary of Socrates, of whom he writes: "Democritus contributed two important strands of thought to the development of economics. First, he was the founder of subjective value theory. Moral values, ethics, were absolute, Democritus taught, but economic values were necessarily subjective. ‘The same thing’, Democritus writes, may be ‘good and true for all men, but the pleasant differs from one and another’."

Rothbard also noted that Saint Augustine grasped the essence of subjective value: "Augustine's economic views were scattered throughout The City of God and his other highly influential writings. But he definitely, and presumably independently of Aristotle, arrived at the view that people's payments for goods, the valuation they placed on them, was determined by their own needs rather than by any more objective criterion or by their rank in the order of nature. This was at least the basis of the later Austrian theory of subjective value."

There is, there can be, no such thing as a "just price" under subjective value theory because the value placed upon an object by an individual, which is used to establish the price, is both unique and dynamic.  This is in direct contradiction to the objective value concept that has dominated economics ever since Adam Smith revived the ancient value paradox by confusing exchange value with use value.

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186 Comments:

Anonymous Josh February 20, 2013 11:26 AM  

I think that is/ought confusion is also driving Asher's hilarious failure here.

Economics describes or explains what is, not what ought to be.

Blogger JCclimber February 20, 2013 11:30 AM  

Labor theory of value.
Objective value.

Both seem so obviously wrong with even a couple minutes of thought that I'm surprised that people of IQ's greater than 90 can base entire markets on them. I mean, do these people have no soul? Have they never been to a bazaar and bargained for something? How do they explain that most people on an airplane paid different prices for their seats?

Blogger Nate February 20, 2013 11:32 AM  

" This is where the subjective theory of value leads. If everything of value has to be reflected in a market price then to not pay anyone for something of value is 'unjust'."


/facepalm

Blogger Joshua_D February 20, 2013 11:32 AM  

I stopped reading Asher's comments after the gem Vox is referencing:

"Asher February 19, 2013 7:59 PM
@ subjective value theorists

Phoenician wrote:

the libertarian perspective should be to pay women for the work they do (and men, should they take on that work). That is, to give them money for cleaning house, for cooking, for raising kids


This is where the subjective theory of value leads. If everything of value has to be reflected in a market price then to not pay anyone for something of value is 'unjust'.


It seems that Asher and Phoenician are focused on a money price of goods, as if the value of a service couldn't be paid through other means, trade, exchange, etc.

For example, a house wife receives plenty of "pay" for her services, including having a roof over her head, a bed to sleep in, food to eat, etc. There is not much need to put a dollar price on those services or the "payments."

Blogger JCclimber February 20, 2013 11:33 AM  

Labor theory of value.
Objective value.

Both seem so obviously wrong with even a couple minutes of thought that I'm surprised that people of IQ's greater than 90 can base entire markets on them. I mean, do these people have no soul? Have they never been to a bazaar and bargained for something? How do they explain that most people on an airplane paid different prices for their seats?

Blogger Nate February 20, 2013 11:37 AM  

"There is, there can be, no such thing as a "just price" under subjective value theory because the value placed upon an object by an individual, which is used to establish the price, is both unique and dynamic. "

I would argue that under SVT... any price that two parties freely agree upon in an exchange is just by definition.

Anonymous Jack Amok February 20, 2013 11:48 AM  

We have been experiencing a perfect illustration of subjective value lately. Namely ammo prices. They're up considerably, and some calibers are simply not in stock at all. People are "hoarding" ammunition (and firearms). Yet the labor cost to create them has remained the same. Their objective value isn't significantly higher since widespread armed rebellion has not broken out.

It's pure subjective value.

Good to see Say's name come up. Whatever problems Rothbard has with him, as far as I'm concerned Say's Law ought to be one of the first things drilled into anyone's head who wishes to study econ. And I don't mean Keynes bastardized strawman version either, but the basic "goods and services are paid for with goods and services."

Anonymous Josh February 20, 2013 11:48 AM  

Nate, I would argue that the concept of justice isn't something that belongs in an economic discussion.

Blogger James Dixon February 20, 2013 11:51 AM  

> Both seem so obviously wrong with even a couple minutes of thought that I'm surprised that people of IQ's greater than 90 can base entire markets on them.

The idea that there's a "correct" price for something, even if it varies slightly over time, is an attractive one to people who want to keep things tidy or controlled. It gives them something to aim for. The idea that there may never be such a correct price for something is very unsettling to those who want to control (or even predict) the economy.

Now, you can't ignore the herd component to people's actions in economics. Many times a large number of people will agree that a certain price range for a certain product is in fact the "fair" price. But that doesn't make it an absolute, merely an agreed upon convention for those people at that time.

> I would argue that under SVT... any price that two parties freely agree upon in an exchange is just by definition.

Yes.

Anonymous Roundtine February 20, 2013 11:52 AM  

The price is wrong, bitch.

Anonymous Jack Amok February 20, 2013 11:56 AM  

I would argue that under SVT... any price that two parties freely agree upon in an exchange is just by definition.

It seems incredible that you would have to argue such an obvious point. It ought to be a given. But a liberal will claim one of the parties is incompetent to manage their own affairs and was taken advantage of by the other party, making it an "unjust" transaction. Being despotism prone themselves, they naturally assume there must be an imbalance of power, then go on to assume it's natural for their own special selves to step in and "solve" the problem (skimming a slice off the top for their trouble, of course).

Blogger Nate February 20, 2013 11:56 AM  

"Nate, I would argue that the concept of justice isn't something that belongs in an economic discussion."

Coercion exists... fraud exists... and thus the concept of justice must be accounted for. That's why we must clarify "free exchange" instead of merely "exchange".

Anonymous Imatiger February 20, 2013 12:01 PM  

VD

You may want to familiarize yourself with the University of Chicago econ program.

Blogger tz February 20, 2013 12:01 PM  

Assuming no fraud or coercion, then the agreed on exchange is just. That does not mean there cannot be an occasion of sin, usury or other lacks of charity, but those are not matters for the state until or unless the peace is breached (and not all provisions of contracts ought to be valid and enforceable, but this would pertain to an ongoing transaction). I would include in fraud intentional omissions of relevant facts. Justice is a virtue, not some leagalese where loopholes are to be sought for. If the positions were reversed, would you agree to the transaction? I.e. do unto others...

Anonymous VD February 20, 2013 12:07 PM  

You may want to familiarize yourself with the University of Chicago econ program.

Monetarism is simply a neoclassical neo-Keynesian heresy. But if they teach subjective value and the history of economic thought, good for them. They certainly don't subscribe to subjective value as a class, though.

Anonymous Stilicho February 20, 2013 12:09 PM  

I would argue that under SVT... any price that two parties freely agree upon in an exchange is just by definition.

That's as good a definition for "just price" as you can find. Of course, what Asher and other "objectivists" like him mean by "just price" is more along the lines of "a price based upon my own subjective interpretation of what is fair".

Blogger parselmouth February 20, 2013 12:14 PM  

I'm not an economist (I don't even play one on TV), but I would have thought that since the advent of game theory and rational agency (particularly Herb Simon's bounded rationality), that the concept of subjective value (and dynamic utility functions) was a core concept in modern micro-economics. Perhaps that's the disconnect? (Macro economics seems to be predicated on something entirely different than micro.)

Anonymous Heh February 20, 2013 12:18 PM  

For example, a house wife receives plenty of "pay" for her services, including having a roof over her head, a bed to sleep in, food to eat, etc.

Not to mention my services as a stallion!

There is not much need to put a dollar price on those services or the "payments."

I usually put a high price on my "services" when women demand them...

Anonymous J February 20, 2013 12:20 PM  

Half Sigma's long-running preoccupation with "value transference" appears to presume that everything has an objective value, and that value is unjustly exceeded through the process of "value transference".

Anonymous Peter Garstig February 20, 2013 12:24 PM  

Also, being capable to understand the elasitcity of the supply/demand curves for a given good helps.

Moste (including Asher) stumble upon this. Because on a given day, in a given Walmart store, everybody pays the same price for an oz of oranges of the same type, they conclude that the supply/demand curve of this type of oranges is inelastic. In reality, it's inelastic for a particular day at a particular store for practical reasons only.

Work the stock exchange for a week and you begin to understand the term 'clearing price'.

Blogger Nate February 20, 2013 12:24 PM  

"Half Sigma's long-running preoccupation with "value transference" appears to presume that everything has an objective value, and that value is unjustly exceeded through the process of "value transference"."

Then he is an idiot.

Anonymous Jack Amok February 20, 2013 12:28 PM  

Of course, what Asher and other "objectivists" like him mean by "just price" is more along the lines of "a price based upon my own subjective interpretation of what is fair".

Indeed, I mentioned on an earlier thread I think the reason economists tend to reject subjective value theories is because it doesn't give them an opportunity to engage in argumentum ad verecundiam since subjective theory disperses the verecundiam far and wide with no central authority to appeal to.

Anonymous DrTorch February 20, 2013 12:28 PM  

" Other than the Mises Institute, there is not a single undergraduate economics program of which I am aware that is not based on the neoclassical assumption of objective value. "

I did not know this, nor can I confirm this.

But, this is why studying science should be lauded here, and not criticized w/ petty attacks...we can figure this out on our own.

Anonymous Godfrey February 20, 2013 12:29 PM  

You throw pearls before swine.

Anonymous VD February 20, 2013 12:29 PM  

Half Sigma's long-running preoccupation with "value transference" appears to presume that everything has an objective value, and that value is unjustly exceeded through the process of "value transference".

It does. That concept is neoclassical and dates back to the 18th century. It's an old attempt to rectify use value and exchange value.

Anonymous DrTorch February 20, 2013 12:30 PM  

Let me add this: Watch a couple of episodes of "American Pickers" and there's no denying the subjectivity of value.

Blogger Nate February 20, 2013 12:30 PM  

"Indeed, I mentioned on an earlier thread I think the reason economists tend to reject subjective value theories is because it doesn't give them an opportunity to engage in argumentum ad verecundiam since subjective theory disperses the verecundiam far and wide with no central authority to appeal to."

PREACH!!!

Particularly in Asher's case... SVT effectively denies him his beloved pass-time... mental masturbation.

Anonymous VD February 20, 2013 12:35 PM  

But, this is why studying science should be lauded here, and not criticized w/ petty attacks...we can figure this out on our own.

Can you elucidate upon this further? If you're saying what I think you are saying, Rothbard and Say have anticipated you.

You throw pearls before swine.

When I address a commenter, I very seldom harbor any concern for convincing the commenter of his errors. There are a hundred readers for every commenter, and most of them are less stubborn and at least as intelligent as the commenters addressed.

There are some genuinely dialectical commenters who can be convinced of their errors. But they are not the majority. Perhaps he'll surprise me, but I fully expect Asher to explain that what he means by subjective value is not what everyone since Democritus has meant and therefore he cannot be wrong.

I don't worry about what people who attempt to defend their arguments in that manner think.

Blogger Nate February 20, 2013 12:39 PM  

"I don't worry about what people who attempt to defend their arguments in that manner think."

yes yes yes...


But why haven't we had that friendly discussion about what is... or is not... money?

Anonymous Mmmm February 20, 2013 12:44 PM  

But why haven't we had that friendly discussion about what is... or is not... money?

Yes, let's talk about money! Some of it in nice piles, others in lovely clanky bits of loose change... nice crisp clean checks, pert pieces of copper coinage thrust deep into trouser pockets, romantic foreign money rolling against the thigh ...

Anonymous Vitus_Bering February 20, 2013 12:47 PM  

Vox is really more than one person. Has to be.

Blogger Nate February 20, 2013 12:48 PM  

Mmmm

Checks are not money. They are mearly place holders for money.

Anonymous Mike M. February 20, 2013 12:48 PM  

I'm surprised that any of this is news.

Trade of any sort relies on the idea that I have a surplus of something - which means that to me, it is worth very little. Except in trade for other things I don't have. It's the difference in individual valuation o a given good or service that makes trade possible.

Anonymous Daniel February 20, 2013 1:01 PM  

Other than the Mises Institute, there is not a single undergraduate economics program of which I am aware that is not based on the neoclassical assumption of objective value.

I was extremely fortunate to have taken 100s from the same normal neo-classical professor who identified a host of the errors of neo-classical philosophy, simply as a matter of course. He offered it as sort of a "best we have, but here's the problems with these assumptions."

This made 300s (like "Money, Credit and Banking") extremely simple, once you realized that it was sort of like talking to a woman: engage in its emotional fantasy, and have fun while it holds true.

The best thing that first teacher ever did for us was outline the borders and bars of the Keynesian hutch, and then mention that the butcher was coming.

Agreed: In the U.S., there is no other undergraduate program of economics that is non-neo-classical, just as there is no other undergraduate program of education that is non-Prussian, or no other undergraduate program of anthropology that is not rooted in the slavery debate.

Anonymous DrTorch February 20, 2013 1:04 PM  

"Can you elucidate upon this further? If you're saying what I think you are saying, Rothbard and Say have anticipated you."

Just that scientists agree with you: value is subjective.

The ones that can't figure that out...we call them "engineers."

Do Rothbard and Say have any comments on the similarities between Stat Mech and economics?

Anonymous Imatiger February 20, 2013 1:04 PM  

VD

While they may not be subscribing to subjective value as a class, in the way that you feel the Mises Institute does, they do teach both neoclassical concepts and ideas such as subjective value. The point, I think, to reach a dialectical synthesis. The issue that I am seeing here is that there appears to be little effort to reach that synthesis. It's either subjective value is the way, or bust. For someone with your understanding of the history of economics and science, I do not understand why you often tell people who disagree with you that they are completely ignorant of a subject. It could be they are partially ignorant, and you partially wrong, leading us to a possible synthesis.

Anonymous Daniel February 20, 2013 1:08 PM  

No, Imatiger. Just...no.

Does a technical support guy need to come to a possible synthesis with the customer who wants to turn on his laptop by hitting himself in the head with it?

Or does he just need to tell the customer: "push the button?"

Anonymous GreyS February 20, 2013 1:11 PM  

"I fully expect Asher to explain that what he means by subjective value is not what everyone since Democritus has meant and therefore he cannot be wrong."

Heh absolutely-- but with feigned incredulity at how you got his view wrong. And then he'll change the subject, gradually, over the course of a few posts.

Anonymous Daniel February 20, 2013 1:13 PM  

Question, Imatiger:

Do you believe that "subjectivism" in this context is a word that means the same thing (or close to it) as "marginalism?"

Blogger Nate February 20, 2013 1:14 PM  

" It's either subjective value is the way, or bust. "


its either 2+2=4 or bust! We need some synthesis with those who think 2+2 may be horse.

Anonymous VD February 20, 2013 1:18 PM  

The point, I think, to reach a dialectical synthesis. The issue that I am seeing here is that there appears to be little effort to reach that synthesis. It's either subjective value is the way, or bust. For someone with your understanding of the history of economics and science, I do not understand why you often tell people who disagree with you that they are completely ignorant of a subject. It could be they are partially ignorant, and you partially wrong, leading us to a possible synthesis.

Between subjective and objective? Are you serious? It's not possible. That's like saying that you want to establish a synthesis between the guy who thinks the Earth is larger than the Sun and the guy who thinks the Sun is larger than the Earth.

I don't ever tell people they are ignorant because they don't agree with me. I tell people they are ignorant because, in the process of disagreeing with me, they have revealed their ignorance.

It was very clear that Asher didn't know what subjective value is, because he is not so hopelessly illogical as to believe that what he claimed followed from his conception subjective value could follow from genuine subjective value theory. Ignorance here is the best case scenario.

Anonymous Desiderius February 20, 2013 1:18 PM  

The problem that Asher identifies is a real one, but the culprit is Rawls building upon the faulty premise of objective value, not the concept of subjective value itself.

Once one accepts Rawls, subjective value is in fact problematic, but this is due to the faulty premise baked into the cake. Accepting Rawls of course, is problematic in its own right whatever the premises. Sheep's clothing for a particularly ravenous wolf.

Anonymous VD February 20, 2013 1:19 PM  

We need some synthesis with those who think 2+2 may be horse.

You idiot! Everyone knows 2+2 = purple badger!

Anonymous LL February 20, 2013 1:20 PM  

A small personal example...my daughter has a "dessert concert" for orchestra. She found a snazzy pinterest recipe, I bought all the ingredients (to make two of them, total cost of ingredients, about $20) and we taste-tested the first. HORRIBLE. The value of that dessert beforehand was high, daughter wanted some personal satisfaction from making a scrumptious appearing dessert with which to wow her cohorts and concert attendees (which would stand out even more because the organizers sent out one recipe that they encouraged everyone to use, but were ok with something different). After finding herself time crunched, and after perusing more time-intensive and "high prestige conferring" desserts...she went with a $3 boxed brownie mix. The value of that first one plummeted to zero (not even for an effort to tweak and attempt again with already paid for ingredients) and the boxed one took precedence and higher value for ease and convenience.

Anonymous Daniel February 20, 2013 1:20 PM  

its either 2+2=4 or bust! We need some synthesis with those who think 2+2 may be horse.

This synthesis occurs in nature.

It's technical name is: "Normal Guy and Idiot Share a Joint."

Anonymous scoobius dubious February 20, 2013 1:22 PM  

In related news, while a bunch of people were arguing about economics, a group of small children discovered today that Dog says Woof!, Cow says Moo!, Sheep says Baaa!, and Cat says Meow.

Film at 11.

Anonymous scoobius dubious February 20, 2013 1:26 PM  

I forgot to add that Chicken says Cluck!

That would probably be the mind-shattering Austrian innovation, or something.

Anonymous Desiderius February 20, 2013 1:26 PM  

"It's the difference in individual valuation o a given good or service that makes trade possible."

Bingo, and that is the reason that all universalizing systems (i.e. the Enlightenment project, as regrettably now misunderstood) end up mysteriously poor.

See Isaiah Berlin on value pluralism, which is another way of expressing what VD calls subjective value. Most post-modernists are already there, although usually bringing along all sorts of extraneous cultural baggage that will make finding common cause difficult.

Luckily VD is a master diplomat.

Anonymous Daniel February 20, 2013 1:29 PM  

In related news, while a bunch of people were arguing about economics, a group of small children discovered today that Dog says Woof!, Cow says Moo!, Sheep says Baaa!, and Cat says Meow.

Film at 11.


Cut it out scoobius. You know darn well that this isn't an argument. This is agreement by the intelligent and handsome and error by the stupid and ugly.

Blogger IM2L844 February 20, 2013 1:30 PM  

Imatiger must have majored in education.

Anonymous Revan February 20, 2013 1:30 PM  

"Vox is really more than one person. Has to be."


What about a Voxhead?

Anonymous Desiderius February 20, 2013 1:32 PM  

"I would argue that under SVT... any price that two parties freely agree upon in an exchange is just by definition.

It seems incredible that you would have to argue such an obvious point."

I would argue that it is a category error.

Free exchange has nothing to do with justice.

The extent to which that freedom is impaired does.

Blogger Joshua_D February 20, 2013 1:33 PM  

Mike M. February 20, 2013 12:48 PM

Trade of any sort relies on the idea that I have a surplus of something


Negative. Trade doesn't require surplus. Trade only requires that your desire the other item more than the item you are trading.

I may have one very nice, black Fender Stratocaster that I really like. But, I might just trade my only Strat for high quality AK 47 if I had the opportunity.

So, the following part of your comment is correct:

It's the difference in individual valuation o a given good or service that makes trade possible.

If I value the AK over my Strat, then I'll trade my only Strat for an AK

Blogger Nate February 20, 2013 1:33 PM  

"'That would probably be the mind-shattering Austrian innovation, or something."


Scoob...

Ever studied econ at the college level?

Anonymous Daniel February 20, 2013 1:33 PM  

What about a Voxhead?

Nice. What are its persons? Designer, Gun and Holy Skewer?

Blogger Nate February 20, 2013 1:35 PM  

"The extent to which that freedom is impaired does."

The mental masturbation corner is over there. Tell Asher we said hi.

Anonymous Porky February 20, 2013 1:36 PM  

Thus, a manufacturer of lipstick may well make a greater fortune than a manufacturer of microscopes—even though it can be rationally demonstrated that microscopes are scientifically more valuable than lipstick. But—valuable to whom?

A microscope is of no value to a little stenographer struggling to make a living; a lipstick is; a lipstick, to her, may mean the difference between self-confidence and self-doubt, between glamour and drudgery.

This does not mean, however, that the values ruling a free market are subjective. If the stenographer spends all her money on cosmetics and has none left to pay for the use of a microscope (for a visit to the doctor) when she needs it, she learns a better method of budgeting her income; the free market serves as her teacher: she has no way to penalize others for her mistakes. If she budgets rationally, the microscope is always available to serve her own specific needs and no more, as far as she is concerned: she is not taxed to support an entire hospital, a research laboratory, or a space ship’s journey to the moon. Within her own productive power, she does pay a part of the cost of scientific achievements, when and as she needs them.


Ayn Rand

Anonymous Tad February 20, 2013 1:42 PM  

@Josh

Nate, I would argue that the concept of justice isn't something that belongs in an economic discussion

A discussion of tax policy, for example, while a discussion of economics, is also a discussion of justice, or at least that which is just.

Anonymous scoobius dubious February 20, 2013 1:44 PM  

"Ever studied econ at the college level?"

Nate, my econ tutor/section leader was a guy who now has an international legal reputation. My alleged "lecturer" was one of the most famous names in the bizniss. My philosophy teacher was Stanley Cavell. Don't go there.

I started operating cash-money businesses when I was like 10 years old. Everything these econ guys said to me had the tone of... how shall I put this?... being something akin to British comic opera. Not necessarily untrue, mind you --there's a wealth of truth in Gilbert and Sullivan if you know how to look for it-- but just, I 'unno, formalist, in a way that makes you look over there!, when the ball under the cup is actually over here.

Blogger stareatgoatsies February 20, 2013 1:45 PM  

What if you get a raise and suddenly you've all this extra cash burning a hole in your pocket? Does the subjective value of things you like suddenly rise because you're now willing to spend money on them?

Blogger Nate February 20, 2013 1:52 PM  

"Nate, my econ tutor/section leader was a guy who now has an international legal reputation. My alleged "lecturer" was one of the most famous names in the bizniss. My philosophy teacher was Stanley Cavell. Don't go there."

Scoob...

My point was not to call you ignorant. My point was... not that the austrians were particularly innovative or brilliant... though some were. The point is that the state of economics is so freaking insanely horrid... that obvious truisms like SVT are almost totally scorned.

The austrians were just the ones pointing out that... hey... look... this isn't nearly as hard as y'all are making it.

Blogger Nate February 20, 2013 1:56 PM  

"What if you get a raise and suddenly you've all this extra cash burning a hole in your pocket? Does the subjective value of things you like suddenly rise because you're now willing to spend money on them?"

To you. Yes.

the value of a given thing goes up and down. Note how the purchasing power of a dollar goes up and down.

Anonymous Tallen February 20, 2013 1:57 PM  

‘The same thing’, Democritus writes, may be ‘good and true for all men, but the pleasant differs from one and another’

This could describe Christianity.

Anonymous Asher February 20, 2013 1:57 PM  

@ VD

To my recollection "value" was not even discussed once in any economic class I ever took, which were all about modeling the behavior of individuals and economies. All these arguments you are making have to do with writing that occurred two centuries ago and are totally irrelevant to anything taught in economics classrooms today.

Say wrote:

J.B. Say firmly re-established the scholastic-continental-French utility analysis. It is utility and utility alone that gives rise to exchange value

I don't think even one of my econ professors would disagree with this quote from Say.

During my junior year I had an extended debate with a philosophy student who was a big follower of Marx and who advocated the labor theory of value. One of my professors was a standard left of center liberal and I asked him if there was some definitive way to debunk the labor theory of value. His response was that theories of value have nothing to do with economics and that economists start from an assumption that different people differently value different things across time, place and circumstance and then attempt to model behavior. I'm pretty sure that every professor I had would have said pretty much the same thing. I cannot recall even one mention of how value originates in any classroom discussion

Now, I would agree that much of the modeling that goes on is pretty poor, Krugman being an excellent example, but it has nothing to do with ascertaining a source for or theory of value. Pretty much all of your economic analysis, the entry of women into the workforce for example, is excellent but arguing over the source of value is rehashing arguments that very few economists today find remotely interesting or productive.

More Say:

Say simply dismissed use-value and the value paradox altogether, and decided to concentrate on exchange-value....

In other words, price. Economists are interested in price and human activity, not the value of things. Sure, lots of economists get lots of things wrong in their modeling by not accounting for all sorts of social factors, total fertility rate, for example, but that does not mean they are searching for some metaphysical standard of value.

Anonymous Daniel February 20, 2013 2:01 PM  

Exchange-value is not price, Asher. Haleg scit.

Blogger Giraffe February 20, 2013 2:05 PM  

My economics education for the most part was reading books on the stock market. They beat it into your head that a stock is worth only the price that you can get someone to buy it from you.

Obviously, there must be an objective value to what a stock is worth. That's why their are value investors. The problem is, in order to know what that objective value is, you have to know everything that can affect that value. VD assures us that not even God is omniscient*. Also, MPAI. Since we can't know everything, and don't correctly interpret what we do know, what we are left with is a subjective value, because different people will percieve different values. This is not to say that their isn't an objective value, but that only God knows what it is, so there may as well not be.

Where's my Nobel prize?

*It is interesting that those who subscribe to the notion of an objective value like to play God.

Anonymous rrm February 20, 2013 2:07 PM  

I know little about economics, but what drew me to the previous post where this has its source was the connection made to Calvinism, something that even drew me out of continued lurking to make a comment or two. Imagine my surprise to see Augustine's economics quoted with approval!

Anonymous Joe doakes February 20, 2013 2:09 PM  

What its the just price for a fireball xl5 lunchbox in mint condition? I had one as a kid and want one now, not to carry my lunch, but for nostalgia. I don't want to be unjust to the seller but i don't want to overpay so tell me, economics guys, what is the just price for one today?

Blogger Nate February 20, 2013 2:18 PM  

And Asher shocks us all by claiming that subjective value isn't subjective value...

who could've seen that coming?

Blogger Scott February 20, 2013 2:18 PM  

The point, I think, to reach a dialectical synthesis. The issue that I am seeing here is that there appears to be little effort to reach that synthesis.

It really isn't that hard. There is a sense in which prices are objective. Every individual's valuation is subjective, but the mechanism by which a market arrives at a 'market price' is objective. The market price is an objective price in that it does not flow from the valuation of any one particular person. The price structure of an economy represents real, objective information about the demand preferences of the people who are participating in it.

Ask if the bid/ask or the last traded price or whatever of 100 shares of XYZ corporation on the NYSE at a given point in time is an objective fact, or if it is just a subjective matter of opinion. I don't think anyone will take the latter position.

Blogger Nate February 20, 2013 2:18 PM  

" I don't want to be unjust to the seller but i don't want to overpay so tell me, economics guys, what is the just price for one today?"

Whatever you can get someone to give you for it.

Anonymous Porky February 20, 2013 2:18 PM  

Giraffe: *It is interesting that those who subscribe to the notion of an objective value like to play God.

Adam Smith liked to "play God"?? The guy who invented the concept of the "invisible hand"??

Anonymous dh February 20, 2013 2:26 PM  

Ask if the bid/ask or the last traded price or whatever of 100 shares of XYZ corporation on the NYSE at a given point in time is an objective fact, or if it is just a subjective matter of opinion. I don't think anyone will take the latter position.

Don't ask the guy at Market Ticker. Or Zero Hedge. It's not so cut and dried once you realize that the bid price was never actually carried out, and the ask was subject to front running.

But otherwise carry on.

Blogger Giraffe February 20, 2013 2:29 PM  

Porky, I'm an econotard. I haven't read Adam Smith. But subjective value seems self evident to me.

As far as I can tell from a quick skim of Wikipedia, Smith didn't believe in objective value either, but I admit my ignorance.

Anonymous Josh February 20, 2013 2:34 PM  

Obviously, there must be an objective value to what a stock is worth. That's why their are value investors. The problem is, in order to know what that objective value is, you have to know everything that can affect that value.

No...it's still not an objective value...it's a subjective value, albeit a different value than whatever the value the stock market has.

When a value investor looks at the balance sheet of a company, the value he places on the company might be less than the trading price of the stock, but it's still not an objective value. He might say, "well, it's trading at 30 a share, but looking at everything, I think that's a dumb price, I'd only buy it for 15"

Blogger Nate February 20, 2013 2:35 PM  

"I don't think anyone will take the latter position."

I will take the position that its the results of LOTS of subjective opinions. If anything serves as evidence that objective value doesn't exist... its the Stock Market.

Anonymous civilServant February 20, 2013 2:36 PM  

That's why we must clarify "free exchange" instead of merely "exchange".

Is exchange with a monopoly a free exchange?

Consider Genesis 41 and 47. Was this a free exchange?

The idea that "there is no such thing as a just price" would seem very attractive to someone who holds a monopoly or effective monopoly on certain necessary goods. Surely independent suppliers would have an interest in forming a consortium and fixing prices for the good of "all" (meaning themselves) - surely this would not be unjust?

Anonymous Noah B. February 20, 2013 2:38 PM  

My first reading in economics was Das Kapital, and although I don't recall him using the term "subjective value," Marx certainly understood this principle well. It is, literally, the entire basis of market economies.

Blogger Nate February 20, 2013 2:38 PM  

microsoft rakes in hundreds of millions... if not billions every year... and has every year since the 80s... but its stock price is the same 30 bucks its always been. Contrast this with say... google... which... as best as i can tell only actually produces stock... is somehow valued at 800 bucks a share.

And suddenly objectivity goes right down the shitter.

Blogger Nate February 20, 2013 2:40 PM  

"That's why we must clarify "free exchange" instead of merely "exchange"."

Because fraud and coercion exist and effect price.

Anonymous Porky February 20, 2013 2:42 PM  

As far as I can tell from a quick skim of Wikipedia, Smith didn't believe in objective value either, but I admit my ignorance.

He didn't think Labor Value Theory mattered for a sufficiently advanced economy, but he still held onto objective value.

subjective value seems self evident to me.

Me too. But I don't think Smith was trying to get rid of subjective value. Rather, he was simply trying to come up with a useful metric.

Anonymous Mark P February 20, 2013 2:46 PM  

Value is ipso facto subjective. Any talk of objective value has inserted politics.

Anonymous Revan February 20, 2013 2:48 PM  

"Nice. What are its persons? Designer, Gun and Holy Skewer?"

The Voxhead:

Writer

Evangelical

Rabbit Hunter

Anonymous Revan February 20, 2013 2:50 PM  

I'd like to clarify that VD the rabbit hunter is more like a hunter in a deer stand rather than actively seeking out his prey.

Anonymous DonReynolds February 20, 2013 2:50 PM  

The study of economics started in the modern era with the middle ages when the church was the focus of higher learning. It is from the church influence that we got the early regulation of economic affairs, from usury to just wage and price controls, prohibitions against unearned income, taxes in support of the church, the obligations of servant to master, the legitimacy of the guilds and trades. This was the influence of the early churchmen, called the Scholastics. Basically, they took the ancient surviving economic works of the pagan Greeks and Romans and changed them to satisfy what was church teaching at the time.

Subjective valuation was part of the rise of capitalism and the gradual withdrawal of the influence of the church (made possible in a large way by the Protestant Reformation). It took 400 years to get the church out of economics, toward that secular value-free capitalism that respects the edicts of the marketplace and the values imposed by the tastes and preferences of the consumer. Every laissez faire achievement in economic freedom was won over the protests of the church, particularly in the more Roman Catholic nations, like France. The church occupied the moral high ground and retained the ability to condemn or sanction. The last vestiges of that moral authority died out in my lifetime with the last of the Sunday Blue Laws, which have been largely forgotten. (One could argue that some of that argument still continues with the ballot initiatives to allow or deny the sale of alcoholic beverages in a voting jurisdiction....the dry counties and the wet counties.)

Yes, objective valuation was very much a part of economics for centuries, but subjective valuation and the dictatorship of the marketplace has been part of the contribution of modern capitalism. We still see in some church leaders the disdain for profit, and usury, and price gouging, and the adoration of the egalitarian ideal that some in the church still appear to cling to.

Anonymous VD February 20, 2013 2:51 PM  

To my recollection "value" was not even discussed once in any economic class I ever took, which were all about modeling the behavior of individuals and economies. All these arguments you are making have to do with writing that occurred two centuries ago and are totally irrelevant to anything taught in economics classrooms today.

I'm not surprised. They are irrelevant to what is being taught. That does not make them wrong or irrelevant. Quite the contrary, most of what is being taught is irrelevant. You may recall I wrote a book which deals with this to a certain extent. I said you were ignorant, but I did not say it was your fault that you were ignorant.

My academic education in economics was every bit as lacking as yours.

His response was that theories of value have nothing to do with economics and that economists start from an assumption that different people differently value different things across time, place and circumstance and then attempt to model behavior. I'm pretty sure that every professor I had would have said pretty much the same thing.

No doubt. There is a reason they failed to see the 2008 crisis coming whereas I did. Their economic models are useless.

In other words, price. Economists are interested in price and human activity, not the value of things.

You are failing to grasp the essential relationship here. You have no idea how important the issue is. All of the price information is irrelevant, because the exchange value that creates it is a snapshot of a moment in time. Unless you understand the dynamic and subjective nature of value, you cannot hope to build a reliable model because your information is guaranteed to be almost instantly outdated.

Stop trying to defend yourself here, Asher. You're intelligent enough to understand the issue, but you won't be able to if you're focused on yourself. It's not in the least bit irrelevant and it is a much bigger thing than you're presently imagining. It's the Red Pill of economics. I'll post more on it soon, but see if you can figure it out before I spell it out for everyone.

Anonymous kh123 February 20, 2013 2:53 PM  

"Labor theory of value.
Objective value.

Both seem so obviously wrong with even a couple minutes of thought that I'm surprised that people of IQ's greater than 90 can base entire markets on them."


From Keynes to Greenspan to Obama to folks like Asher, I figure they see themselves or their objective value systems as a sort of Christ attempting to calm the economic storms, simply by the power of Word, regulation, and appeals to justice, social or otherwise.

Blogger Giraffe February 20, 2013 2:54 PM  

@Josh

When a value investor looks at the balance sheet of a company, the value he places on the company might be less than the trading price of the stock, but it's still not an objective value. He might say, "well, it's trading at 30 a share, but looking at everything, I think that's a dumb price, I'd only buy it for 15"

I agree that it is not objective. I don't think we as humans can know objectively what the value is.

Still, I think in order to be a value investor you have to believe there is an objective value and that you are better than everyone else at figuring out what it is. You are betting that the market is inefficient, and is pricing a $15 stock at $30. So you short it. You are betting that the market will come to realize that they have priced it wrong and that it will change in price to reflect the true value.

Anonymous David February 20, 2013 2:54 PM  

As one commentator whose name I can't recall once said, anytime someone tells you they have a degree in economics, tell them you would have been more impressed if they said right after that-

"but despite that, I actually know something about economics."

Blogger Scott February 20, 2013 2:55 PM  

The point is, subjective and objective have to do with point of view, not true or false, or just or unjust or anything like that. That valuation arises 'inside' an individual means that it is subjective -- it comes from and arises within his own point of view. But to you, as an 'outsider' it is an objective fact that the individual values the thing the way he does.

A market is 'outside' of any one person. Everyone participates with his own opinion/valuation, but what the market produces is an objective price.

Which is not to say an intelligent or a rational price, or anything like that, only objective. It is external to anyone's point of view, unless you want to call a market a sort of 'super-consciousness' or something which all our own come together to create and the value arises within this super-awareness. Then it could be subjective. But that's just weird.

Blogger Panzerdude February 20, 2013 2:57 PM  

Asher, and all objective theory proponents, can see subjective value theory in the their own lives. I'll bet Asher would never pay $900 for a softball bat that professional softball players use when they play.

Under Asher's theory, he MUST buy the bat and pay $900, because that's the "just" price (the objective value of all the labor, materials and equipment required to produce the bat).

Forget the fact that Asher doesn't want a bat. Even if he were to play, he probably still wouldn't spend his money to acquire even a "cheap" bat, but hope he could borrow one.

This is subjective value in action. People spend their limited resources on the things they see value in and sell their resources for the value they perceive to be fair.

Every other form of "valuation" cannot work, because nothing outside a person can establish the value an item, service or time has for each person, given the limitless differences in what people place their values on.

To think otherwise usually requires 4 years of being "educated" out of common sense and inculcated with a faux intellectualism that ends up producing snobs that believe they have all the answers. My subjective value of their opinion is zero...

Anonymous VD February 20, 2013 2:57 PM  

I would go so far as to say that economics is, fundamentally, the study of value. I believe I wrote something to that effect in RGD. And the reason economists are drawn to objective value assumptions is that the complexity involved in subjective value, to say nothing of DYNAMIC subjective value, (one of my points of criticism of Austrian theory as practiced, by the way), is that it renders pretty much all of mainstream neoclassical theory, both Keynesian and monetarist, patently futile.

And who wants that?

Anonymous VD February 20, 2013 3:01 PM  

I don't think Smith was trying to get rid of subjective value. Rather, he was simply trying to come up with a useful metric.

He may not have been intending to do so, but he did. And it is obvious that you haven't read Smith. The problem is that Smith talked out of both sides of his mouth in The Wealth of Nations and contradicted himself. You have to read him and Ricardo to believe it.

Ricardo actually concluded that a nation's entire net profit was derived from the price of corn. I am not exaggerating.

Anonymous DonReynolds February 20, 2013 3:02 PM  

Joe doaks...."What its the just price for a fireball xl5 lunchbox in mint condition? I had one as a kid and want one now, not to carry my lunch, but for nostalgia. I don't want to be unjust to the seller but i don't want to overpay so tell me, economics guys, what is the just price for one today?"

Does not matter what is just.

If the lunchbox is for sale and you are willing to pay the price and you have the money to pay it....it will be yours.

If more than one person wants to buy it at the same time, you will own it if you are willing and able to pay more than anyone else. That is about as "just" as you are going to find....a willing seller and the eager buyer, both of whom agree on a price....else the lunchbox will "unjustly" stay with the current owner.

Anonymous Josh February 20, 2013 3:02 PM  

Still, I think in order to be a value investor you have to believe there is an objective value and that you are better than everyone else at figuring out what it is.

You can't figure out objective value because objective value does not exist.

Anonymous Josh February 20, 2013 3:03 PM  

Ricardo actually concluded that a nation's entire net profit was derived from the price of corn. I am not exaggerating.

Ah, the Ricardian Rice

Anonymous VD February 20, 2013 3:03 PM  

Ask if the bid/ask or the last traded price or whatever of 100 shares of XYZ corporation on the NYSE at a given point in time is an objective fact, or if it is just a subjective matter of opinion. I don't think anyone will take the latter position.

You're completely missing the point. What the price WAS is an objective fact. But what the price WILL BE is not. Price is not value, price is the momentary intersection of millions of subjective value judgments, many of which have nothing to do with the object being priced.

Blogger Nate February 20, 2013 3:04 PM  

"And who wants that?"


...


Me?

I've long believed that even bothering to track unemployment is a massive waste of time.

Blogger Giraffe February 20, 2013 3:05 PM  

@Nate
microsoft rakes in hundreds of millions... if not billions every year... and has every year since the 80s... but its stock price is the same 30 bucks its always been. Contrast this with say... google... which... as best as i can tell only actually produces stock... is somehow valued at 800 bucks a share.

And suddenly objectivity goes right down the shitter


I get confused when you use an objective argument in favor of subjectivity.





Blogger Giraffe February 20, 2013 3:07 PM  

You can't figure out objective value because objective value does not exist.

Nate thinks it does. He thinks Google trading at 800 is crazy.

Blogger Nate February 20, 2013 3:08 PM  

"Still, I think in order to be a value investor you have to believe there is an objective value and that you are better than everyone else at figuring out what it is."

No. To be a good investor you need to know that value is subjective.. and be able to predict what direction the subjective value will be doing for a given stock in the future.

Blogger Nate February 20, 2013 3:10 PM  

"Nate thinks it does. He thinks Google trading at 800 is crazy."

it is crazy.

Most subjective things are crazy. The popularity of Justin Beiber for example.

Blogger James Dixon February 20, 2013 3:17 PM  

> A discussion of tax policy, for example, while a discussion of economics, is also a discussion of justice, or at least that which is just.

How can you have a discussion about justice when the discussion is about an inherently unjust process? The only just taxes are voluntary ones. All others are unjust to one extent or another. Note that unjust does not equate to unnecessary.

> Obviously, there must be an objective value to what a stock is worth.

Yes. It's printed on the stock certificate. Usually $0.01 to $0.10/share from the ones I've seen. But even that's only good as long as the company is still in business.

> That's why their are value investors.

Uhm. No. Value investors are almost always actually betting on a reversion to the mean, not an objective value, whether they know that or not.



Blogger foxmarks February 20, 2013 3:20 PM  

My academic education in economics was every bit as lacking as yours.

Me, three! Although I was fortunate enough to have a couple of TAs who were outside the orthodoxy. I once got full credit for a short-answer test question that included my explanation, "Because he's a neo-Keynesian douchebag."

Economists are interested in price and human activity, not the value of things.

I can't parse this sentence. What is human activity, other than constantly valuing alternatives? What is price, other than the value of all the choices foregone?

Everybody gets wrapped up in abstracting value into monetary terms (dollars). Money itself is a subjective, transient value.

The nature of life and the human mind may make useful the concept of objective value. If we hold some value(s) as a constant, we can then look at the situation from non-economic perspectives. We can talk about justice and imagine a more pleasing distribution of elements. And that exercise might well feed back into our choices, which then change subjective valuations. But it never works quite like the model predicts, because we forget that the snapshot we took when we fixed things at their objective values was just a picture of a moment in time.

The way thing were distributed in that picture were distributed that way because that's how the universe of subjective valuations arranged them. Retouching a picture taken yesterday does not change the reality of today. Attempting to change reality by retouching a picture of it leads to madness.

Blogger Giraffe February 20, 2013 3:21 PM  

No. To be a good investor you need to know that value is subjective.. and be able to predict what direction the subjective value will be doing for a given stock in the future.

Yes. But a value investor will buy a stock and then tell you that the market is wrong.

it is crazy.

Most subjective things are crazy. The popularity of Justin Beiber for example.


Justin Beiber's popularity is crazy. That is an objective fact. You've just destroyed my whole economic worldview.

Anonymous Asher February 20, 2013 3:26 PM  

@ VD

Subjective value severs any possible connection between price and justice;

Theories of value either lie in the realm of metaphysics or political philosophy. I doubt there are many, if any economists who would say that any particular non-coerced exchange is unjust. That said, if injustice and corruption is endemic in a society then that injustice and corruption is likely to be reflected in the overall price structure of things - corruption and injustice distorts prices.

But that injustice and corruption is not the subject of economics, itself

Nor is subjective value theory new.

That's correct, it's old, very old. It's so old that it is an artifact of the history of economic thought, as are all theories of value, and rather irrelevant to how economics is currently explicated.

The problem, here, lies in talking about the metaphysical notion of value, itself, when talking about economics. The problem is metaphysics.

Rothbard says:

First, he was the founder of subjective value theory ... the pleasant differs from one and another’."

This is not a theory at all, but an assumption, and one with which most economists agree.

There is, there can be, no such thing as a "just price" under subjective value theory

When people say that it's not fair to work full-time and only earn 14k they are not making an observation on that specific transaction but on the overall state in which large numbers of people find themselves. What they're saying is that there is overall injustice in society and that this injustice is reflected in that particular transaction, not that the transaction, itself, is unjust. They then go on to advocate raising the minimum wage as a means of addressing what they perceive as an overall unjust situation, in society.

I disagree with them and think that raising the minimum wage leads to even greater problems, but brow-beating them with "the subjective theory of value severs the connection between price and justice" is not going to win you any political battles.

Hell, I used to do that. Back in college I was a standard libertarian and made the exact same arguments you make on this blog. I have seen many smart, highly-informed libertarians make all these same arguments and it doesn't convince anyone ... except other libertarians, and this is why I am no longer a libertarian.

What I came to realize is that libertarianism, for most libertarians, is just another totalizing system of ideas about how the world ought to work, and that is only likely to convince individuals for whom those ideas "work". In this sense, it is no different from Marxism, and I am not the only one to make such an observation. I have challenged you a couple of times over whether or not your libertarianism is a total ideal system because that's what it looks like to a non-libertarian.

Libertarians have lots of penetrating insights into how the world and humans function, but as a total ideal system it is a loser.

Blogger Nate February 20, 2013 3:37 PM  

"Yes. But a value investor will buy a stock and then tell you that the market is wrong."

Yes. That's because they believe in the future the market will subjectively change its mind.

Blogger Nate February 20, 2013 3:39 PM  

"In this sense, it is no different from Marxism, and I am not the only one to make such an observation."

Libertarians!!!

Out to take over the world and leave you alone.

Anonymous Asher February 20, 2013 3:39 PM  

@ Josh

Economics describes or explains what is, not what ought to be.

"Value", for most people is a normative concept and why it does not belong in economics, either as a subjective or an objective consideration.

I'm not the one making the is/ought error. Anyone claiming that economics says anything about "value", at all, is making that error. This, btw, directly relates to the issue of the 'libertarian straddle' in Jeffrey Friedman's essay "What's Wrong with Libertarianism" that I brought up a couple weeks ago - the straddle of going back and forth between normative and consequentialist arguments for libertarianism tends to produce the is/ought error, that's it's major problem.

Anonymous Porky February 20, 2013 3:39 PM  

I would go so far as to say that economics is, fundamentally, the study of value.

I'll take that further and say that economics is the study of human nature - i.e., how humans assign value.

He may not have been intending to do so, but he did.

No he didn't (get rid of subjective value). He merely limited value to what he could readily quantify - much as science limits it's method to what it can observe and test.

And it is obvious that you haven't read Smith. The problem is that Smith talked out of both sides of his mouth in The Wealth of Nations and contradicted himself.

Wrong, and I wasn't asserting that Smith was right or wrong or that he never contradicted himself. Even Ricardo himself pointed out Smith's contradictions. I was giving my personal opinion about why a genius like Smith would attempt to deny the obvious.

Anonymous Asher February 20, 2013 3:42 PM  

@ Jack Amok

Of course, what Asher and other "objectivists" like him mean by "just price" is more along the lines of "a price based upon my own subjective interpretation of what is fair".

This is a hideously bizarre comment. I've been called many things but "objectivist" is not one of them. I don't have an "objective" theory of value; hell, I don't have any theory of value, at all. Theories of value are metaphysical and I don't attempt to rationally explicate metaphysics.

Anonymous VD February 20, 2013 3:42 PM  

Theories of value either lie in the realm of metaphysics or political philosophy.

You are completely, utterly, and totally wrong.

That's correct, it's old, very old. It's so old that it is an artifact of the history of economic thought, as are all theories of value, and rather irrelevant to how economics is currently explicated.

Yes. And it is vital and relevant, precisely because the way economics is currently explicated is hopelessly flawed, in part due to it having gone down the neoclassical track of objective value.

Hell, I used to do that. Back in college I was a standard libertarian and made the exact same arguments you make on this blog. I have seen many smart, highly-informed libertarians make all these same arguments and it doesn't convince anyone ... except other libertarians, and this is why I am no longer a libertarian.

No one cares what you did or what you are. Like the economists of the world, you are turning your back on observable and provable truth, which is why all your blathering in this regard is irrelevant.

I gave you your chance, Asher. You spurned it in favor of more mental masturbation and talking about yourself. It's a pity, because I think you potentially have the capacity, but your self-obsession and inability to leave the realm of the rhetorical renders you unfit to join the adults in discussions like these.

Anonymous VD February 20, 2013 3:44 PM  

He merely limited value to what he could readily quantify - much as science limits it's method to what it can observe and test.

Sure, just as others limit economics to what they can quantify and calculate... and then they wonder why their calculations are inevitably wrong. It's simply absurd.

I don't think Smith was a genius. I think he was, like Keynes, very useful.

Anonymous Asher February 20, 2013 3:46 PM  

@ VD

Between subjective and objective? Are you serious? It's not possible. That's like saying that you want to establish a synthesis between the guy who thinks the Earth is larger than the Sun and the guy who thinks the Sun is larger than the Earth.

The very distinction between subject and object, itself, is sythetic.

Anonymous VD February 20, 2013 3:47 PM  

What I came to realize is that libertarianism, for most libertarians, is just another totalizing system of ideas about how the world ought to work, and that is only likely to convince individuals for whom those ideas "work". In this sense, it is no different from Marxism, and I am not the only one to make such an observation. I have challenged you a couple of times over whether or not your libertarianism is a total ideal system because that's what it looks like to a non-libertarian.

Rhetoric, rhetoric, nothing but rhetoric.

You are a poopy-headed Aspie, Asher. That's the level of your discourse, Asher. Only the vocabulary differs.

Blogger Nate February 20, 2013 3:50 PM  

"I don't think Smith was a genius."

We should see about compiling a list of the Heavy Hitters... who we would or would not put on the genius list.


Anonymous Asher February 20, 2013 3:50 PM  

@ Desiderius

Once one accepts Rawls, subjective value is in fact problematic,

Have you ever stopped to consider why so many people find Rawls' argument so compelling? I highly suspect that the notion of "fairness" was hardwired into us by evolution over the 100k or so years we spent as mall tribes of hunter/gatherers. That instinct still exists but it is poorly translated into mass society and creates all sorts of deleterious side effects.

When libertarians decry the effects of that instinct what they are doing is engaging in another violation of the is/ought distinction, and that makes libertarianism just another totalizing ideal system, just like Marxism.

Anonymous Asher February 20, 2013 3:51 PM  

@ Nate

And Asher shocks us all by claiming that subjective value isn't subjective value...

I didn't claim anything of the sort. Learn to read fuckwad. What I said is that the subjectivity of value isn't a theory but an assumption, one with which I agree.

Blogger foxmarks February 20, 2013 3:55 PM  

I'll take that further and say that economics is the study of human nature - i.e., how humans assign value.

I like that a lot.

I doubt there are many, if any economists who would say that any particular non-coerced exchange is unjust.

*facepalm* Really? You took more than one college econ course and never ran across somebody with a sheepskin preaching about instances of unfair and injust exchanges?

What they're saying is that there is overall injustice in society and that this injustice is reflected in that particular transaction, not that the transaction, itself, is unjust.

You have it backward. It is the aggregation of individual injustices that lead the mainstream to conclude that society is unjust. To illustrate by parallel, if nobody was ever called "nigger" in real life, on what basis would the concept of racism have been invented?

The way you describe it, injustice would have been an a priori condition, and we just sift through all of human experience to find stuff that fits the model. Kind of like global warming…

Anonymous Josh February 20, 2013 3:59 PM  

Anyone who concludes that libertarianism is the same sort of system as marxism is a little confused

Anonymous Imatiger February 20, 2013 4:04 PM  

@ VD

I actually do care what Asher did or was. It gives me insight into his subjective valuation schema.

Blogger Scott February 20, 2013 4:04 PM  

Asher, do you have a website?

Anonymous Asher February 20, 2013 4:05 PM  

@ VD

Unless you understand the dynamic and subjective nature of value

I'm not sure what you mean by this. If you mean that I understand *that* there is not some unitary, objective measure then not only do we agree but pretty much everyone agrees with you. But what you could mean is that there is some overarching metaphysical *essence* that is both subjective and quantifiable and that can be accessed via intellect.

If the latter, then you are engaging in a mystical, esoteric metaphysics that isn't going to appeal to anyone because it has nothing to do with modeling behavior.

Their economic models are useless.

Sure, but has nothing to do with them misunderstanding *value* but with the fact that their models don't include all kinds of social factors that affect economic performance. "Value" has nothing to do with it.

Blogger Nate February 20, 2013 4:06 PM  

" What I said is that the subjectivity of value isn't a theory but an assumption, one with which I agree."

wow... so I guess I should type slower for you. there are a few logical steps one has to take to get to the conclusion I noted in my accusation. Being a rhetorical type though... I see that's to much to ask.

try real hard to follow along.

Vox predicted you would claim that X doesn't mean what everyone has always said X means... so therefore you aren't wrong.

You then claimed that subjective value is not a theory... but an assumption.... so you aren't wrong.


See how that works? Look I know you're a little slow but come on. Try.

Anonymous Asher February 20, 2013 4:07 PM  

@ kh123

From Keynes to Greenspan to Obama to folks like Asher, I figure they see themselves or their objective value systems

This is one of the most idiotic comments I've seen. The notion that I am advocating some objective value system is absurd, as I consistently argue against even the possibility of such a thing.

Democritus was correct that pleasures vary but he was incorrect that morality doesnt, it does.

Anonymous Imatiger February 20, 2013 4:12 PM  

This discussion reminds me of the idea that people can be grouped into two segments - chunkers and splitters. Chunkers try to find common themes within ideas, to build a unified theory of [insert subject]. Splitters try to tear ideas apart into individual constituents and group ideas by differences. I don't find either concept particularly useful. You can chunk and split simultaneously. Or on opposite days.

Also, why can't we look at objective value as something different than subjective value, but intertwined with? Objective value is something that is defined by the subjective valuations of an entire market. You approach it asymptotically. You can never reach it, but you can get close enough to it that it looks a lot different than individuals subjective value.

And this is the part where I reveal how huge of a dork I am - I am reminded of the Borg Queen saying to Data - You imply a separation where there is none.

Anonymous AlteredFate February 20, 2013 4:14 PM  

Excuse a short experience but it speaks volumes about "value". I was on my way to a rock concert downtown, when a buddy of mine called me. I told him where I was headed and invited him along, not knowing whether or not we'd be able to buy another ticket at the door. We met up and headed over to venue arriving some minutes after the show had already started. Scalping is legal here, and there were several people hawking tickets near the entrance. One of them asked if we needed tickets, and we told him that we did. I didn't remember what I had already paid for my ticket which I had bought online weeks earlier, but the guy asked $20 bucks and my friend paid and got a ticket and we went inside. Once inside I happened to look at my ticket stub and noticed that the face value of the ticket was $38.

If I'm understanding this right, objectively, he lost $18 on this transaction assuming he paid the face price.

Now how many things are wrong with the objective observation that the scalper 'lost' $18?

Is this a poor example?

Blogger Nate February 20, 2013 4:15 PM  

"Also, why can't we look at objective value as something different than subjective value, but intertwined with? Objective value is something that is defined by the subjective valuations of an entire market."

I know you wish there was a macro... but there is no macro. There is only micro.

Anonymous VD February 20, 2013 4:16 PM  

I'm not sure what you mean by this. If you mean that I understand *that* there is not some unitary, objective measure then not only do we agree but pretty much everyone agrees with you.

They agree in theory, but not in practice. All their models depend upon the idea that the price somehow magically serves as an objective substitute. In other words, instead of following the implications of subjective value, they punt and utilize a pseudo-objective value that allows them to play with their crude quantified models.

Hence the dismal state of their "science".

Anonymous VD February 20, 2013 4:18 PM  

Also, why can't we look at objective value as something different than subjective value, but intertwined with? Objective value is something that is defined by the subjective valuations of an entire market. You approach it asymptotically. You can never reach it, but you can get close enough to it that it looks a lot different than individuals subjective value.

Because it leads you to false conclusions. That's what economists have done since Adam Smith. And the more they quantify and calculate, the further afield they fly, until they're fabricating statistics and printing fake money and indulging in all sorts of craziness justified by their approximations.

Anonymous Porky February 20, 2013 4:21 PM  

Sure, just as others limit economics to what they can quantify and calculate... and then they wonder why their calculations are inevitably wrong. It's simply absurd.

Yes. It's like Evo-psych.

I don't think Smith was a genius. I think he was, like Keynes, very useful.

I liken him more to Darwin. Smart guy who made very good observations, but stumbled and bumbled over the implications. Like Darwin, he asserted his theory without any real foundation (outside of a priori appeals to "nature"). And yes, like Darwin, he was useful to utilitarians and authoritarians, but I believe there is still a great much to be learned from him.

Anonymous Athor Pel February 20, 2013 4:22 PM  

I'm going to describe something I read recently in as few words as possible. It makes sense on the surface but I was wondering whether there is something I'm missing. It concerns the money.


Considering the origin of federal reserve notes, dollars, in that they only get created from debt, there is an inevitable bind created with respect to paying off that debt.

To pay off all debt is to destroy all dollars. That is one consequence but it is one that will never be reached because of the compounding interest on the debt.

Since there is compound interest charged and the interest does not create dollars in the same way the original debt did there will never be enough dollars to ever pay off the debt. Since debt creates more dollars the only way to pay off one debt is to create new debt, with the new debt larger than the original debt to compensate for the compounding interest.


Anonymous Imatiger February 20, 2013 4:23 PM  

@ Nate

You might be right. And it may also be more useful when talking with people who believe in objective value that you start from the perspective that objective value is a manifestation of subjective value, so that they don't tune you out from the start.

Blogger Nate February 20, 2013 4:27 PM  

" so that they don't tune you out from the start."

Meh.

I'm not all that interested in educating people... generally I assume people cannot be educated on stuff like this.

Blogger James Dixon February 20, 2013 4:29 PM  

> Also, why can't we look at objective value as something different than subjective value, but intertwined with? Objective value is something that is defined by the subjective valuations of an entire market.

Because that's price, not value.

Anonymous Imatiger February 20, 2013 4:39 PM  

@ James Dixon

I'll buy that. And you can use that description to explain value versus price.

So if there can be no just price, can there be a just value?

Blogger Nate February 20, 2013 4:43 PM  

"So if there can be no just price, can there be a just value?"


...


See?

Blogger James Dixon February 20, 2013 4:51 PM  

> So if there can be no just price, can there be a just value?

How can there be a just value when value is entirely subjective, varying not only from person to person, but by time and circumstance with the same person?

You might argue for a consensus value, but not a just one.

Anonymous ericcs February 20, 2013 4:53 PM  

I am obviously not an economist, and I'm trying to recall what little I learned during university engineering and business classes. The following is meant simply as a request for an explanation so that I can better understand this issue.

If productivity is increased to a point that is greater than the economy's ability to immediately consume, isn't something thereby automatically stored, such that it can be used by future generations? Since this can be a long-term transaction, I always thought that what was stored was intrinsic and therefore of objective value. Conversely, if it were subjective, then future generations might have changed their valuations so much that the earlier productivity increases would be rendered invalid. If invalid, then the quest for productivity increases would seem to be ultimately foolish, a conclusion with which I and I suppose most others would disagree. So where am I going wrong?

Anonymous Josh February 20, 2013 5:07 PM  

Conversely, if it were subjective, then future generations might have changed their valuations so much that the earlier productivity increases would be rendered invalid. 

How valuable was a gigantic stockpile of buggy whips at, say, 1927?

Blogger James Dixon February 20, 2013 5:10 PM  

> If productivity is increased to a point that is greater than the economy's ability to immediately consume, isn't something thereby automatically stored...

If I grow more corn than I can sell in a given year, what do you think happens to the amount I can't sell or store?

Anonymous Daniel February 20, 2013 5:16 PM  

How valuable was a gigantic stockpile of buggy whips at, say, 1927?

Super valuable.

Mae West was in her 30s. Too old to worry, young enough to get into it.

Objectively speaking, of course.

Anonymous ericcs February 20, 2013 5:16 PM  

Sorry, still puzzled. Isn't increased productivity indicated by a lessened amount of inputs to meet current demand, and not by an excess of production? Also, I think my final question is still out there. Thanks.

Blogger Giraffe February 20, 2013 5:19 PM  

I always thought that what was stored was intrinsic and therefore of objective value

Sometimes things are stored, but the value is still subjective. I'll bet a M1 Garand is worth more today than it was during WW2. Maybe not after adjusting for inflation. But theses values aren't fixed, and producing more than the market will bear will result in lower prices, which will result in lower prices till the surplus is used up. You won't have very many things stored for a generation.

Blogger Scott February 20, 2013 5:21 PM  

You're completely missing the point. What the price WAS is an objective fact. But what the price WILL BE is not. Price is not value, price is the momentary intersection of millions of subjective value judgments, many of which have nothing to do with the object being priced.

I do not see what dynamism has to do with subjectivity. The tides also change; but what they are at any moment in time is an objective fact, as is what they will be at any future moment in time. Future prices are also objective facts; they simply aren't known in the present, and they do not necessarily follow some pre-determined pattern.

The second sentence is, of course, completely correct. But the terms 'subjective' and 'objective' apply to the ways in which reality is experienced, and prices and valuations both have their objective and subjective elements. The formation of market prices is an objectively experienced process, and the 'market valuation' assigned to objects through the price mechanism is an objective phenomenon, even though it is the product of subjective valuations.

Objective does not imply 'universal law' or 'scientific' or anything else. Just because one can't 'derive' a price the way one might derive an equation in physics does not mean the phenomenon does not contain objective elements.

Blogger foxmarks February 20, 2013 5:21 PM  

@ericcs

In meatspace, value cannot be stored. Only stuff can be stored. The value of any chunk of stuff is always relative and subjective.

In accounting terms, Josh's buggy whips were held in inventory at some book value. Honest accounting would depreciate the value of those whips over time. Business accounting is one of the areas where it is useful to pretend that objective value exists and holds between periods.

As Nate noted, there is no macro, only micro. So think of theoretical like you posed not as abstracts, but in terms of some firm or individual. I do have to store (or destroy) my excess product. If my goal is to attempt to carry the value of my excess labor into the future, I would likely convert it into something that has proven utility or exchange value over lifelong time spans. I would/should have traded my excess buggy whips for gunpowder or gold.

Anonymous Asher February 20, 2013 5:24 PM  

@ panzerdude

Asher, and all objective theory proponents,

Yeah, the Ilk is looking more and more like one big circle jerk. I don't have an objective theory of value, I don't have any theory of value, at all. What you are doing is reasoning that since vox has a subjective theory of value and I disagree with vox on some point that I have an "objective theory of value".

But I don't. I don't have a theory of "value", at all, because theories of value, of any kind, are metaphysical and I don't regard arguing metaphysics as useful for anything.

Anonymous Daniel February 20, 2013 5:26 PM  

ericcs
If productivity is increased to a point that is greater than the economy's ability to immediately consume, isn't something thereby automatically stored, such that it can be used by future generations?

No. What makes you think it is automatically stored? Or that if it is, it keeps its value? Obvious examples: if an ice house produces too much ice on a hot a day, the ice that didn't sell immediately loses all value by melting. Overproduction has resulted in countless useless things being stored. What is the value of, say, 1000 boxes of blank VHS tapes? What were their value in 1983?

Anonymous Josh February 20, 2013 5:39 PM  

And, of course, this malinvestment is at the heart of Austrian business cycle theory.

Because, if objective value exists, it's impossible to have malinvestment.

Since malinvestment does exist, there is no objective value.

Anonymous Daniel February 20, 2013 5:54 PM  

I don't have a theory of "value", at all, because theories of value, of any kind, are metaphysical and I don't regard arguing metaphysics as useful for anything.

You do realize that your regard for metaphysics is predicated on metaphysical grounds, right?

This is a self-admission of uselessness.

If someone gets you to say Mxyztplk, do you vanish?

Anonymous Idle Spectator February 20, 2013 6:02 PM  

The field used to be called Political Economy.

Then they split it into Economics and Political Science. Because just as in economics, values in politics are subjective. Microeconomics is important, but I can own and run a business successfully without knowing a thing about macroeconomics. You have politicians running around doing economics, and economists attempting to do politics.


Now, was that a good thing, or a bad thing they split?

Anonymous Daniel February 20, 2013 6:21 PM  

Now, was that a good thing, or a bad thing they split?

I don't think there ever was that neat of a "split", really. Smith and Marx and that sort were into leveraging the nation-state, and proponents of Political Economy, which we now call economics. But, there were economic thinkers who would not have considered themselves in the Political Economy group - they thought nation-leveraging on objective grounds were bad ideas, like Rousseau maybe and Montesquieu. So economics as a study predates the term Political Economy.

The "split" is not terribly different than the mythological "Freemasons/vs. Illuminati" model. The idea is that the Illuminati infiltrated the freemasons, and started a secret society within a secret society, and they never are sure who is helping or fighting whom. So Smithians duel with the Marxists over "the economy" when in fact they a bi-factional ruling party, wholly ignoring the obvious: that economics in fact has washed over their 'Political Economy' theories and left them in the dust. Why can they do this? Because it doesn't matter that they are both wrong, their "duel" ensures that they are always going to be assumed to be running the show.

tl;dr - when in power, ally with a phony enemy, and duke it out to present the illusion of choice.

Calvin and Catholics over Servetus. Sauron and Saruman over Middle Earth. Smith and Marx over the nations.

Keep it up long enough, and reach, on your own grit, merit, and adherence, and you may just end up writing the history for the children in the public schools that you have taxed their parents into providing for them that includes your name in great big lights on the cover.

The "invisible" hand is that of a proctologist puppeteer.

Anonymous VD February 20, 2013 6:31 PM  

Yeah, the Ilk is looking more and more like one big circle jerk.

That's absolutely false, Asher, as evidenced by the discussion in this thread. If you genuinely believe it, then go away and don't come back. You've proven yourself to be a narcissistic poser with nothing to offer but reliably off-topic rhetoric. Tad at least has an ideological reason to be a useless prick. You don't even have that excuse.

The next time you vomit up that sort of baseless and off-topic rhetoric about other commenters here, you'll be on the same five-comment limit that Tad is.

Anonymous Desiderius February 20, 2013 6:32 PM  

Asher,

"Have you ever stopped to consider why so many people find Rawls' argument so compelling?"

Uh, yeah, that's why I brought him up. He's the particular rabbit hole down which we've fallen. Vox provides some useful ideas about how we might find our way back to the surface.

On a related note, have you ever stopped to consider being less patronizing? You're not my father, nor I yours.

"I highly suspect that the notion of "fairness" was hardwired into us by evolution over the 100k or so years we spent as mall tribes of hunter/gatherers. That instinct still exists but it is poorly translated into mass society and creates all sorts of deleterious side effects."

Of course. Likewise male preference for younger, hotter, tighter and female for dominance with a side of plausibly deniable psychopathology.

Various patches (known as "traditions") for the original faulty code were developed over the ages. This was once known as progress.

"When libertarians decry the effects of that instinct what they are doing is engaging in another violation of the is/ought distinction, and that makes libertarianism just another totalizing ideal system, just like Marxism."

No, the hardwiring is the "is". The oughts are contained in the various patches. New patches need to work with old code. Effective liberals do this homework, with assistance from their conservative friends keeping us honest.

Aspie modernists lack the patience for either, so instead wreck the whole thing.

Evidently they've intimidated you into making excuses for them. Stockholm Syndrome?

Anonymous VD February 20, 2013 6:34 PM  

I do not see what dynamism has to do with subjectivity. The tides also change; but what they are at any moment in time is an objective fact, as is what they will be at any future moment in time.

Most people don't. More importantly, they don't realize what the consequences of the dynamic nature of subjectivity mean for mainstream economic theory.

I'll be posting on this in the next day or two.

Anonymous Daniel February 20, 2013 6:44 PM  

Scott
...prices are also objective facts

A-ha, but they are not objective mirrors of value. An agreed upon price is a duality, not an accurate, objective measure of value, not even in the moment.

That uncertainty (or, as you put it "dynamism") is important to subjectivity because it proves why seemingly reliable predictions become completely unreliable over time, and why a faith in increasingly unreliable predictions is so horribly misplaced: objective neo-classical faith becomes a guarantee for economic devastation.

The dynamic component of subjectivity assures this - the "law of unintended consequences" or something worse.

Anonymous Desiderius February 20, 2013 6:47 PM  

"Libertarians have lots of penetrating insights into how the world and humans function, but as a total ideal system it is a loser."

All total idea systems are losers (cf. Godel, Berlin, et. al.).

You're the one playing for (or at least making excuses for) the totalizing team, not us.

Blogger stareatgoatsies February 20, 2013 6:55 PM  

If the moment of exchange is the moment objective value (retrospective and specific to the parties involved and the items exchanged) is assigned and the subjective values of other people can only be inferred from their (objective) actions, how can a theory taking subjective value as a first principle make predictions about the future, objective, actions of other people?

From what I've gleaned, it would be a lot more convincing if it could take a bunch of objective facts, pass them into a computer simulation which models the grey zone psychological stuff, and comes out with correct predictions. I'd be interested in what might be the bare bones model of subjective value that'd work.

I'm a smoker and when I was in college I'd regularly buy cigarettes and cheap food instead of spending to eat healthily. I smoked rollies then and moved on to regular cigarettes later on - but sometimes went back to rollies out of financial necessity and sometimes because I knew I'd smoke less of them. I want to give up. If you asked me I'd say their value to me is negative, but the objective proof of the money I've spent on them argues against it. And that's only the start of the various factors that influence the subjective value of cigarettes alone to me. How would you model all the goods bought by a population. It seems intractable without big data and a lot of experimental modelling.

Anonymous Desiderius February 20, 2013 6:59 PM  

"When people say that it's not fair to work full-time and only earn 14k they are not making an observation on that specific transaction but on the overall state in which large numbers of people find themselves. What they're saying is that there is overall injustice in society and that this injustice is reflected in that particular transaction, not that the transaction, itself, is unjust. They then go on to advocate raising the minimum wage as a means of addressing what they perceive as an overall unjust situation, in society."

This sounds like a rationalization that you've constructed for them to help you make peace with their current dominance. If this were a distinction that was actually meaningful to them, then they would concern themselves with the myriad injustices that have produced this state of affairs instead of being content with band-aids such as minimum-wage laws.

The glaring lack of such concern demonstrates that any such distinction is not meaningful for them, however much you might wish it were. The ineffectiveness of the band-aid is in fact a feature, not a bug, by the way.

"I disagree with them and think that raising the minimum wage leads to even greater problems, but brow-beating them with "the subjective theory of value severs the connection between price and justice" is not going to win you any political battles."

One can in fact catch more flies with honey than vinegar; that is until a bear breaks in and steals all one's honey.

Precincts with 100% turnout, let alone preference for one candidate, are an indication that we're dealing with conquest, not politics.

Anonymous VD February 20, 2013 7:09 PM  

If the moment of exchange is the moment objective value (retrospective and specific to the parties involved and the items exchanged) is assigned and the subjective values of other people can only be inferred from their (objective) actions, how can a theory taking subjective value as a first principle make predictions about the future, objective, actions of other people?

Now you are beginning to wake up. A better question: if a theory taking subjective value as a first principle is CORRECT, how can anyone using an objective model make predictions about the future, objective actions of anyone?

Anonymous Idle Spectator February 20, 2013 7:11 PM  

I don't think there ever was that neat of a "split", really. Smith and Marx and that sort were into leveraging the nation-state, and proponents of Political Economy, which we now call economics. But, there were economic thinkers who would not have considered themselves in the Political Economy group -they thought nation-leveraging on objective grounds were bad ideas, like Rousseau maybe and Montesquieu. So economics as a study predates the term Political Economy.

The split is neat in the academy, especially with undergraduates. Obviously in the real world, that is not the case.

The "split" is not terribly different than the mythological "Freemasons/vs. Illuminati" model. The idea is that the Illuminati infiltrated the freemasons, and started a secret society within a secret society, and they never are sure who is helping or fighting whom. So Smithians duel with the Marxists over "the economy" when in fact they a bi-factional ruling party, wholly ignoring the obvious: that economics in fact has washed over their 'Political Economy' theories and left them in the dust. Why can they do this? Because it doesn't matter that they are both wrong, their "duel" ensures that they are always going to be assumed to be running the show.

Similar to Keynes quote: "The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas."


All total idea systems are losers (cf. Godel

Kurt Godel? You're going to need to be way more specific.

Blogger tz February 20, 2013 7:44 PM  

There is a bit of imprecision. It is normally called (marginal, etc.) UTILITY, not value. Talking about values in economics and values in ethics means we are trying to measure or compare things, but it is separate, like measuring sourness and yellowness, then trying to figure out a single score for a lemon.

There are transcendent things. That is why we give honor to those who put their lives at risk to protect us, marriage, etc. And why things like perjury and bribery, or mercenaries and prostitutes - and the slave trade - are considered evil. It is also why selling indulgences was so wrong. Some are willing to trade things which are of a different category for money, but they are getting cheated and the one who buys is cheating.

Societal injustice can cause economic distortion. The simplest example is debasing the currency or artificially manipulating the rate of interest. But fees, taxes, subsidies, tariffs, and such also distort. Or when it is permitted not to bear the entire cost of the trade - fencing stolen merchandise is an obvious example, but dumping pollution instead of proper disposal, cheating the workers (reneging on paying the agreed to wages after the work is done), is all part of it.

Any injustice within the transaction comes from government, either by commission or omission. The price would be just except for a third party distorting the price.

As to "money", the typical functions are a medium of exchange, store of value, and measure of value. The last seems a tautology given the other two. The store of value is equally subjective, think Confederate dollars, or Zimbabwe dollars. Real money should have some intrinsic utility though that is still subject to being subjective (e.g. palladium or platinum when a new source dumps into the market or another dries up). You cannot avoid this.

Human Capital is the only one difficult to confiscate, but also hard to transfer. A skill, speaking a foreign language, being able to diagnose and/or fix a class of things are all very valuable. Knowledge is valuable, at least depending on the type and current fashion. You can store food and water or you can know how to obtain such from the land.

But also our kingdom is not of this earth. Lay up treasures in heaven. But how many really act on this belief?

Blogger Scott February 20, 2013 7:44 PM  

That uncertainty (or, as you put it "dynamism")...

Dynamism and uncertainty are not the same thing. I 'put it' as dynamism because that's how Vox put it. (But I do agree that price and value are not the same thing, either. They are related to one another through the mechanism of markets.)

I think that two (main) big mistakes keep cropping up here: 1) the conflation of too many notions as following directly from the notions of subjectivity and especially objectivity, and 2) the tendency to attach too much significance to the fact that prices superficially take the form of numbers, and therefore appear 'mathematical,' and 'therefore' all this quasi-scientific stuff 'following,' which doesn't. (But I suspect a lot of that is actually what Vox is criticizing...)

Just because you say there is a 'subjective' element or an 'objective' element to this stuff doesn't automatically toss it into the same category as all other types of things with these labels -- morals, math, science (at least the physical varieties...), whatever -- and grant them all the qualities we tend to associate with those things.

Blogger tz February 20, 2013 7:55 PM  

I should also note that there at least three spheres, each with its own measure of value, purpose, method of action.

The Market - discovers prices, allows exchange of goods and services. Uses voluntary exchange. Makes no moral judgments - but you pay for your mistakes.

The Government - keeps the peace, settles disputes (enforcing contracts). Uses violence. Should be the smallest and only a backstop for those who insist on persisting in evil.

The rest - church, charities, etc. (DeToqueville, democracy in America) - They are what keeps things balanced. Uses shame and exhortation to righteousness. Prevents market excesses and redresses distortions caused when the market does it's job properly.

Mixing or trying to have the wrong part of society do something results in evil and chaos. Government cannot set prices, only shoot you if they find you exchanging voluntarily in violation. Charities cannot provide any wages except to those who they employ - they cannot create the wealth, only redistribute it as they can use shame or exhortations to almsgiving to acquire it. They can also get people to not be stupid and do stupid market transactions. Government is power and violence, and an evil kept around only because there are greater evils, barbarians within and without that would destroy both the church and the market. Government cannot do good, it can only use violence to threaten against, mitigate, or punish evil.

Anonymous kh123 February 20, 2013 7:59 PM  

"This is one of the most idiotic comments I've seen."

I lost patience a while ago trying to parse the one-man show, keeping track of which subject this week Asher finds not-objective, what statements are devil's advocate, how fine the train is, etc. Scroll-by status tends to do that to one's comments.

Blogger tz February 20, 2013 8:11 PM  

The price of XYZ when an exchange happened is data. There is no "the price ought to have been". Also most don't mention QUANTITY. 100 shares? 1000 shares? If it has been 10,000 shares, it would not have occurred or the average price might have been different.

There is an instantaneous set of supply and demand curves. Also note that "Price" is merely the quantity of the other side of the exchange and would be as valid for barter, e.g. N cows v.s. M sheep. And more specifically something in more dimensions so that the instantaneous marginal utility is reflected.

Also note that any transaction ALTERS the curves! You've taken a quantity at the price. For another transaction to occur, there may not be a quantity available at the same price. The bids are all lower and the asks are all higher!

(In OHA, Mises properly derided both static models and the "continuously rotating" model).

So the snapshot is about as useful as a freeze-frame of a car that you can't even tell at what speed it is moving.

Blogger tz February 20, 2013 8:21 PM  

Humpty Dumpty was famous for saying words mean whatever he wanted them to, and when Alice objected he said it was who was to be the master, did the words mean what everyone understood them to mean - how dare they not be servants!

All the king's horses and men couldn't fix Humpty.

Nor do I think they could make Asher whole.

Anonymous Idle Spectator channeling Asher through Séance February 20, 2013 8:31 PM  

Yeah, the Ilk is looking more and more like one big circle jerk. I don't have an objective theory of value, I don't have any theory of value, at all. What you are doing is reasoning that since vox has a subjective theory of value and I disagree with vox on some point that I have an "objective theory of value".

But I don't. I don't have a theory of "value", at all, because theories of value, of any kind, are metaphysical and I don't regard arguing metaphysics as useful for anything.


IDIOTS! ALL OF YOU! What I really meant was something else than that thing you think! No one could possibly understand the depths of Asher. Asher is hungry, so let me repeat my Asherianisms once again for you stupid idiots.

Anonymous Idle Spectator February 20, 2013 8:33 PM  

I don't have an objective theory of value, I don't have any theory of value, at all

So... why exactly are you posting again?

I'm so confused...

Anonymous WaterBoy February 20, 2013 8:50 PM  

stareatgoatsies: " If you asked me I'd say their value to me is negative, but the objective proof of the money I've spent on them argues against it."

Yes it does argue against it, because their value to you at the time you purchased them was positive -- it provided the nicotine fix you desired. What you are considering negative is either the consequential health effects of smoking or the opportunity cost of not eating healthier food. But the subjective value of the cigarettes to you was a positive at the time you purchased them, since your desire for nicotine was higher than those other concerns.

FYI, if it still applies: when you place a higher value on not-smoking, for either health or economic reasons (or both), it makes it easier to quit.

stareatgoatsies: "And that's only the start of the various factors that influence the subjective value of cigarettes alone to me. How would you model all the goods bought by a population. It seems intractable without big data and a lot of experimental modelling."

I believe that has already been addressed -- that since no model can adequately account for all the subjective variables, any attempt to replace them with approximated objective values is bound to fail.

Anonymous WaterBoy February 20, 2013 8:53 PM  

(Not So) Idle Spectator: "No one could possibly understand the depths of Asher. Asher is hungry, so let me repeat my Asherianisms once again for you stupid idiots."

I call it TWATA: The World According To Asher.

Anonymous Jack Amok February 20, 2013 9:37 PM  

Sorry, still puzzled. Isn't increased productivity indicated by a lessened amount of inputs to meet current demand, and not by an excess of production?

You're confusing efficiency with productivity. Productivity = efficiency * input ( P = e * I).

If e goes up, we can reduce I, but that doesn't mean the unused I is now automatically stored. Continuing Daniel's example, if we become more efficient at producing S&M entertainment by filming one video instead of sending troupes to every major city for live shows, we don't need as many buggy whips. But those suddenly surplus buggy whips don't magically become VHS tapes, or even Ethernet cables.

Anonymous Jack Amok February 20, 2013 9:38 PM  

Yes. But a value investor will buy a stock and then tell you that the market is wrong.

A value investor is using his own subjective assessment of objective value to predict changes in the larger market's subjective valuation.

There's nothing inherently wrong with using objective data to predict subjective results, so long as you remember even very good predictions can still turn out to be wrong.


@Asher

This is a hideously bizarre comment. I've been called many things but "objectivist" is not one of them.

That wasn't my phrase, I was quoting someone else (forget who, dont' want to scroll up to find out). If you don't have an objective theory of value, then please feel free to decline membership in the Appeals to Authority club. But if that's the case... why are you arguing with Vox on this thread?

Anonymous Jack Amok February 20, 2013 9:41 PM  


Have you ever stopped to consider why so many people find Rawls' argument so compelling? I highly suspect that the notion of "fairness" was hardwired into us by evolution over the 100k or so years we spent as mall tribes of hunter/gatherers.

Ah, I see my Hunter-Gatherer theory has gained a convert. Well, it's Asher, but I'll chalk it up as a win anyway. Indeed, I do believe some people are stuck with a Hunter-Gatherer mindset and cannot easily conceive of production. Their brains only really understand consumption/distribution.

Genetically superior thinkers however, are capable of understanding production. I do not believe that mutation has spread very wide in the gene pool. But I do savor the implications - that liberals, who like to think of conservatives as troglodytes, are in fact the less-evolved form of homo sapiens.

Call them homo demi-sapiens.

But even if we can understand why they reach erroneous conclusions, it doesn't make their conclusions right. You might even say they are objectively wrong in their belief of objective value...

Anonymous The One February 20, 2013 9:59 PM  

Stocks have both subjective and objective value. A stock price would almost never dip below the actual cash on hand the company has. (I'm ignoring the changing price of the dollar of course)

Anonymous The One February 20, 2013 10:10 PM  

Actually, is it correct by Vox's current economic thinking that almost everything has both an subjective and objective value? For example food has an objective value because biologically you will eventually be hungry, how hungry you are at the moment determines the subjective value. Perhaps it is better to say objective value=time value, almost like an option.

Anonymous Josh February 20, 2013 11:12 PM  

Actually, is it correct by Vox's current economic thinking that almost everything has both an subjective and objective value?

No

Anonymous Jack Amok February 20, 2013 11:26 PM  

Stocks have both subjective and objective value. A stock price would almost never dip below the actual cash on hand the company has.

That's hardly an objective value, dear fellow. In the first place, almost no one pays "Book Value" (the projected liquidation price of the company's assets) for a stock. Stocks almost always trade for some premium above Book Value, and that premium is subjective. So it's only a value in the purely theoretical sense to begin with.

Plus, it's not really objective either, since the liquidation value of the company's assets is a subjective assessment of what could be had for them. Cash on hand? Almost always a fraction of the assets counted for Book Value. Accounts receivable, property, licenses, royalties, etc. are all assets who's value is a subjective assessment.

So other than being neither objective nor a value, your objective value is fine.

I guess.

Anonymous Noah B. February 21, 2013 1:13 AM  

"There's nothing inherently wrong with using objective data to predict subjective results, so long as you remember even very good predictions can still turn out to be wrong."

Hence the adage, "the market can remain irrational longer than you can remain solvent." Or something like that.

Anonymous VryeDenker February 21, 2013 2:14 AM  

This is what happens when someone takes a few courses in philosophy and then feels ready to tell the world why it's stupid.

Anonymous Toby Temple February 21, 2013 2:47 AM  

The subjectivity of value should be obvious even as a child.

Blogger James Dixon February 21, 2013 9:39 AM  

> A stock price would almost never dip below the actual cash on hand the company has.

Well, I'll grant that with the almost there, that's largely correct. But it depends entirely on their outstanding obligations. If a company has $3M on hand, but a debt of $10M due tomorrow, no one is going to value them at $3M.

Blogger James Dixon February 21, 2013 9:40 AM  

> Or something like that.

I think that's pretty close, if not correct. :)

Blogger tz February 21, 2013 5:39 PM  

The stock price can dip below cash if the liabilities exceed the cash or whatever else, otherwise Bear, Lehman, and AIG wouldn't have gone to zero.

Anonymous workingman February 22, 2013 6:36 PM  

Morons:

If a man cuts down a tree in the forest but it does no one any good, is there value?

If a man wishes with all his being that a tree in his yard might be cut down, but it cannot or will not be done, is there value?

No you abject idiots, value is the intersection of subjective preference and objective labour.

Anonymous workingman February 22, 2013 7:32 PM  

"Now you are beginning to wake up. A better question: if a theory taking subjective value as a first principle is CORRECT, how can anyone using an objective model make predictions about the future, objective actions of anyone?"

How is that going to change anything? Asher is right, economics as practiced doesnt give a shit what subset of metaphysics value might fit under in your interpretation. The models are based on prices subject to certain assumptions. If taxes are lowered by x investment will increase by y, or whatever it might be. Furthermore, subjective doesnt mean unknowable you special little snowflake. Changes in subjective valuations are due to changes in circumstances, which are objective events and in many cases the relationship can be modeled. If x number of people lose their jobs new car sales are likely to fall by y. Your special little snowflake theory has nothing to do with it.

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