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I'm reading Thomas Sowell's Basic Economics and the idea of inherent value is addressed in the 2nd chapter: “The most fundamental reason why there is no such t
by JadoJodo 6y ago
I'm reading Thomas Sowell's Basic Economics and the idea of inherent value is addressed in the 2nd chapter:
“The most fundamental reason why there is no such thing as an objective or “real” value is that there would be no rational basis for economic transactions if there were. When you pay a dollar for a newspaper, obviously the only reason you do so is that the newspaper is more valuable to you than the dollar is.
At the same time, the only reason people are willing to sell the newspaper is that a dollar is more valuable to them than the newspaper is. If there were any such thing as a “real” or objective value of a newspaper—or anything else—neither the buyer nor the seller would benefit from making a transaction at a price equal to that objective value, since what would be acquired would be of no greater value than what was given up. In that case, why bother to make the transaction in the first place?”
- tomcatfish 6y agoI understand that it is a vocabulary choice, but I take issue with calling the price non-objective in that case. As a toy example, imagine Alice farms Bananas and Bob farms Apples, but each is only able to eat the other food. They would both happily trade forever as they both gain value from this. This doesn't mean that the value is _subjective_, it means the value is _situational_, and I think the rigid vocabulary term and the connotations of the word are conflated a lot.
- sujinge9 6y agoThe value in your example is still subjective. What is the ratio of Bananas to Apples that is being traded and how much is being produced? While both are certainly willing to keep trading indefinitely, and to not do so would be catastrophic, but the actual price being paid is very subjective to the market players.
- chii 6y agoThis is what happens when the language is unclear - the word "value" has different meaning in each context. "Value" as in "utility", and "value" as in "currency" or unit of account. When trading some currency for utility, each side of the transaction gains something more than what they gave up. The buyer of food got food they needed to eat. The seller of food (presumably has so much food they cannot eat it all) gains extra currency that they can use elsewhere.
- JadoJodo 6y agoAssuming this scenario implies each needs to eat 1 banana and 1 apple, the Thomas Sowell outline still holds: Alice, having 2+ bananas, needs 1 apple more than the extra banana. And vice versa for Bob. Any bananas/apples beyond those needed to eat don't have any value at all.
- erik_seaberg 6y agoThe value of a newspaper depends on how many I have. If I have none, I want one, but probably not two. If I printed a million, I just want to sell them (and amortize what I paid the staff).