This is a companion discussion topic for the original entry at https://curi.us/2590-prices-decision-factors-and-time-will-run-back
1 Like
Really cool article, I enjoyed it a lot. It shows CF gives depth to economics understanding.
People shouldnât think about whether a price is correct in the general to guide their purchases. They should think about whether the price is worth it for them.
You can say âthatâs way too much for Xâ and you can mean that as a critique about other peopleâs purchasing decisions. Products have different values to different people, but the value of a product is objective for any one person. Therefore an outsider can critique anotherâs purchasing choice, because the real value doesnât come from the personâs subjective valuation of the product, but the objective use the person can get from the product.
A central planner isnât omniscient so he couldnât have the knowledge of each persons context and problems. And if he did he still wouldnât be infallible so he still shouldnât force his valuation on others. But I think for example it would be way better if people were rationally persuaded to not buy products for prestige, i.e. social status.
They either think about what problems stuff will solve in their own lives or they think about using it for future trade, which is ultimately based in solving problems in their lives but more indirectly.
The objective value of a product to a person are the problems it can solve for them.
TWRB:
âMarxâs labor theory of value was wrong, Adams, among other reasons, because it rested on the assumption that values were measured by some objective unit, whereas values are only measured subjectively. The value of a commodity doesnât reside in the commodity; it resides in a relationship between somebodyâs needs or desires and the capacity of that commodity to satisfy those needs or desires⌠Marx looked for some objective standard of value because he assumed that two commodities that exchanged for each other must do so because of some âequalityâ between them. But if two commodities were exactly equal, in the opinion of two persons, each of whom held one of them, there would be no reason for any exchange to take place at all. It is only because Peter, who holds potatoes, thinks that a certain amount of prunes, held by Paul, would be more valuable to him, that Peter would want to make an exchange. And only if Paul placed the opposite relative value on a given amount of potatoes and prunes would he agree to make the exchange.â
Objective here is used as intrinsic in the commodity. So the value would be the same for everyone, i.e. universal, which is what people usually think objective means. If you include the full context instead of only looking at the words then objective means universal. âI think X product is worth 10 dollarsâ is evaluated differently for different people, but in context it actually meant âSpecific person A thinks X product is worth 10 dollarsâ, and that would be true for everyone (if A truly thinks so).
If a commodity satisfies someoneâs actual needs (problems) then itâs objective. But merely satisfying desires can mean the values are subjective. If someone desires a luxury car then a luxury car will satisfy the desire, but the luxury car isnât necessarily objectively better for the person than a regular car. But our desires are our best guesses (if arrived at rationally) about what our needs are. This just means people are fallible in their trading decisions. That a trade satisfied a desire doesnât guarantee that what we traded for was more valuable than what we traded away.
Similarly, there are no objective exchange ratios between factors in different dimensions. There are no single right answers for conversion factors (as there are between miles and meters, which are factors in the same dimension, length). Instead, the comparative values of dimensions are contextual which Austrian economists call âsubjectiveâ â they vary by the relationship between the factor and a personâs needs or desires (which changes over time even for the same person, as his situation, goals, resources, etc. change).
Isnât this economic fact just a consequence of the epistemological fact rather than just being similar? Isnât epistemology more fundamental or would that be reductionism?
Are prices knowledge created by an evolutionary process by the market? Does better markets mean better error-correcting markets? These epistemology and economics connections are very interesting to me.
1 Like