Properly understood, all economic values are subjective. Some items have useful applications, but the relative value of those applications is itself subjective; there’s nutritional value in a pound of cauliflower, and there’s nutritional value to an ounce of Beluga caviar, and the difference in the price between the two is based on no objective criterion. Even scarcity does not explain the difference: There are more diamonds in this world than there are autographed photos of Anthony Weiner, but try giving your wife the latter for your anniversary and you’ll get a short and possibly violent lesson in the subjectivity of value. In fact, it is the subjectivity of value that makes exchange possible — if our values and preferences were perfectly aligned, we’d never trade anything for anything else, because we’d all value every item and service at precisely the same level, and there would therefore be no incentive to engage in commerce. That our preferences should be non-uniform ought not be surprising — our lives are non-uniform, too. If I operate an apple orchard, I am probably not going to buy apples from you at any price, unless perhaps they are a different sort of apple than the ones I grow. The rancher and the fisherman each assigns a different value to beef and fish than does his opposite number. Disagreement is fundamental.
The crude version of exchange — which is, unhappily, the common version — is inclined to suspect that there is an objectively correct price for a good, and that profit comes from duping somebody into paying more than the correct price for it. That error is fundamental to Marxism and other anti-capitalist philosophies, and it is implicit in such social phenomena as the anti-advertising movement, “Buy Nothing Day,” and similar political tendencies. But that bias does relatively little harm in the heads of greying Marxists, peddlers of “profit is a crime” banalities, and Occupy riff-raff. Where it is truly destructive is in the disorganized thoughts of the large majority of ordinary people with no particularly strong political commitments or economic orientation. Consider these phrases: “An honest day’s work for an honest day’s pay,” “just wages,” “fair price,” “obscene profits,” “price gouging,” “excessive executive compensation.” For any of those phrases to have any intellectual content, then there must be a price that is in some non-subjective sense the correct one. But if economic values are subjective — and they are — then “an honest day’s work for an honest day’s pay” can only mean one thing, that being the payment of an agreed-upon wage for an agreed-upon performance of labor, with “honest” referring only to the fulfillment of the agreement and saying nothing substantive about the terms of the agreement itself.
Kevin D. Williamson, “The Profit Police”, National Review, 2014-06-30.
March 17, 2015
QotD: Subjective economic value
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