Re: Value v/s Price

[Yazad Jal <yazad@ccsindia.org>]

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in economics there is no such thing as "objective value." value is
subjective. there is no way of determining value except in voluntary
exchange. i may have an original picasso drawing, but as to it's "value" i
can only make a  guess--until i sell it. at that point, the price is what
determines the value of that picasso, the value is measured in terms of how
much the buyer is willing to give me to obtain the picasso.

any other explanation of value falls foul of the famous "water-diamond"
paradox. [water is so very useful and vital, but it costs hardly anything,
diamonds have a very limited use, but are very expensive! i.e. water has
great "value-in-use", but a low price, diamonds have a small "value-in-use"
but a much higher price] this paradox puzzled economists from the time of
Adam Smith. it was finally sorted out by 3 economists (W S Jevons, Carl
Menger, & Leon Walras) independantly stumbling onto the concept of marginal
utility in 1871. only Menger went further and expounded on subjective value.
each one of us values the same things differently depending on our tastes,
preferences, etc.

the value of a product can only be determined when that product is exchanged
in a voluntary transaction at a given point in time. it has nothing to do
with the labour involved, scarcity, usefulness, etc.

Yazad Jal
Centre for Civil Society

PS: in other spheres of life like morality, there are objective values or
principles. e.g. honesty is an objective value.


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