Jim Hlavac
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Economic Theory
| Economic Theory |
The value of thing both Karl Marx, and though to a lesser degree,
Adam Smith said lies in the labor put into the thing. And this would
mean that value is inherent in a thing. Once it was made the value
would be set -- it was the labor that went into it. The belief is that
there is some intrinsic value to everything and only this one value.
This though, is not true. The value of a thing only lies in the
eyes of the beholder of the thing. No matter what value a person
assigns to a thing because of his labor he put into it the value is
nothing if the beholder says he sees no value in it.
The best example is art. The artist of course thinks there is
enormous value in what he created, his painting. But the person in
the gallery might conclude the painting is worthless. On the other
hand the value the beholder might assign is millions of dollars, far
more than the value of the labor could ever possibly be.
There is no such thing as a true or pure, or objective, value.
Value is totally subjective. No two people value a thing the same.
No matter how close the valuation comes -- say even for a can of
peas -- in the final analysis the valuation of that can of peas must be
different for each person. If values were expressed in terms of
hundred digit numbers, with each digit representing some nuance or
aspect of an individuals valuation, then there would always be at
least one digit that was different -- a very samll difference
admittedly, but a difference nonetheless.
The labor theory of value posited by Marx has in fact infected
the world, and thus we are confused about the true nature of value.
Which leads to many problems.
The value of an overcoat is not in the labor put into produce it
-- because to the man in Sweden that overcoat is a lot more valuable
than to the man in the tropics. With any given thing we can see
how clearly that the value is determined solely by the individual
who must use the thing under consideration.
The best example of people knowing intuitively about the value
being in the eyes of the beholder is in wrongful death suits. The
law, the judge, the jury, the attorneys, the people involved on both
sides, the society itself -- all clearly asisgn a different value to the
life lost. Now they are only trying to arrive at a valuation that all
can agree on. Everyone agrees that a can of peas is about 89 cents
now, and likewise with a life, after the court case, a valuation of
say, a million dollars, is derived. With a can of peas, the differences
in individual valuation doesn't lead to conflict, only the desire to buy
or not buy the can of peas at any given moment. But with life there
is always the emotions and a hundred different considerations, and
thus dispute is more likely over the valuation.
For every thing there is always this difference in valuation
which always leads to some "dispute," most times just a decision to
buy today or not. Sometimes the difference in valuation leads to
lawsuits and major court cases affecting public policy. At no time
does anyone really consider the amount of labor put into a thing to
be the determiner of value. Even if we account for labor as part of
the value, and surely we do, because no one expects something
totally free, we know it's not the sole determinate, and usually plays
a very minor role in the valuation.
However, the labor theory of value has caused much grief in
the world.
Adam Smith said lies in the labor put into the thing. And this would
mean that value is inherent in a thing. Once it was made the value
would be set -- it was the labor that went into it. The belief is that
there is some intrinsic value to everything and only this one value.
This though, is not true. The value of a thing only lies in the
eyes of the beholder of the thing. No matter what value a person
assigns to a thing because of his labor he put into it the value is
nothing if the beholder says he sees no value in it.
The best example is art. The artist of course thinks there is
enormous value in what he created, his painting. But the person in
the gallery might conclude the painting is worthless. On the other
hand the value the beholder might assign is millions of dollars, far
more than the value of the labor could ever possibly be.
There is no such thing as a true or pure, or objective, value.
Value is totally subjective. No two people value a thing the same.
No matter how close the valuation comes -- say even for a can of
peas -- in the final analysis the valuation of that can of peas must be
different for each person. If values were expressed in terms of
hundred digit numbers, with each digit representing some nuance or
aspect of an individuals valuation, then there would always be at
least one digit that was different -- a very samll difference
admittedly, but a difference nonetheless.
The labor theory of value posited by Marx has in fact infected
the world, and thus we are confused about the true nature of value.
Which leads to many problems.
The value of an overcoat is not in the labor put into produce it
-- because to the man in Sweden that overcoat is a lot more valuable
than to the man in the tropics. With any given thing we can see
how clearly that the value is determined solely by the individual
who must use the thing under consideration.
The best example of people knowing intuitively about the value
being in the eyes of the beholder is in wrongful death suits. The
law, the judge, the jury, the attorneys, the people involved on both
sides, the society itself -- all clearly asisgn a different value to the
life lost. Now they are only trying to arrive at a valuation that all
can agree on. Everyone agrees that a can of peas is about 89 cents
now, and likewise with a life, after the court case, a valuation of
say, a million dollars, is derived. With a can of peas, the differences
in individual valuation doesn't lead to conflict, only the desire to buy
or not buy the can of peas at any given moment. But with life there
is always the emotions and a hundred different considerations, and
thus dispute is more likely over the valuation.
For every thing there is always this difference in valuation
which always leads to some "dispute," most times just a decision to
buy today or not. Sometimes the difference in valuation leads to
lawsuits and major court cases affecting public policy. At no time
does anyone really consider the amount of labor put into a thing to
be the determiner of value. Even if we account for labor as part of
the value, and surely we do, because no one expects something
totally free, we know it's not the sole determinate, and usually plays
a very minor role in the valuation.
However, the labor theory of value has caused much grief in
the world.