Subjective Value
One of the most crucial insights of economics is that the value is subjective. It means that value ultimately comes from human mind. It doesn’t in here or in things that we value. I wanna explain that with some T-shirts that I went out and made. I went to the mall recently and bought two t-shirts and I bought some iron ons. Here is one of my t-shirts. It is of a revolutionary who is famous from Cuban Che Guevara. And another t-shirt’s of one of my heros, Milton Friedman. now these t-shirts both cost me about the same amount of time to make and the same amount of money. So, in terms of what I spent, the resources that went into these t-shirts, it’s the same. But you know what? The value of the Che t-shirt is, in fact, a lot higher to most of people than is the value of Milton Friedman t-shirt. If, for some reasons, Che falls out of favor in the public mind, the value of Che t-shirt falls. If the value of Milton Friedman image rises, if people become to really like Milton Friedman, the value of the Friedman T-shirt increases. But the point is, objectively, physically, these t-shirts, this one and this one, are largely identical. Only difference is the image on the front. Nice things about subjective value, our values do differ. I would not be caught on streets wearing a Che t-shirt because I think he was a scoundrel. I would love to wear Milton Freeman t-shirt, in fact, I am eager to wear this for the first time. I value this t-shirt more highly than do other people. And that's one of beautiful things about understanding subjective value. It is important to understand that the value is not in the thing itself. It doesn’t come like the marketists believe, or even the classical economists believe. From the amount of labor that goes into producing it. Value's not a product of how many other resources went to producing something. Ultimately, things have value only if, only because human beings want those things. The more intensely human beings want those things, the more valuable they are. The classical economists, for all of their wonderful discoveries, did not get subjective value. Economists did not understand subjective value until the middle of 19th century when particularly Carl Menger of the Australian school realized that people pay for things only because they want those things, and they don’t pay for things when they don’t want. And so, the value people have in their minds for the things they buy that value get transmitted through money prices into The market prices of the goods and services. One implication of subjective value is that you cannot tell me that, The fact, I prefer Milton Friedman t-shirt to Che Guevara t-shirt, means that I am wrong. It’s not your preference. perhaps. But it’s my preference. And because you cannot read my mind, I cannot read your mind. The best you can do is to say, if I prefer Friedman t-shirt to Guevara t-shirt, then in fact, Friedman t-shit is to me, more valuable. If you prefer Guevara t-shirt to Friedman t-shirt, the best I can conclude is that Guevara t-shirt to you is more valuable than Friedman t-shirt. Neither of us are right or wrong in some objective sense. Subjective value is just what each of us, how each of us accesses the worth to each of us, of each of these t-shirt. It's one of the things that make the economical world go around we have these different evaluations on different things. We express our evaluation how much we are willing to pay.
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