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Author Topic:   Economics: How much is something worth?
Buzsaw
Inactive Member


Message 46 of 330 (661080)
05-01-2012 10:29 PM
Reply to: Message 7 by Percy
05-01-2012 9:03 AM


Re: Re; Economic Values
Percy writes:
Hi Buz,
You should probably find another thread if you'd like to discuss whether currency should be backed by gold or silver.
If you'd like to discuss value or worth as defined in economics and it bothers you to think of value in terms of currency then think of it in terms of how many hours of your own labor you think something is worth.
In your OP you referred to goods and services. Gold and silver happens to be a type of goods. Silver is an investment goods and other kinds of goods. Jewelry manufacturing and industrial goods are two examples. No?

BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.
Someone wisely said something ;ike, "Before fooling with a fool, make sure the fool is a fool."

This message is a reply to:
 Message 7 by Percy, posted 05-01-2012 9:03 AM Percy has replied

Replies to this message:
 Message 58 by Percy, posted 05-02-2012 12:57 PM Buzsaw has replied

  
Buzsaw
Inactive Member


Message 47 of 330 (661083)
05-01-2012 11:08 PM
Reply to: Message 37 by Percy
05-01-2012 4:30 PM


Re: Sources And Mechanisms Of Wealth Creation
Percy writes:
The definition of value is not the answer to all questions economic and otherwise. It's a simple definition. I was hoping to resolve a confusion most people had about the sources and mechanisms of wealth creation.
One of the greatest sources of the creation of wealth has been gold and silver. Wise investors understood the significance of unbacked dollars. They knew that sooner or later it would inflate.
History confirms that the money of nations which did not back their money with intrinsic value eventually became worthless.

BUZSAW B 4 U 2 C Y BUZ SAW.
The Immeasurable Present Eternally Extends the Infinite Past And Infinitely Consumes The Eternal Future.
Someone wisely said something ;ike, "Before fooling with a fool, make sure the fool is a fool."

This message is a reply to:
 Message 37 by Percy, posted 05-01-2012 4:30 PM Percy has replied

Replies to this message:
 Message 48 by Dr Adequate, posted 05-01-2012 11:28 PM Buzsaw has not replied
 Message 59 by Percy, posted 05-02-2012 12:58 PM Buzsaw has not replied

  
Dr Adequate
Member (Idle past 284 days)
Posts: 16113
Joined: 07-20-2006


Message 48 of 330 (661084)
05-01-2012 11:28 PM
Reply to: Message 47 by Buzsaw
05-01-2012 11:08 PM


Re: Sources And Mechanisms Of Wealth Creation
One of the greatest sources of the creation of wealth has been gold and silver.
And cowry shells.
History confirms that the money of nations which did not back their money with intrinsic value eventually became worthless.
With the trifling exception of all the nations where this hasn't happened.

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 Message 47 by Buzsaw, posted 05-01-2012 11:08 PM Buzsaw has not replied

  
Jon
Inactive Member


Message 49 of 330 (661094)
05-02-2012 1:54 AM
Reply to: Message 27 by Percy
05-01-2012 1:58 PM


Re: Real Worth
'Fraid you're still not addressing the major objection I raised to your understanding of 'worth'.
At the end of the day, we bought a loaf of bread for $1.50 because that bread was worth more to us than the money we paid for it.1 This should be a clear sign for why we cannot use willingness to pay as a marker for worth: because the amount someone pays is always less than their perceived worth of the good or service they are purchasing; it has to be or else they won't buy it.
How can we use one value as a marker for another when we know for a fact that they are never going to be the same?
It simply doesn't work.
Willingness to pay ≠ Worth
Jon
__________
1 The mere fact that we can talk about the 'worth' of $1.50 should tell us that worth is something separate from money and payments. It has to be measured by something other than dollars and cents.

Love your enemies!

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


(2)
Message 50 of 330 (661097)
05-02-2012 4:15 AM
Reply to: Message 37 by Percy
05-01-2012 4:30 PM


Percy writes:
The definition of value is not the answer to all questions economic and otherwise. It's a simple definition. I was hoping to resolve a confusion most people had about the sources and mechanisms of wealth creation.
If you want to define "worth" in such a way that many of the most significant contributing factors to wealth creation have no worth then we can't stop you doing that.
But if you are then going to apply this definition to the question of how wealth is created and who it is that we can attribute wealth creation to - You are going to get some very silly results.
For reasons that should be obvious.

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RAZD
Member (Idle past 1404 days)
Posts: 20714
From: the other end of the sidewalk
Joined: 03-14-2004


Message 51 of 330 (661102)
05-02-2012 7:07 AM
Reply to: Message 43 by Minnemooseus
05-01-2012 8:49 PM


Re: A fraudulent item is not worth the same as the real thing
Hi Moose,
You did not get what you paid for.
Exactly. If it had been an ipod then it would have been worth $300.
It's like if I steal $300 from you, your net worth has decreased and mine has increased even though no item was bought or sold.
You were willing to spend $300 for an ipod, but that doesn't mean you were willing to spend $300 on an empty box.
Enjoy

we are limited in our ability to understand
by our ability to understand
Rebel American Zen Deist
... to learn ... to think ... to live ... to laugh ...
to share.


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This message is a reply to:
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Percy
Member
Posts: 22388
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 52 of 330 (661110)
05-02-2012 9:05 AM
Reply to: Message 39 by Dr Jack
05-01-2012 5:10 PM


Re: Real Worth
Mr Jack writes:
Things that aren't sold are still considered to have value in any vaguely coherent economic model - including Adam Smith's. Wealth creation does not simply happen at the point of sale.
Yes, this is true. Value can often be fairly accurately estimated prior to sale. But once something changes hands then all prior estimates of value go out the window.
The value of things often changes over time. This season's hot sneakers might sell for $150, and we can reasonably assign this price because kids are buying these sneakers for this price all across the country. We can be reasonably certain that a pair of these sneakers sitting on the shelf have a value of $150 because thousands of pairs of these sneakers are already changing hands for $150.
But by next season any leftovers will be marked down to maybe $80. Say 10 pairs were leftover at a retailer's. He now has to write off $700 in inventory losses.
In accounting there is often more than one way to do something, and the way you're tracking the change in the value of grandma's plate is fine. In my scenario the value of the plate was unknown, but in your scenario the value of the plate has already been established at $60, perhaps because it is listed in collectible catalogs. When grandma sells the plate for $5 she incurs a loss of $55, even though it is value she didn't know she had. Tha dealer who purchased the plate has an immediate increase in his net worth of $55. He hopes to sell the plate to some unwitting purchaser for $100, but at the end of the day is still happy to let it go for the $60 listed in the catalogs.
But what if he does sell the plate for $100? There's two ways we could look at this. Perhaps this plate is on its way to increasing in value, something that will be reflected in next year's catalogs, and therefore the plate is now worth $100. Or perhaps we are certain the value is not changing and the catalogs are correct, and therefore the person who purchased the plate has just lost $40 in value. Prices are known to move up and down, and which way they're moving at any given time is a speculator's game, but there is more than one way to track value on a balance sheet.
--Percy

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Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 53 of 330 (661119)
05-02-2012 11:07 AM
Reply to: Message 19 by New Cat's Eye
05-01-2012 12:32 PM


Re: "this boy knows the price of everything and the value of nothing"
Straggler writes:
But by your definition it is perfectly possible for things which raise living standards and create wealth to have no worth.
CS writes:
Absolutely: they don't have any Economic worth, even though they might have "worth" to the economy.
Given that this thread follows hot on the heels of the Trickle Down Economics - Does It Work? thread and that Percy seems to be using this thread in order to justify his conclusions about who is responsible for wealth creation in that one......
Isn't "worth to the economy" what is important in terms of wealth creation in the economy?
CS writes:
But we all know Economics is bullshit anyways.
If it is bullshit it is important bullshit. Because it is the basis upon which policy decisions which affect all our lives are made.
Edited by Straggler, : No reason given.

This message is a reply to:
 Message 19 by New Cat's Eye, posted 05-01-2012 12:32 PM New Cat's Eye has replied

Replies to this message:
 Message 55 by New Cat's Eye, posted 05-02-2012 11:55 AM Straggler has replied

  
New Cat's Eye
Inactive Member


Message 54 of 330 (661121)
05-02-2012 11:45 AM
Reply to: Message 34 by Percy
05-01-2012 4:01 PM


Re: Driving economists crazy
Until you discover the fraud you believe you have an item worth $300 and that the shop has $300 of your money. Everything seems fair and your net worth hasn't changed.
What I was getting at was a perceived issue with the definition of value being what someone is willing to pay for something. The problem I was seeing was when you were willing to pay for something, but its not what you think it is. So, should you really define the value of that thing as what was paid for it when afterwards you know that it really wasn't worth shit?
But I guess the issue boils down to the willingness of the person. They wouldn't have been willing to pay that for it if they had known what it really was.
But once you discover the fraud the iPod has to be written off, probably 100%.
Well not necessarily. That's what else I was getting at: You could just pass the buck and trick the next guy into buying it. Does it really have that value if you have to trick people into being willing to pay that much for it? And I guess I now realize that the answer is "no", because they weren't really willing to pay that much for the item, its just that they were tricked into thinking it was something else, and that something else is what they were willing to pay for, not the junk.

This message is a reply to:
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New Cat's Eye
Inactive Member


Message 55 of 330 (661122)
05-02-2012 11:55 AM
Reply to: Message 53 by Straggler
05-02-2012 11:07 AM


Re: "this boy knows the price of everything and the value of nothing"
Isn't "worth to the economy" what is important in terms of wealth creation in the economy?
Sure, but that's not something that can be measured and quantifed like Economic Value can.
If it is bullshit it is important bullshit. Because it is the basis upon which policy decisions which affect all our lives are made.
Scary, huh?
Given that this thread follows hot on the heels of the Trickle Down Economics - Does It Work? thread and that Percy seems to be using this thread in order to justify his conclusions about who is responsible for wealth creation in that one......
Here's an issue that we didn't get a chance to resolve in the other thread, and it pertains to this topic:
Let's say you come up with a worthy idea, but don't have the money to make it happen. How much is the guy who loans you the money that allows your idea to come to fruition contributing to the worth in this case? Without the money, your idea is worthless since it can't be realized. You don't seem to put much value on the people who invest in venture capital.

This message is a reply to:
 Message 53 by Straggler, posted 05-02-2012 11:07 AM Straggler has replied

Replies to this message:
 Message 56 by Straggler, posted 05-02-2012 12:22 PM New Cat's Eye has replied

  
Straggler
Member
Posts: 10333
From: London England
Joined: 09-30-2006


Message 56 of 330 (661124)
05-02-2012 12:22 PM
Reply to: Message 55 by New Cat's Eye
05-02-2012 11:55 AM


Re: "this boy knows the price of everything and the value of nothing"
Straggler writes:
Isn't "worth to the economy" what is important in terms of wealth creation in the economy?
CS writes:
Sure, but that's not something that can be measured and quantified like Economic Value can.
If we are talking about wealth creation and who to attribute it to then Percy's definition of "worth" in this thread is simply inadequate to deal with that question. Because it can only assign worth to that which is readily quantifiable. And whilst we all seem to agree that things like research, innovation, technological progress and increased productivity are essential components of wealth creation we can't quantify their effect in the way his rather narrow definition of "worth" demands.
If on the other hand Percy is, in this thread, simply talking about some sort of bookkeeping notion of "worth" that is wholly quantifiable then I'm not sure what his point is.
CS writes:
Let's say you come up with a worthy idea, but don't have the money to make it happen. How much is the guy who loans you the money that allows your idea to come to fruition contributing to the worth in this case? Without the money, your idea is worthless since it can't be realized. You don't seem to put much value on the people who invest in venture capital.
Actually I put quite a lot of value in it. But I also put value in the idea. And I also put considerable value in the investment we all make in the infrastructure that allows the combination of the idea and the investment to flourish and create wealth.
In the other thread we saw that it is the wealthiest who have reaped nearly all of the rewards of increased productivity over the last 30 years. My point there was simply that if they are receiving more wealth than they are responsible for creating then wealth is trickling up rather than down.
Edited by Straggler, : No reason given.

This message is a reply to:
 Message 55 by New Cat's Eye, posted 05-02-2012 11:55 AM New Cat's Eye has replied

Replies to this message:
 Message 60 by Percy, posted 05-02-2012 1:12 PM Straggler has replied
 Message 61 by New Cat's Eye, posted 05-02-2012 1:53 PM Straggler has replied

  
Percy
Member
Posts: 22388
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 57 of 330 (661128)
05-02-2012 12:52 PM
Reply to: Message 41 by Straggler
05-01-2012 7:32 PM


Re: "this boy knows the price of everything and the value of nothing"
Hi Straggler,
What I was asking you to reconsider was your assertion that the definition is "just circular and silly." It's a definition, just like "The race goes to the swift" and "Those who are most fit survive" are definitions. They weren't analogies to an economy. They were examples showing the error of concluding circularity.
The definition comes from Economics 101. Without it you are helpless in assigning value and tracing the origins of wealth. In your approach wealth becomes a subjective assessment with whatever value you care to give it. You reach conclusions as to the origins of wealth with no metrics to go by. If you think something is valuable and someone else doesn't, how are you going to figure out who is right? You could argue about it interminably, but the only true way to get the answer is to find out how much someone is willing to pay.
--Percy

This message is a reply to:
 Message 41 by Straggler, posted 05-01-2012 7:32 PM Straggler has replied

Replies to this message:
 Message 64 by Straggler, posted 05-02-2012 3:58 PM Percy has replied

  
Percy
Member
Posts: 22388
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 58 of 330 (661129)
05-02-2012 12:57 PM
Reply to: Message 46 by Buzsaw
05-01-2012 10:29 PM


Re: Re; Economic Values
Hi Buz,
If it helps you to think of value in terms of ounces of gold or silver instead of dollars then go right ahead, but this thread is not about whether currency should be backed by gold or silver.
--Percy

This message is a reply to:
 Message 46 by Buzsaw, posted 05-01-2012 10:29 PM Buzsaw has replied

Replies to this message:
 Message 90 by Buzsaw, posted 05-03-2012 6:28 AM Percy has replied

  
Percy
Member
Posts: 22388
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 59 of 330 (661130)
05-02-2012 12:58 PM
Reply to: Message 47 by Buzsaw
05-01-2012 11:08 PM


Re: Sources And Mechanisms Of Wealth Creation
Buz, seriously, this thread is not about whether our currency should be backed by gold or silver.
--Percy

This message is a reply to:
 Message 47 by Buzsaw, posted 05-01-2012 11:08 PM Buzsaw has not replied

  
Percy
Member
Posts: 22388
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 60 of 330 (661131)
05-02-2012 1:12 PM
Reply to: Message 56 by Straggler
05-02-2012 12:22 PM


Re: "this boy knows the price of everything and the value of nothing"
Hi Straggler,
If sources of wealth aren't measurable, then how are you determining that the wealth accumulated by the rich was not created by them? Maintaining your view forces you to argue that graphs and tables containing actual numerical measures of wealth and income are somehow consistent with handwave arguments about wealth creation not being measurable and unsupported claims of who you think created the wealth.
--Percy

This message is a reply to:
 Message 56 by Straggler, posted 05-02-2012 12:22 PM Straggler has replied

Replies to this message:
 Message 63 by Straggler, posted 05-02-2012 3:55 PM Percy has replied

  
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