Summations Only

Probably not. By assessing it's outcome. If that book contained the blueprints of some transformative technology that ended up boosting the productivity of the entire nation tenfold it would be ridiculous to assess it's value at $0.25 because that is what was paid for it in a thrift store wouldn't it? Because price and value are not the same thing and the owner of the book thought it was written by a crank rather than a genius who had actually had the insight to discover and detail faster than light travel (or whatever). Only later did he realise the true value of that book. And his story kept him o the chat show circuit for years to come afterwards.Edited by Straggler, : No reason given.

Okay, so you're following classical economics. There's a reason there are few classical economists around: there's no way to attach a tangible value to anything. When you disconnect value from price all you'll get is lengthy arguments about people's opinions of the value of things. Identical objects have different values. The guy who made a $100,000 using a book assigns a value of $100,000 to it, yet if the book burns up in a fire he has lost nothing but the price of the book, which he can easily repurchase. If he brings his copy of the book to a book signing and accidentally gets it mixed up and returns home with a signed different book, now his $100,000 book is at the bookstore. What's the economic impact of this mixup? Nothing.You must have seen my post about the value-added tax, and being from Europe you're familiar with it first hand, so clearly you known the mainstream definition of value, the one used by mainstream economists everywhere and the one upon which all economic statistics are based, yet you insist on arguing from a classical standpoint. Your viewpoint has no connection to the real world, yet you argue endlessly for it. Weird.Part of your position is that the wealthy have benefited disproportionately from productivity gains. You're right about this.But another part of your position is that workers create wealth out of all proportion to their salaries and that the company is unfairly appropriating it. From the standpoint of mainstream economics you're wrong about this. You can argue pointlessly that economists should return to the classical economics of a century or two ago, but they haven't and they won't.--PercyEdited by Percy, : Typo.

Well, I think we could try. Imagine we're buying groceries. We see:(a) A bag of 2lb of potatoes for $1
(b) A bag of 1lb of identical potatoes for $2You can say that 1lb of potatoes has more value than 2lb of potatoes because they cost more.I can say that 2lb of potatoes has more value than 1lb of potatoes because there are more of them.You can say that they are both equal value for money, since one has value $2 and cost $2, giving it a v.f.m. of 1, whereas the other has value $1 and cost $1, giving it a v.f.m. of 1.But I can say that the 2lb bag is better value for money, because it costs 50c/lb as opposed to 200c/lb.So in this instance, at least, I can do what you can do in comparing value and in comparing value for money. The difference is that my answers aren't stupid.Edited by Dr Adequate, : No reason given.

Hi Dr Adequate,I believe I already covered the issue of relating price to value with the Rice-A-Roni example where different supermarkets sell it for different prices due to different pricing strategies and promotions. In your example one supermarket sells potatoes for $2/lb, while another sells them for $.50/lb. The question you're posing is what is the actual value of a pound of potatoes given the price variations.While I don't know the answer in any formal sense, I would suggest that the value for a given region of the country is the total amount paid for potatoes divided by the total pounds of potatoes purchased.In practice the supermarket selling potatoes for $2/lb probably sells many fewer pounds of potatoes than the supermarket selling them for $.50/lb, but they'll sell more than zero pounds. Some people are like me and were sent to the supermarket by their wife and have no sense of food costs. Other people are in a hurry and just say, "What the heck, I don't have time to price shop." Other people prefer one-stop shopping. But there's only so much flexibility in pricing. There are probably very few if any circumstances under which someone would pay $100/lb.--Percy

Now, if both supermarkets buy the potatoes from the same wholesaler at the same price/lb, which creates more value by selling a bag of potatoes?Edited by Dr Adequate, : No reason given.

Because you can't pay or be paid the value of something. You can only pay or be paid the price.Watch an episode of the History Channel's hit series Pawn Stars sometimes, and in a 26-minute episode, you'll see this situation happen approximately three times:Customer: Hi, Rick, I've got this Civil War-era rifle I'd like to pawn. Been in my family for generations; great-great-grandpappy carried it at Gettysburg.
Rick (proprietor of the pawn shop): I've got a guy that appraises this stuff, let me bring him in.
Appraiser: This is an excellent piece. Walnut stock, original mechanisms, and if you look here, you'll see the hallmark from Virginia Arms Co. I'd value this at approximately $15,000.
Rick: I'll give you $3000 for it.About half of the time, people who have just been told by an expert what the value of their merchandise is take a tiny lowball offer from Rick, because they know that price and value aren't the same thing. It's not even a matter of the rifle having a different value for the customer and for Rick; we know that they value the antique exactly the same because they've just been informed of what the value is. But the customer can't sell the antique for its value. They can only sell it for the price. Rick would be out of business immediately if price and value were the same thing, since his business is based on buying things for a lower price than their value.

There is a name for the wholly tangible quantity you are referring to. It's called "price". Unless you disconnect them there seems little point in having two different words. The reason we have two different words is because the two things are conceptually different. Whether you like it or not.The price of something is effectively what you can convince someone to pay for it. It is linked to the perceived value or (in the case of an investment) the anticipated value of that thing. But it's true value cannot be known until later.Isn't it ridiculous to say that the investment banker who has convinced his employers to pay him 5 million dollars a year but whose performance is so woeful as to end up bankrupting many of his clients and losing his bank vast swathes of money actually has a value of 5 million dollars that year?Any sensible definition of value would disassociate how much he was paid with what his actual value turns out to be. But you aren't applying sensible definitions. Because the value has already been acquired in the form of increased earnings as a result of owning the book. His $100,000 isn't in the bookstore at all. It is in his bank account and assets obtained as a result of owning a copy of the book that enhanced his career to that extent.Jumping up and down pointing out that treating price and value as different things results in them being different things isn't really helping your case here. There is a reason economics is called "the dismal science". From your own much cited wiki link: "The economic value of a good or service has puzzled economists since the beginning of the discipline".Your definition doesn't really solve the difficulty of assigning value. It just sidesteps the issue by making price and value one and the same. With rather silly results. Gasp! So.....?Identical objects can have different prices too can't they? Can you really not think of situations where different people are willing to pay different prices for identical objects? Have you never been to an auction?A man starving to death trapped in a hole may well give you everything he owns for a donut. Someone who has just eaten a huge lunch and doesn't even like donuts may not even take it if you are giving them away for free.So what is the price of that particular donut? What is the value? I haven't really said that at all. I have said that the economic value of something can be different to it's price. I have said that the income of someone doesn't necessarily reflect their contribution to wealth creation. And that the inevitable result of your blinkered bookkeepers definitions is the wealthiest unjustifiably classifying themselves as "wealth creators" and congratulating themselves on trickling down wealth to the rest of us when in fact this isn't the case at all. I'm not arguing this either. I'm arguing that price and value are not the same thing. I (and others) are pointing out the ridiculous situations you land yourself in if you insist that they are. I am mystified as to why you think the world of economics is with you one this.You have taken a definition whose legitimacy is at least debatable and then extrapolated it to an extent where no economist could possibly agree with you.

Since your example described each supermarket as selling bags of different weight, let us say that one supermarket sells one 2-pound bag of potatos for $1 ($1 per 2-pound bag), while the other sells two 1-pound bags of potatos for $4 ($2 per 1-pound bag). This means they each sell 2 pounds of potatoes. Let's say they both purchased these potatos from the wholesaler for $.50/pound.The first supermarket has created value of $0, while the second has created value of $3. Here's the same information in a table: The profit (created value) appears on the bottom line of the supermarkets' financial reports. If this were Europe then the supermarkets would pay a value-added tax on the created value.--Percy

Well, I will be a repeat customer at Store #1 and avoid Store #2.What kind of value do you assign to that? Customer loyalty?Maybe Store #1 is doing a loss-leader run on potatoes and the customers will come back again & again.

This isn't true at all, though it is certainly much more often true in the world of classical economics. That's why this viewpoint no longer holds sway and hasn't in quite some time, like for over a century at least. The classical concept of value has no connection to actual money, and money is what economics is all about. As it became increasingly necessary to tote up the movement of money through economies and track profits and losses, classical concepts of value simply fell by the wayside.Since you guys are evidently not going to give up the classical concept of value we need to be clear about which concept of value we're referring to, so I'm going to suggest we use the term "classical value" when we're talking about classical economics. We can just use the term value for the neoclassical context because that's the mainstream definition.Classical value has no practical use today because objects can be assigned values out of all proportion to what anyone would ever pay. As you yourself just said, you can never get paid what something is worth in terms of classical value. Since this is the case, where, exactly, does classical value fit in in terms of money changing hands? The answer: nowhere. It plays no role in day-to-day economic life whatsoever.But in mainstream economics it is frequently true that you can be paid the value for something. If the value of a bag of frozen peas is $1 then you'll likely find it in supermarkets selling for prices ranging from $.80 to $1.20. Some supermarket somewhere will likely be selling it for exactly $1.I don't understand why you guys continue to ignore the dominant paradigm of modern economics. As Wikipedia says about value, "Many neoclassical economic theories equate the value of a commodity with its price, whether the market is competitive or not." The very concept of neoclassical value is embedded in European tax laws. Instead of arguing mindlessly against this you should try to understand it.By the way, your gun sale example made no sense. When you pawn something it's considered a loan secured by the object you're pawning, not a sale unless and until the pawner defaults on the loan. I think you need an example involving an actual sale.But I can say this much. Unless something is changing hands for $15,000 then it doesn't really have a value of $15,000. Is anyone anywhere paying anything in the neighborhood of $15,000 for the same gun in the same condition? If not, then what's the point of giving it a value of $15,000? There isn't one, it's a pointless exercise.--Percy

Hi Straggler,I don't know the relationship between value and price in any formal sense, but I think I can take a stab at something reasonable. This will track closely with what I've said previously.Value is an aggregate, price is a specific. Value reflects the totality of prices at which a commodity is changing hands, like donuts. Let's say the retail value of a plain donut is $1, reflecting a sort of average across all donuts changing hands. Likely plain donuts will be for sale ranging in price from free (coupons, promotions) to maybe $1.50. The price of a donut in comparison to its value will influence demand. There will be a lot of demand for free donuts and very little for $1.50 donuts.Merchants will try to maximize profits. That means finding a price point relative to cost that maximizes income. Increasing the price reduces sales, decreasing the price increases sales. Somewhere in there is the best price point that maximizes profits.This price point will change as the competitive landscape changes in terms of costs and strategies of other merchants of donuts, and this will feedback to value, which is an aggregate across total sales of donuts. Uh, yes, you are. You thought it perfectly reasonable that someone who makes a $100,000 on an idea from a book should value the book at $100,000. I am explaining the dominant paradigm in economics today, one where many, as Wikipedia explains, "equate the value of a commodity with its price." And those who don't accept it as a basic premise but believe it too simplistic.--Percy

Right. It seems to me that the best answer to that is concentrate on what does fit in with the notion of money changing hands: price. But out of the range of 40 different values between .80 and 1.20, only one of those is coincidentally the value of the bag of peas: 1.00 dollars. Sure, you might pay a price identical to the exact value, or you might pay a price identical to your exact birthday. Those would both be coincidental, not evidence (say, in the latter case) that the price of something could be equated with the birthdate of the purchaser.Now, of course, the price is not completely unrelated to the value but I've already proven they can't be equated since they're not subject to the same constraints. But we understand that this is a simplification, like "assume a spherical cow." You need to watch the show, I guess. Rick's pawn shop does both loans and outright purchasing. But, look, now who's quibbling about words?

Apparently we both agree that the classical definition of value is useless, but the definition of value from mainstream economics is linked to price and has great usefulness, as I will explain yet again. If you recall, you objected to "equated" and argued that "linked" is a better term for the relationship between value and price, and I agreed, but now you're using "equated." What gives?Anyway, we agreed before that price is linked to value, and the relationship is pretty tight. The $100,000 *classical value* of the book of an earlier example is completely divorced from both reality and price, but if the value of the book, using value as defined by mainstream economics, were actually in the neighborhood of $5 then one could reasonably expect to see prices in a range around that value. You could produce a graph with sales volume on the horizontal axis and the price/value ratio on the vertical axis. It would look like this: I just borrowed this graph off the web, pretend the y-axis is really labeled price/value ratio. Ignore the values, I'm just illustrating the relationship.So what we see is that as price increases relative to value (increasing y-axis) that quantity sold decreases (decreasing x-axis). Value is an extremely useful concept within mainstream economics. No, I don't need to watch the show, but you *do* need to learn not to say "pawn" when you mean "sell". In the real world people do not sell guns worth $15,000 for only $3000 unless there are some kind of incredibly adverse circumstances. If the gun were really changing hands at prices in the general neighborhood of $15,000 then the guy would sell it for $15,000 instead of to Rick for $3000. If the expert you mentioned was assigning a value based on the market for the gun where guns in its condition are changing hands in the neighborhood of $15,000, then Rick would just be out of luck. But if the expert was using some criteria other than the market then it's just one of those made up values from classical economics having no connection to reality.--PercyEdited by Percy, : Grammar.

What is Neoclassical Economics?Difference Between Classical & Neoclassical EconomicsBasic Concept of Economic ValueNow, you were telling us how in mainstream economics, value is the same as price?Do please go on.

Now, let's try to capture our intuitive concept of value and put a figure on it.It is clear that for any given person, you can order values. We can devise a relation <_P such that A <_P B iff person P would rather have the use of good B than good A. We can then construct a relation =_P where, obviously A =_P B iff neither A <_P B nor B <_P AThen we can also construct a relation ≤_P such that A ≤_P B iff A <_P B or A =_P B.By construction, this allows comparison between any two goods. Furthermore, unless P is nuts in some strange way, it is transitive: if P would rather have the use of C than B (B ≤_P C) and P would rather have the use of B than A (A ≤_P B) then it follows that A ≤_P C; and in general these relations work just as the notation employed would suggest.A couple of thing to note. First, this allows us to take into account the values we set on things which are not conventionally considered goods, or which are not desirable, or have no price, etc. For example:Whooping cough <_me a stubbed toe.
A sunny day <_me oxygen.Second, note the phrase "have the use of" in our definition of <_P. This is important. I would rather have a Lear Jet than a car, because I could sell the Lear Jet and buy any car I wanted, and also some pie. On the other hand, I would rather have the use of a car than a Lear Jet, because I have no use for a Lear Jet. Hence:Lear Jet <_me a car.So, this gives us an ordering which captures our intuitive ideas of value. Can we quantify it? Certainly. We can quantify it, if we like, in dollars, if we grant that having the use of a dollar means being able to spend it.Then a quantitative expression of the value of good A to person P can be given by $x, where A =_P $x.Where there is no sum of money equivalent to the possession of A (for example if A is oxygen) we might write A =_P $∞.We can have values with negative sign, for goods which we actively don't want (bads, I guess). So for example we might write "whooping cough =_P -$500" iff not having whooping cough =_P $500. But for now, let's concentrate on actual goods with a value expressed in a positive number of dollars.A couple of things to note about the expression A =_P $x. It is not in any way the price at which P would sell the good. Think again of the example of the Lear Jet. Clearly if I had one and could sell it, I would try to do so at the market price. However, it has no value to me.Nor is it necessarily the price at which P would be willing to buy it, if P didn't have it and if P had the money. I would be perfectly willing to buy a Lear Jet for $1000, if I could sell it, but I am here considering the value of a good to the consumer --- to a middleman, the use of a good is to sell it, and we would adjust our definition accordingly.Nor is $x necessarily the market price.The simplest way of looking at it is this: suppose your fairy godmother appeared and said that you could either have the use of A or $x. Then A =_you $x for the exact sum x at which you would say: "meh, it doesn't really matter" and would be willing to toss a coin to decide. (Technical note: we should probably assume that the cost in time and effort of purchasing A is negligible; if the only boutique selling it was on the summit of Mt. Everest, this would complicate the situation.)Now, this gives us a quantification of value. If we wanted to get into neoclassical economics, we would then have to look at the idea of marginal value, which focuses on the value added or subtracted by having more or less of a good: e.g. oxygen is inestimably valuable to me, but more oxygen than I currently have is worthless to me.We might then state neoclassical concepts in terms of a quest for (marginal) value for money. Suppose I am thinking of buying a certain quantity of good A and a certain quantity of good B. Now suppose that at those quantities, the value of one dollar's worth more of good A is greater than the value of one dollar's worth more of good B. Then I should be buying more of good A, and if we take the usual neoclassical assumption that I'm a rational actor, I shall do so. Hence my schedule of purchases (under neoclassical assumptions) will be such that the goods I purchase will have equal marginal value for money, and such that any good that I don't purchase will have lower marginal value for money than any good that I do.Hence we have a concept of value which is well-defined, which is ordered, which in principle may be quantified, which can serve as a sound basis for the practice of neoclassical economics, and which captures our intuitive notion of value such that if a layman heard us talking about it he wouldn't think that we'd gone completely mad.Edited by Dr Adequate, : No reason given.Edited by Dr Adequate, : No reason given.