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Author Topic:   Economics: How much is something worth?
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 316 of 330 (664600)
06-02-2012 2:41 PM
Reply to: Message 271 by Straggler
05-29-2012 2:36 PM


Re: Price And Value
Hi Straggler,
You didn't respond as to whether you wanted to call it or not, and I didn't want to respond if all it did was continue the silly repetition of arguments, so what I've come up with is a few observations.
Scientists, be they Galileo, Newton, Pasteur, Einstein or lesser lights, make their contributions to science.
Companies can use the current state of scientific knowledge to create wealth.
Companies that create wealth report it on their income statements.
The salaries of company officers that are paid out of company income have risen much, much faster than median income.
The share of taxes paid by the wealthy has declined over the past few decades.
This is a pretty clear trail of dollars.
We're not disagreeing on what has happened. We're only disagreeing on how to describe it.
--Percy

This message is a reply to:
 Message 271 by Straggler, posted 05-29-2012 2:36 PM Straggler has replied

Replies to this message:
 Message 318 by Straggler, posted 06-04-2012 4:46 AM Percy has replied

  
Jon
Inactive Member


Message 317 of 330 (664677)
06-04-2012 12:44 AM
Reply to: Message 315 by Percy
06-02-2012 10:19 AM


Re: Game Point
Someone who doesn't shop much might not know the value of a bag of peas,
Of course they will. They just won't know the usual price of a bag of peas, nor will they understand the purchasing power of the money they have.
But they will still have a very clear idea of how much stuff they are willing to go without in order to own a bag of peas. Would they give up their house? No. Their car? No. Ten minutes of their time performing work? Perhaps.
Now, obviously since they do not use money for making purchases very often, they won't have a good sense of how to translate all that into dollars and cents.
That doesn't mean they don't know the value of a bag of peas.
If you need to know the value of something rare like a flintlock from the early 1800s then you need someone who knows the prices at which such rare items change hands (an expert for lack of a better name), and it is those prices that determine value.
No. If you need to know the value to someone else of something rare like a flintlock from the early 1800s then you need to ask someone else or someone who specializes in knowing what value collectors place on items such as early 1800s flintlocks.
Technical definitions involving marginal utility and so forth have analytical value because they can be plugged into equations and used in economic models, but people aren't usually very analytical about purchasing decisions until the prices get interesting.
What 'technical definitions'? The values used aren't thought up in a stuffy room in the basement of a university building. The value people place on things is measured by observing how people place value on things. So to say that these measurements cannot be relevant or meaningful because people don't behave in the manner they describe is nonsense. Obviously people behave in the manner described because the manner described is found out by actually watching people behave.
In most day-to-day life very little thinking goes into purchasing decisions.
Of course, because people know the value they place on things intuitively, so they don't have to think about it.
I need gas to get to work, so whatever the price of gas is today, that's what I pay.
And when gas was cheaper I needed gas for joy riding... but I don't do that anymore. Funny. You would have thought that as the price of gas went up, the value I placed on using gas (joy riding, for example) would have increased as well.
Of course it didn't. The value I place on joy riding has remained relatively unchanged and so as the price of gas increases above and beyond the value I place on joy riding, I consume less gas. This should be easy enough to figure out, of course, because its reflected in the classic supply/demand curve everyone learns in Econ 101.
Analytical economists can claim that the price I paid exceeded the value I assigned, but nothing like that was going on in my head,
Of course not. Because by the definitions that economists use in describing value, the price you pay always has to be at least somewhat less than the value you assign. If you pay $300/gallon, then the economist will tell you that you value gas at at least $300/gallon. That is how economists figure out what value people place on things: by watching their consumption behavior.
they find that such simplistic models, convenient as they are, only capture part of what is really going on.
Huh? Those 'simplistic models' are constructed around data collected from 'what is really going on'.
For some goods increasing price can actually increase sales.
Yes. And I already addressed that. People can consider price in determining their value of things, just like they can consider the quality of the pain reliever, the utility of the plastic bottle it comes in, the color of the picture on the box, and so on. I have never once said that people cannot consider price in determining value. Obviously people can consider whatever the hell they want.
I think the biggest problem we've had in this thread is an insistence that one's position is correct to the exclusion of any other position, no matter how minor the differences might be.
Your position might be right, it might be wrong. Some things you've said are right. Some things are just nonsense.
Unfortunately, you've been jumping all over the place so much that it's been impossible to really figure out what your actual position is.
I wish we could have had a more enlightening discussion.
I feel very enlightened.
Jon

Love your enemies!

This message is a reply to:
 Message 315 by Percy, posted 06-02-2012 10:19 AM Percy has replied

Replies to this message:
 Message 319 by Percy, posted 06-04-2012 10:04 AM Jon has replied

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


(1)
Message 318 of 330 (664685)
06-04-2012 4:46 AM
Reply to: Message 316 by Percy
06-02-2012 2:41 PM


Re: Price And Value
Percy writes:
Companies can use the current state of scientific knowledge to create wealth.
Wealth creation is a collective endeavour. We are all standing on the shoulders of giants when it comes to creating wealth. And the value to the economy of any person, company or government project is incredibly difficult to ascertain. Because wealth creation in a successful capitalist economy involves a complex interraction between innovative individuals, entrepreneurs, state funded institutions, workers, educators etc. etc. etc. etc. It involves a whole raft of things that don't appear on any balance-sheet (e.g. the level of education of the population that is essential to the knowledge economy).
So you cannot possibly look at a set of accounts and say how much value someone has or has not added to an economy. Not in any meaningful way.
Edited by Straggler, : Spelling

This message is a reply to:
 Message 316 by Percy, posted 06-02-2012 2:41 PM Percy has replied

Replies to this message:
 Message 322 by Percy, posted 06-04-2012 6:39 PM Straggler has replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 319 of 330 (664694)
06-04-2012 10:04 AM
Reply to: Message 317 by Jon
06-04-2012 12:44 AM


Re: Game Point
Jon writes:
But they will still have a very clear idea of how much stuff they are willing to go without in order to own a bag of peas. Would they give up their house? No. Their car? No. Ten minutes of their time performing work? Perhaps.
You have a conception of value that is, literally, of no value. Staying with the example of our hypothetical non-shopper, let us say he is willing to pay 5 minutes of work for a bag of peas, but finds they are charging 10 minutes of work. So he decides to buy a bag of corn which he also values at 5 minutes of work, but finds they are also charging 10 minutes of work for corn. He checks the prices of all the frozen vegetables and discovers the same thing. He looks for other foods and finds they're all priced higher than the value he assigns. But he has to eat, so in the end he pays a price higher than his value. So where's that leave this claim of yours:
Jon writes:
Because by the definitions that economists use in describing value, the price you pay always has to be at least somewhat less than the value you assign.
Either our hypothetical non-shopper has just violated your inviolate rule, or he has adjusted his internal sense of value to better accord with the prices actually being charged.
Unfortunately, you've been jumping all over the place so much that it's been impossible to really figure out what your actual position is.
I can see how someone still trying to find infinity on the supply/demand curves might think this.
--Percy

This message is a reply to:
 Message 317 by Jon, posted 06-04-2012 12:44 AM Jon has replied

Replies to this message:
 Message 320 by Jon, posted 06-04-2012 10:13 AM Percy has replied

  
Jon
Inactive Member


Message 320 of 330 (664695)
06-04-2012 10:13 AM
Reply to: Message 319 by Percy
06-04-2012 10:04 AM


Re: Game Point
Either our hypothetical non-shopper has just violated your inviolate rule, or he has adjusted his internal sense of value to better accord with the prices actually being charged.
Or, he always did value peas and other frozen vegetables at at least ten minutes of work. And that is what any honest economist will tell you.
I can see how someone still trying to find infinity on the supply/demand curves might think this.
Huh?
If infinity doesn't exist on the supply and demand curves it is only because infinity doesn't exist in the real world of people making efforts to satisfy their wants and needs.
And economics deals with the real world.
Jon

Love your enemies!

This message is a reply to:
 Message 319 by Percy, posted 06-04-2012 10:04 AM Percy has replied

Replies to this message:
 Message 321 by Percy, posted 06-04-2012 6:20 PM Jon has replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 321 of 330 (664751)
06-04-2012 6:20 PM
Reply to: Message 320 by Jon
06-04-2012 10:13 AM


Re: Game Point
Jon writes:
Or, he always did value peas and other frozen vegetables at at least ten minutes of work. And that is what any honest economist will tell you.
Interesting. Is it your view that nothing ever affects the values an individual assigns to things, and if not, what are the circumstances under which they would change?
Jon writes:
I can see how someone still trying to find infinity on the supply/demand curves might think this.
Huh?
If infinity doesn't exist on the supply and demand curves it is only because infinity doesn't exist in the real world of people making efforts to satisfy their wants and needs.
And economics deals with the real world.
You apparently don't recognize your own logic. This is you in Message 264:
Jon in Message 264 writes:
No. I'm claiming that 'value in trade' is a pointless synonym for 'price' and that 'value in use' is what actually determines a consumer's willingness to pay, which in turn sets the demand curve...
Value in use assigns an infinite value to air. Let us know when you find infinity on the demand curve.
--Percy

This message is a reply to:
 Message 320 by Jon, posted 06-04-2012 10:13 AM Jon has replied

Replies to this message:
 Message 323 by Jon, posted 06-04-2012 7:44 PM Percy has replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 322 of 330 (664754)
06-04-2012 6:39 PM
Reply to: Message 318 by Straggler
06-04-2012 4:46 AM


Re: Price And Value
Straggler writes:
So you cannot possibly look at a set of accounts and say how much value someone has or has not added to an economy. Not in any meaningful way.
You are so contradictory. I've given you a chain of evidence measured in dollars showing how the money is getting to the rich, and you say it isn't meaningful. Yet you post a chart delineated in dollars as evidence for your claims that the rich are taking more than their fair share. Make up your mind. Do dollars count as "meaningful" in your world or not?
I think you just like the sound of saying, "The rich are taking an unfair share of the benefits of the productivity gains from ideas and innovation." The fact of the matter is that money is fungible, and the rich are taking an unfair share of money from all contributors to the means of production. Breaking it down into how much from each contributor, such as air, gravity, wind, oil, roads, Boyle's Gas Law, thermometers, the internal combustion engine, GPS, a reliable currency, etc. and so forth, just isn't possible, not even remotely.
--Percy

This message is a reply to:
 Message 318 by Straggler, posted 06-04-2012 4:46 AM Straggler has replied

Replies to this message:
 Message 328 by Straggler, posted 06-05-2012 4:06 PM Percy has seen this message but not replied

  
Jon
Inactive Member


Message 323 of 330 (664757)
06-04-2012 7:44 PM
Reply to: Message 321 by Percy
06-04-2012 6:20 PM


Super Peas
Interesting. Is it your view that nothing ever affects the values an individual assigns to things, and if not, what are the circumstances under which they would change?
Obviously that's not my view, since I've mentioned elsewhere some of the ways to make people value things more. In Message 206, I mentioned that increasing the perceived benefit a product has to consumers is one way to raise the value of something. You also made a similar claim in Message 251.
Super peas with the power to bestow immortality would have a much higher value than regular peas.
Value in use assigns an infinite value to air. Let us know when you find infinity on the demand curve.
Let me know when you find people in possession of an infinite quantity of goods to exchange for air.
Econ 101.
Jon

Love your enemies!

This message is a reply to:
 Message 321 by Percy, posted 06-04-2012 6:20 PM Percy has replied

Replies to this message:
 Message 324 by Percy, posted 06-04-2012 10:16 PM Jon has replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 324 of 330 (664759)
06-04-2012 10:16 PM
Reply to: Message 323 by Jon
06-04-2012 7:44 PM


Re: Super Peas
Jon writes:
Obviously that's not my view, since I've mentioned elsewhere some of the ways to make people value things more. In Message 206, I mentioned that increasing the perceived benefit a product has to consumers is one way to raise the value of something. You also made a similar claim in Message 251.
Well now you're just making a big hash of things. In Message 206 you emphasized that for you scarcity increased price, not value, but now you're saying it does increase value. And in Message 251 where I argued that advertising could increase perceived value you replied with unrestrained sarcasm, concluding I believe with, "Shocker that is!"
I suppose I should give up hope of ever getting a consistent story out of you, but what the heck. So if you believe a person's perception of value can change over time, what criteria are you applying in deciding which things can affect perceived value and which can't? Seems to me that any and all information available to a person could affect that perception to varying degrees, so please explain how you are dividing things into these two categories of things that can affect perceived value and things that can't.
Super peas with the power to bestow immortality would have a much higher value than regular peas.
Super peas would be a different product from peas.
Value in use assigns an infinite value to air. Let us know when you find infinity on the demand curve.
Let me know when you find people in possession of an infinite quantity of goods to exchange for air.
Jon, you're right, it's ridiculous, but that's the position you took. I'm just describing your own position to you. Maybe at some point you should look up what value in use means. In the case of air and other nutrients essential for human survival it means the value is infinite. I quoted the definition in this very thread, but there you were several posts later arguing that value in trade is useless and that only value in use made any sense for setting the demand curve.
So are we going to see a response that makes sense this time. Maybe you have a different definition of value in use? Maybe you'll change your mind and decide that value in trade is the definition to use for circumstances where money is changing hands, i.e., things are being traded? But please, whatever you decide to answer, try to make sense.
--Percy

This message is a reply to:
 Message 323 by Jon, posted 06-04-2012 7:44 PM Jon has replied

Replies to this message:
 Message 325 by Jon, posted 06-05-2012 12:34 AM Percy has replied

  
Jon
Inactive Member


Message 325 of 330 (664766)
06-05-2012 12:34 AM
Reply to: Message 324 by Percy
06-04-2012 10:16 PM


Re: Super Peas
In Message 206 you emphasized that for you scarcity increased price, not value, but now you're saying it does increase value.
No I am not. You clearly failed to locate the relevant portions of the message I quoted. So here they are:
quote:
Jon in Message 206:
The way to make the value of something increase is to make it able of providing greater percieved benefit to the consumers.
A scientific discovery showing that vitamin C has health benefits no one ever knew of before would increase its value to consumers.
Jon, you're right, it's ridiculous, but that's the position you took.
No it's not.
I quoted the definition in this very thread, but there you were several posts later arguing that value in trade is useless and that only value in use made any sense for setting the demand curve.
And value 'in use' is the type of value that influences the demand curve by determining WTP (an at least measurement of the value consumers place on the goods, services, and resources that they consume). Just look up utility on Wikipedia. This is what it'll tell you:
quote:
Wikipedia on Utility:
In economics, utility is a representation of preferences over some set of goods and services. Preferences have a utility representation so long as they are transitive, complete, and continuous.
...
t was recognized that utility could not be measured or observed directly, so instead economists devised a way to infer underlying relative utilities from observed choice. These 'revealed preferences', as they were named by Paul Samuelson, were revealed e.g. in people's willingness to pay: ...
There's that phrase again, willingness to pay. Let's see what it really means:1
quote:
Wikipedia on WTP:
In economics, the willingness to pay (WTP) is the maximum amount a person would be willing to pay, sacrifice or exchange in order to receive a good or to avoid something undesired, such as pollution. This term stands in contrast to willingness to accept payment (WTA), which is the minimum amount an individual is willing to receive to give up a good or to accept something undesirable.
...
Unlike WTA, WTP is constrained by an individual's wealth. For example, the willingness to pay to stop the ending of one's own life can only be as high as one's wealth, while the willingness to accept payment to accept the ending of one's life would be an extremely high number, perhaps approaching infinity.
That last part is important. While people may infinitely value something such as air, their WTP will never be infinite, since WTP is 'constrained by an individual's wealth'. Which is (just one of the reasons) why, as I've said repeatedly in this thread WTP is not equal to the value people place on things. In fact, this is what I said in the very first post I made in this thread:
quote:
Jon in Message 11:
Percy writes:
It is worth what someone is willing to pay.
I find this flawed. And here is why:
What a good or service is worth is a measure of the benefit that someone receives from consuming that good or service. For obvious reasons, this cannot be the same as what someone is willing to pay for that good or service since people will only exchange their ability to consume something else (which is all paying for something is) if the thing they are consuming is worth more to them than the other things they gave up consuming (that is the other things they could have bought with the money they paid, = the price of the good or service).
Percy writes:
Thus, economic value is measured by the most someone is willing to give up in other goods and services in order to obtain a good, service, or state of the world.
If the purchased item does not provide a higher return (even if it is just perceived) than what it cost, it will not be purchased. People have to think the item on the shelf is worth more than the money in their pockets before they will exchange the latter for the former.
Jon
And again in Message 49:
quote:
Jon in Message 49:
Willingness to pay ≠ Worth
So what I'm saying now is same thing I've been saying all along. If you want a consistent story out of me, just read my other posts in this thread!
But please, whatever you decide to answer, try to make sense.
Honestly, if the above still doesn't clear things up, then I'm prepared to declare further conversation on this matter between you and I a lost cause.
Jon
__________
1 To be clear, I think everything in that Wikipedia article past the part I quoted is hogwash.

Love your enemies!

This message is a reply to:
 Message 324 by Percy, posted 06-04-2012 10:16 PM Percy has replied

Replies to this message:
 Message 326 by Percy, posted 06-05-2012 10:22 AM Jon has replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 326 of 330 (664791)
06-05-2012 10:22 AM
Reply to: Message 325 by Jon
06-05-2012 12:34 AM


Re: Super Peas
Jon writes:
Honestly, if the above still doesn't clear things up, then I'm prepared to declare further conversation on this matter between you and I a lost cause.
Your "logic" has islands of consistency, but moving between them is as disorienting as climbing the stairs in an Escher drawing. Thus we have this as your current explanation, paraphrasing of course:
"Value in use, which assigns a value of infinity to air because of its essential nature for human survival, is still useful for setting the demand curve because willingness to pay (WTP) is 'constrained by an individual's wealth.'"
I understand your point that WTP will always exceed value. It's one of the things you're saying that makes sense (though insisting that there are no other valid perspectives is clearly wrong). But if the value of air is infinite, as you also insist, and even if we instead say that the value of air to an individual is his total net worth, how can WTP ever exceed it?
Here is the paragraph from The Economic Way of Thinking Part 1 that defined value in use versus value in trade:
Economists point out that both free goods and economic goods possess utility. People place a value on air; it just happens that in most cases, the quantity of breathable air supplied exceeds the quantity demanded. But things may be valued in two different ways. Some things like air and water are very valuable in use, but usually have no value in trade. Diamonds have a great deal of value in trade, but less value in use. Economic value is always in the eye of the beholder.
If you 'd like to propose a different definition of value in use then go ahead, but if you're going to accept this definition, as you appear to have done, then your logic contains a major contradiction.
--Percy

This message is a reply to:
 Message 325 by Jon, posted 06-05-2012 12:34 AM Jon has replied

Replies to this message:
 Message 327 by Jon, posted 06-05-2012 10:53 AM Percy has replied

  
Jon
Inactive Member


Message 327 of 330 (664795)
06-05-2012 10:53 AM
Reply to: Message 326 by Percy
06-05-2012 10:22 AM


Re: Super Peas
I understand your point that WTP will always exceed value.
If after everything that I've posted you honestly believe that this is my point, then I really don't think there is much more for us to say to one another on this matter.

Love your enemies!

This message is a reply to:
 Message 326 by Percy, posted 06-05-2012 10:22 AM Percy has replied

Replies to this message:
 Message 330 by Percy, posted 06-06-2012 8:29 AM Jon has seen this message but not replied

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


(1)
Message 328 of 330 (664822)
06-05-2012 4:06 PM
Reply to: Message 322 by Percy
06-04-2012 6:39 PM


Look Past The Balance-Sheet
Percy writes:
You are so contradictory. I've given you a chain of evidence measured in dollars showing how the money is getting to the rich, and you say it isn't meaningful.
There is nothing contradictory in pointing out that whilst balance-sheets can adequately verify who is receiving the proceeds of wealth-creation your book-keepers approach to economics cannot meaningfully describe how wealth is actually created or who it is that is creating it.
Your accountants approach inevitably glorifies ownership at the expense of other factors. Factors which we need to understand if we want to focus resources on the things that most effectively add value to the economy.
Look past the balance-sheet.......

This message is a reply to:
 Message 322 by Percy, posted 06-04-2012 6:39 PM Percy has seen this message but not replied

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


(1)
Message 329 of 330 (664826)
06-05-2012 5:20 PM
Reply to: Message 288 by New Cat's Eye
06-01-2012 10:02 AM


Re: Price And Value
CS writes:
You say...
I'll tell you what I say.
CS writes:
How do the methods of accounting do that?
By being incapable of quantifying all of the factors that contribute to wealth creation. Thus the focus is inevitably on those things that can be most easily quantified.
CS writes:
But those methods are how we got to your chart in the first place, so if they've got it all fucked up then whay are you starting with them?
The chart clearly shows who is receiving the proceeds of growth. What it cannot do is meaningfully show how that wealth was created. In accounting terms it will predominantly be assigned to shareholders and thus give the false impression that the wealtheist are almost solely responsible for wealth creation. Thus many will conclude that they are the "wealth creators" who we need to nurture and pander to in the form of tax breaks and minimal legislation. This is the flawed thinking behind trickle down economics. That is where all this started.
CS writes:
What this should teach you is that if you want to get yourself some money, you need to start holding some shares of some companies!
How do you know I don't?
CS writes:
If nobody provides the capital to get the project started, then it can't ever create any wealth at all, no matter how good the idea is.
It depends on the project. And there is no reason that capital has to be provided by wealthy individuals rather than pensions company investments of the middle classes (for example). Yet in this trickle down world the pensions of the middle classes are faring no better than their salaries in terms of gaining from growth.
CS writes:
The investors are the ones who are "responsible" for the wealth creations in the sense that they're the ones incurring all the risk by allowing their capital to be used for the project.
Except for all the publicly funded projects. Except for "too big to fail" industries and companies. Except for the investor who loses everything and has to rely on the economic safety net supplied by the state.
Risk is a lot more dispersed than the pseudo-idealised capitalism you and Percy keep preaching.
CS writes:
Products I've invented were idealized by my own mind, but I don't have my own chemistry lab to do the R&D in.
Many of the most advanced and expensive research projects are publicly funded. Who pays for those? Who bears the risk?
CS writes:
I'd rather create some wealth for myself.
That's fine. But in the unlikley event you manage to join the top percent or so don't then have the gall to sit there telling everybody else how lucky we are to have you.

This message is a reply to:
 Message 288 by New Cat's Eye, posted 06-01-2012 10:02 AM New Cat's Eye has not replied

  
Percy
Member
Posts: 22394
From: New Hampshire
Joined: 12-23-2000
Member Rating: 5.2


Message 330 of 330 (664872)
06-06-2012 8:29 AM
Reply to: Message 327 by Jon
06-05-2012 10:53 AM


Re: Super Peas
Jon writes:
If after everything that I've posted you honestly believe that this is my point, then I really don't think there is much more for us to say to one another on this matter.
If after all you have said you choose to let your contradictions stand, that is up to you.
--Percy

This message is a reply to:
 Message 327 by Jon, posted 06-05-2012 10:53 AM Jon has seen this message but not replied

  
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