Poor rich people

[vimothy]

You should read what I said! IF the value of a good is only what the market pays for it, then that's tautological and there would be no use for markets. This is a problem with your position, not mine.

Think this hinges on a misunderstanding of what is meant by "what the market is prepared/wants to pay". If there were no markets, there would be no price, and we're back at inherent value. This basically stems (IMHO) from a misunderstanding of the function of markets in general. I'll come back to this when I get some spare time at work.

 

[IdleRich]

"Is this really so hard to understand? There is no instrinsic, "true" value for a good, only what the market is prepared to pay."

You're mixing up the value and the price here aren't you? It's surely theoretically possible for something to have an intrinsic value that is distinct from its market-fixed price isn't it? I thought that Marx recognised that...in fact here is a quote from that LVT link you suggested:

"Contrary to popular belief, the LTV does not deny the role of supply and demand influencing price since the price of a commodity is something other than its value. "

 

[borderpolice]

Think this hinges on a misunderstanding of what is meant by "what the market is prepared/wants to pay". If there were no markets, there would be no price, and we're back at inherent value.

I understand that. But markets would not be deemed necessary, unless the self-referential market price had some external function. If price was entirely self-referential, it would be observationally indistinuishabel from randomly chosen prices. (in fact, prices in some markets are seemingly observationally indistinuishabel from randomly chosen prices). But that is not true for all markets. my previous post explained how I see markets: (1) there are fairly stable external preferences that can be approximated in some markets under certain circumstances, (2) even in markets where price is seemingly not tied to external notions of value, market price functions as an indication of other people's beliefs about future prices etc, so allows some degree of prediction of these people's future (economic or otherwise). Note that (2) works only when sufficiently many market participants believe that the market price is a reasonable predictor of whatever they care about. But the possibility of (1) triggers the beliefs required for (2).

This can be summarised by saying that markets are a way in which society, in particular its subsystem "Economy", observes itself to guide its self-organisation and future evolution. This is an instance of a more general phenomenon, whereby complex, self-organising systems contain models of themselves to aid decision processes: the elections and opinioin polls ("public opinion") have a similar function in politics.

 

[vimothy]

You're mixing up the value and the price here aren't you? It's surely theoretically possible for something to have an intrinsic value that is distinct from its market-fixed price isn't it? I thought that Marx recognised that...in fact here is a quote from that LVT link you suggested:

Yes, I am, deliberately in fact. Marx theorised that under the conditions of captalism value and price do not equate - indeed, that's one of his criticisms. And that's my point: for Marx, price (EDIT: under capitalism) is variable, contingent, whatever, but value is a definite, intrinsic, inherent, absolute, whatever, figure. Hence, of course, the famous transformation problem that Marx "discovered" while writing Kapital: how to transform the "value" of any given good into the price.

My position is that there is no intrinsic value, only the market price (representing the many varying factors (supply and demand and so on) we've been discussing).

 

[IdleRich]

OK, I thought that you were saying that Marx didn't recognise that the market determined the price.

 

[vimothy]

It's surely theoretically possible for something to have an intrinsic value that is distinct from its market-fixed price isn't it?

To clarify, I disagree with this, while Marx surely didn't (although he could never satisfactorily explain it (there is a prize if you can)).

 

[vimothy]

OK, I thought that you were saying that Marx didn't recognise that the market determined the price.

No, for Marx price and value are separate. Not so for me. (And this is where we find the origin of the theory of exploitation).

(I am actually really interested in Marx's economic system, even though I think it's pretty demented. It's what first got me started on economics).

 

[nomadologist]

Yes, Vimothy is right (on this point), these two things are surely the same. I think Nomadologist didn't read that last point properly or failed to understand it or something because she claimed to disagree with it and then repeated it.
Doesn't change the overall situation though...

No, the point I was disagreeing with was when Vimothy said "society places a value on things". Society does no such thing. The market does.

 

[borderpolice]

No, the point I was disagreeing with was when Vimothy said "society places a value on things". Society does no such thing. The market does.

So markets are not part of society? that's a curious concept of society.

 

[nomadologist]

No, "markets" are just a different abstract force from what people call "society" --at least, in economics. Society exists, but markets are not equivalent to "society" as such.

 

[Mr. Tea]

Of course they're not the same thing, but they're inextricably intertwined, right? If there is a trend for people to live in a certain way or in a certain area, or to buy a certain product, then these are social changes and they naturally have effects on the market (by modulating demand). Similarly, markets affect society as the price and availability of certain goods and services fluctuate (i.e. changes in supply). So the two are constantly affecting each other.

 

[nomadologist]

They may be intertwined, but in economics, it is entirely incorrect to attribute the forces of the market to some sort of notion of "society" as some sort of entity with intentions.

 

[nomadologist]

So the two are constantly affecting each other.

Yes, "society" may be part of what runs a market, but it is not what determines value. The market itself, which is an abstract force made up of more than just "society" and has a dynamic all its own (which is what is fascinating to me about economics) that cannot be reduced to the effects of "society" is what determines value.

 

[borderpolice]

No, "markets" are just a different abstract force from what people call "society" --at least, in economics. Society exists, but markets are not equivalent to "society" as such.

I'd say that markets are part of society (a subsystem).

The structure of markets is coupled with rest of society, but markets (like politics, religion, science ...) have achieve a substantial degree of autonomy and self-reference.

 

[borderpolice]

Yes, "society" may be part of what runs a market, but it is not what determines value. The market itself, which is an abstract force made up of more than just "society" and has a dynamic all its own (which is what is fascinating to me about economics) that cannot be reduced to the effects of "society" is what determines value.

The discussion becomes less confusing if one is careful with terminology.

Markets determine Prices. Prices are different from values.

the rest of society outside markets is interested in prices, because it is assumed -- whether right or wrong is a different matter -- that prices are (weak) indicators of market-external facts, which we may call values. Examples of such market external facts are (1) notions of optimal resource allocation, (2) socially aggregated individual preference orderings, (3) the average amount of labour that needed to go into the production of a given priced item, (4) scarcity of a good, (5) expected future developments of one of the above, (5) a metaphysical notion of value that is inherent in things ... and i'm sure one can come up iwth more.
Hence prices (which is what markets produce), can be seen as a quantification and linearistation and simplication of some market-external value).

Because those notions of market-external value are not readily observable, market-based pricing mechanism are deemded to be good tools to circumvent the difficulties in observing market-external values.

Markets don't determine prices outside of society, very much on the contrary. But because markets are large, distributed and self-referential systems, market prices are no longer predicatble to society (and in fact to market participants themselves), at least with precision. This unpredicatbility is often simplified as market autonomy or market forces.

 

[nomadologist]

I never said markets determined anything "outside" society. I said markets are partially fueled by society but become something abstract of their own that cannot be accounted for solely with reference to "society"

What are on earth are you talking about? Prices may be different from values (and I don't think they are, I'll agree with Vimothy here), but society still doesn't determine "values".

 

[borderpolice]

I said markets are partially fueled by society but become something abstract of their own that cannot be accounted for solely with reference to "society"

Well, i think that market price is a product of society, but one that -- for reasons of complexity -- cannot be determined except by the market mechanism itself. But if "markets are partially fueled by society but become something abstract of their own that cannot be accounted for solely with reference to "society"", then you will have to account for this metaphysical abstract force externally. What is it? the in visible hand?

What are on earth are you talking about? Prices may be different from values, but society still doesn't determine "values".

I'm just trying to clarify the terminology, not very sucessfully it seems

Anything can be a value. you could for example judge products by the number of animals killed in their production. With respect to any chosen one can ask the following question: are market-prices good approximants of that specific value? yes or no. many different answers can be given to this question.

Vimothey seems to choose optimal resource approximation as relevant value, and claims that markets give the best available approximations -- something we both disagree with.

Marx saw it as an intellectual challenge to show that in equilibrium capitalism market prices correspond to the value "average labour time". It is generally agreed that he failed to establish this correspondence.

Currently, there is a lot of work being done on changing legislation such that the value "environmental impact" is reflected in market prices.

 

[nomadologist]

I see what you mean by "value" now--you're using the technical economic term, not the common use one (which I thought vimothy was using). When I was saying value I meant basically "price" or "cost"

There's no need for markets to be "metaphysical" because they're abstract. Are math equations metaphysical simply because their "mathematical" nature cannot be accounted for with reference to a concept of "society"? No.

 

[nomadologist]

Currently, there is a lot of work being done on changing legislation such that the value "environmental impact" is reflected in market prices.

Exactly, and this is why I told VImothy I thought his view was too much of a reductionist stance. I definitely agree that prices can reflect social change or social conditions. But I don't think "markets" = "society" in any way shape or form.

 

[nomadologist]

Marx saw it as an intellectual challenge to show that in equilibrium capitalism market prices correspond to the value "average labour time". It is generally agreed that he failed to establish this correspondence.

Which is easy enough to see if you look at, say, a hand embroidered silk bag in Chinatown