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More Nonsense Inspired, Incidentally, By Apple

No, this isn’t another post having a go at Apple, or Steve Jobs, or Mac Users, or any of that. Instead, we’re looking at an article in The Daily Telegraph and some twat called Michael Gartenberg, who is an “analyst” and this glorious gem of “analysis”-

Michael Gartenberg, an analyst at Gartner, says: “Consumers have shown that the price they are prepared to pay is not associated with [manufacturing costs] but with the perception of value, and the way Apple products are perceived, they have an extraordinarily high value.”

And how else, precisely, would you expect buyers in a market to judge value, Mr Gartenberg? Sigh.

It is astonishing how pervasive, in this day and age, thinking based on the Labour Theory Of Value is. That despite the fact that nobody of any significance in economics has (at least supposedly) believed in it since the 1860s and the so-called “Marginal Revolution” when economists realised that economic value, and thus prices, are not set by some deterministic function of a measurable quantity- such as labour, or “costs”- but are subjective and whimsical. You can’t calculate what a price should be, only explore the subjective perceptions of value in the market place empirically and, constantly, aware that those values are in constant flux. But probably the most generalised economic error in our society is this belief that prices “should” be something and much head scratching and conspiracy theorising when they turn out to be something other than this value they “should” be.

So here we have our “analyst” presenting the high perceived value of Apple goods to their customers as something unusual, as if it’s something special to Apple. Instead, it is how all prices work. Sigh. Again.

So okay, you can forgive ordinary folks who aren’t interested in economics not knowing this. You maybe can’t forgive a State that crams them into immiserating schools for years on end and never teaches them it unless they take a special economics course, but that’s another matter. But a market analyst ought to know it. Officially, only two economically interested groups still believe in the Labour Theory Of Value; traditionalist Marxists (because Marxist eonomic theory is entirely derived from the LTV, via the vastly overrated Adam Smith and David Ricardo). There’s also a group of pseudo-libertarian entryists calling themselves the libertarian “left”, led by a gurning jester called Kevin Carson, who believe in it too, but they are best ignored. The only other significant group (to us at least) still trapped in a swirling morass of nineteenth century value theory are the Georgists, who believe that all prices are a function of the price of land, which is Ricardo’s fault again. But you can’t really blame him in that he died a very long time ago, even if you can blame people who haven’t read any books on economics published since.

So, nobody significant believes in Labour (or Land) theories of value, not in the mainstream anyway. Free marketeers don’t. Monetarists don’t. Even Keynesians don’t. But presumptions about prices which contain an implicit labour theory are widespread and routinely communicated by quotes such as the one above. And this is pernicious.

It leads people to believe there is a “correct price”, and thus if the price is something else, something must be wrong with the Universe, or at least with the economy. It is because the LTV gets the value “chain” the wrong way around. It traces economic value from the beginning of production to the end (the good in the shop) trying to add all the producers’ wages up to sum to a final price. If you do that, it then seems that the “capitalists”, taking a little money from each “worker” at each stage, are stealing bread from their mouths, which is why Marx used it of course. You think, “if we could take the capitalists out of the picture, all the workers would get the money they rightfully deserve.” (The Georgist makes the same argument, but with “rentiers” instead of “capitalists”).

But the chain of prices works the other way. The final value of the good- determined subjectively at the point and moment of sale- defines the value of the labour. If you produce a high value good, your wages are higher than if you produce a lower valued good. It is very clear to see this if one is a one-man business, like what I am. I draw pictures for a living, and sell them in various ways. One way is by subscriptions on a website, but another is to sell them direct to a customer. And when your personal economics work this way, it is very very clear to see there is no “wage” driving the final value. If I draw a picture and it took me ten hours, and it is subjectively perceived to be worth $200 to some particular customer, my “wage” was, in retrospect, $20 per hour. But if I could only find somebody who thinks it is worth $50, my “wage” was $5 per hour. And if a rentier wants to rent me a studio for $400/month, but my income (from those final prices) can only support $200/month, then again he has to ultimately drop his price or not rent the studio. Production costs do not generate prices. Prices control production costs, be they labour or land or any other Damned Thing.

So, while it may be fun to describe Apple products as “over priced”, that isn’t true. There is no such thing. All one can say is, “well, I would not pay that price”, because an iPad (or whatever) does not have that subjective value to me, and me alone. I cannot, under economic theory say, for instance, “Devil’s Kitchen, you should not buy a Mac, it is overpriced”. All I can say is, “I would not buy one at that price”. But who knows, if Apple made it more valuable to me personally, like putting some porn on it or something, maybe now it would have that value. We cannot say until the moment of transaction occurs. Should I buy, or should I not? Nobody knows, least of all Michael Gartenberg.


Just before posting, I just thought I’d add, that the way the Marxists (and Carsonites) get out of the clear problem demonstrated by my “selling pictures” example is to talk about “commodities”. The idea is that the LTV applies to large markets of fungible goods- to quote Marx from Das Kapital-

A given commodity, e.g., a quarter of wheat is exchanged for x blacking, y silk, or z gold, &c

-and since these goods seem to have an “average” price which is metastable, they can be calculated from an averaged labour value. Because Marxism is a theory of the days of mass fungible employment- hordes of identikit workers labouring in the dark satanic mills, indistinguishable economically from one another- it seems naively plausible. Of course the problem arises that one cannot decide what is a commodity and what isn’t; we might have “a quarter of wheat is exchanged for x naked Wonder Woman pictures, y bespoke walking sticks, and z performances by The Beatles” and then we see quite clearly that the “commodity” workaround doesn’t get us anywhere at all.


  1. Laird says:

    Very well said. But I suspect you’re preaching to the choir here.

  2. Ian B says:

    Well, maybe I am Laird, and that sometimes puts me off posting because I imagine everyone reading the thing and saying, “Well helloooo Captain Obvious”. But the way I look at it is there are all sorts of libertarians and casual readers, and some of them might find it useful and, if there hadn’t been postings on blogs by the likes of Paul Marks stating the basics when I was a n00b, maybe I never would have joined the choir at all. This isn’t an exclusive club. It’s also about outreach, isn’t it?

  3. Frank Davis says:

    I agree with almost everything you say, particularly how Marxists use the Labour Theory of Value to claim that capitalists are stealing from workers.

    I also agree that in the case of something like a work of art, the beauty (i.e. value) is in the eye of the beholder (and potential buyer). In this sense the Marginalists were right about how prices are formed. They are, as you put it, “subjective and whimsical.”

    But personally I don’t think that’s the end of the story. In Idle Theory I divide goods into “useful tools” and “luxuries and amusements”. The former generate idle time, and the latter consume it. An example of a “useful tool” might be an axe which is used to chop down trees. The axe-maker spends, let us say, C amount of time making the axe. But the value of the axe to the woodcutter, V, is the amount of time the axe saves him cutting down trees (because without one it would take a lot longer). And that also is a measurable amount of time. And there’s nothing in the least bit subjective or whimsical about it. The woodcutter is not interested in how mice and shiny the axe is, or whether people will envy him for having one, or anything like that. And assuming V is greater than C, the minimum price at which the axe will be exchanged will be C (because anything lower will mean a time loss to the seller), and the maximum price will be V (because anything higher will mean a time loss to the buyer). When the price is somewhere between V and C, both buyer and seller gain time (i.e. profit) from the transaction.

    This is neither a Smith/Ricardo/Marx theory of value, nor a subjectivist/marginalist Jevons-type theory of value, but an entirely new one (I believe). But it really only applies to “useful (idleness-increasing) tools” and not to “luxuries and amusements” like paintings or music.

    OT, but have any of the physicists on Counting Cats taken a look at my debunking of HAARP?

  4. Sam Duncan says:

    It’s such a seductive idea. I mean, I’ve always found it hard to understand why it persisted for so long without anyone even thinking of refutation, since subjective value has always seemed obvious to me, but even I can look at an iPod Shuffle and get genuinely annoyed that people can’t see that it isn’t worth what they charge for it. What’s wrong with these people?

    Well, it is to them. They want that shiny pink anodized aluminium, the white headphones, and the voice that cuts in to tell you what you aren’t listening to because the voice has cut in over it. And they’re prepared to pay for it, even at the cost of functionality and capacity. Chacun à son goût.

    I’ve never understood this left-libertarian thing. It’s like being a Jewish Nazi, or a coalmining Greenist seal-clubber. What I mean is, you could twist and bend those ideologies so you’d kind of fit in a way, keeping the bits you liked and discarding the bits you didn’t, but they’d end up as something unrecognisable.

    “if Apple made it more valuable to me personally, like putting some porn on it or something, maybe now it would have that value”

    I can see it now… “2.4GHz Intel not so muCore i5 processor, 4Gb RAM, and a massive 1.5Tb hard drive preloaded with 750Gb of quality filth and depravity!” It’d save time, I can see that…

    Marx really was a berk, wasn’t he? What happens if there’s a sudden fashionable craze for either gold or silk in a particular place? The same amount is being produced, via the same expended labour, but suddenly a quarter of wheat is exchanged for x/2 silk, or y/3 gold in that place, but still only x silk or y gold elsewhere. And if that can happen in different continents, it can happen in different countries, cities, neighbourhoods, streets, families, right down to individual people.

    Of course, socialists have never cared much for people. “The People”, yes – whatever that is – but actual everyday farty people, with their irksome free will, capricious desires, and sentimental ideas… well, they just get in the way, don’t they?

  5. Sam Duncan says:

    Where’d that “not so mu” come from?

  6. Sam Duncan says:

    The value of the time saved isn’t objectively measurable, Frank. The woodcutter might use the axe to cut down more trees (as assumed by most of these kinds of theory), giving him a measurably greater income, but he might use it to spend at home with his family, learn another useful trade which is more remunarative than cutting down trees but less conducive to full-time employment, or to get himself a bit on the side during “work” hours when the missus isn’t looking. He might even think to himself, “Cutting down more trees in the same amount of time? That means lugging more bloody logs to the sawmill, and it won’t make that any easier. Bugger that for a lark; I’ll keep my old one, thanks.” We might think that’s a rather defeatist line to take, but that’s just the point: whatever he does, it’s entirely subjective to him. Thus the value of the tool that gives him that extra time is subjective.

  7. Frank Davis says:

    The value of the time saved isn’t objectively measurable, Frank.

    But the duration of it is objectively measurable – with a clock. And the idle time it provides is the foundation of value in the subjective sense, because it’s only in their idle time that anyone can value things and make choices. No idle time = no choice.

  8. Ian B says:

    I like the idle time idea, as an explanatory tool. But I don’t think it provides a theory of value. The problem is what Sam has pointed out. It’s like this, we have to ask, “why is this guy cutting trees down?”. He might want the wood to make chairs. He might want the clearing for a pleasure garden. He might just hate trees. But the value of clearing the trees is the problem to explain. How much idle time he can achieve depends on what he needs to do with his time, which depends on satisfying his desires. He can gain idle time by not cutting the trees down at all, but then he loses whatever he wanted from the trees. But whatever that is, it is a subjective value.

    I can have more idle time if I’m prepared to have less stuff, by working less to gain it. So although the time is measurable objectively, the value of the stuff I sacrifice time for isn’t measurable objectively.

    So to me, Idle Time resolves to a different formulation of standard economics on Opportunity Cost. So as I say, I like it as a way of explaining the purpose of markets- to get stuff, including leisure that you desire, as opposed to Calvinist/LTV ideas of work as the end in itself. But it isn’t a theory of value.

  9. Frank Davis says:

    The world of Idle Theory is one that is bounded at its bottom by Zero Idleness and zero freedom of choice, and its top by Perfect or Unit Idleness and complete freedom of choice. A zero idleness world is one in which someone would have to work continuously just to stay alive, and therefore would not be free to do anything else. There would not only be no freedom of choice in such a world, but no luxuries or amusements, or art or music, or invention, or indeed even thought (of a philosophical and enquiring kind).

    Until relatively recently, humanity spent most of its time not far from this Zero Idleness floor. People spent pretty much all their time looking for food, and constructing shelters whose thermal insulation reduced their heat losses and so reduced their need for food, and they warmed them with wood fires (which had the same effect). The woodcutter I am thinking about is confronting the necessities of life, and the wood he cuts will either go into repairing his shelter or will be used to heat it. He wouldn’t dream of making chairs or a pleasure garden. He would have no conception of such things, because they are things which only idle people with plenty of idle time can make and enjoy, and he’s not one of them. The only value to him of food, wood, axes, and anything else is the idle time they afford him, and he sees precious little of it.

    The rather grim view of life in Idle Theory is one of humanity on the brink of Zero Idleness extinction, and struggling with wood and fires and axes and huts to escape that looming extinction.

    By contrast, the subjectivist/marginalist view of life is really one of near-complete freedom and leisure. It assumes a world in which people want to make chairs, or pleasure gardens, or who don’t like trees. It’s a world in which survival isn’t a problem. It’s a world which is one (in Idle Theory’s terms) of near-perfect idleness. It’s a subjective world because it’s one in which people can think and make choices and construct sets of preferences.

    But it’s also a world which could vanish overnight.

    In this respect, even though I don’t agree with their economic analyses, Smith and Ricardo and Marx seem to me to have had their feet far more firmly planted in economic reality (a Malthusian struggle for existence – Malthus being an economic philosopher, of course) than their subjectivist descendants (another chocolate, please). All I think that the subjectivists have succeeded in doing has been to muddy the water and render objective economic analysis impossible.

    My complaint about your economic analysis is that it’s one which assumes plenty of idle time (and perhaps even that life is ALL idle time), so that leisure and freedom are regarded as given, and in which almost all goods on sale are luxuries and amusements, and from which all necessity has been banished, and economic debate boils down to arguing over whether to have chocolate mint truffles or lemon meringue tarte for dessert. It’s an analysis that is true as far as it goes, but it’s the economic analysis of a temporary situation. We’ve never had it so good. We may not always have it so good. And we ought to have an economic understanding which includes a not-so-good situation.

  10. Ian B says:

    Frank, that’s a strange mischaracterisation and it suggests to me that you haven’t really understood marginal utility. It’s about applying scarce time to scarce goods, and how one chooses how to use that time (“Opportunity Cost”).

    To take one example from your comment, it’s about whether you’d prefer to sit on a chair, or prefer to sit on the floor and spend the time you would have used making a chair growing more vegetables. Leisure in those terms is itself a good, which you can have at the expense of neither the chair nor the vegetables.

    The problem with trying to use “idle time” the way you are doing is you’re not addressing the hard part of the question, which is what counts as an adequate subsistence. Having an iPad isn’t a necessity in the “or you will die without one” sense, but many people would rather work to buy one, than have the leisure and not have an iPad.

    Standard economic analysis applies as much to the struggling subsistence farmer as to the rich man in a mansion. Your characterisation borders on the perverse.

  11. Frank Davis says:

    The problem with trying to use “idle time” the way you are doing is you’re not addressing the hard part of the question, which is what counts as an adequate subsistence.

    What is “adequate” is what survives. That point is reached when foregoing something doesn’t increase idleness, but decreases it. So someone might forego clothing, but find that they instead have to eat more food to compensate.

    Frank, that’s a strange mischaracterisation and it suggests to me that you haven’t really understood marginal utility. It’s about applying scarce time to scarce goods, and how one chooses how to use that time (”Opportunity Cost”).

    It may well be a mischaracterisation, but in my economic textbooks the only thing that is “scarce” about time is that we only get one day of it per day. And that’s not at all what I mean by scarcity of time, because I divide time into busy and idle time, and idle time is what’s scarce.

    I’ve come at economics by developing my own ideas rather than by studying the existing literature. I only started reading the literature once I’d developed my own ideas. And found immediately that I rejected not only Adam Smith and Marx, but also the entire marginalist/subjectivist school as well.

    There’s nothing wrong with doing this. There’s no obligation upon anyone to start from the reigning (subjectivist) orthodoxy. But it does make it difficult to communicate between orthodoxies, because there’s no shared language. But that applies as much to Marxists (or any other unorthodox economic thinkers) as it does to me.

  12. Ian B says:

    Frank, the problem with this approach of not reading the books is that you haven’t understood the questions that need answering. It’s like me coming at subatomic physics without reading all that quantum mechanics crap, and thus not understanding why “light is a wave” isn’t a good theory.

    Look at it this way-

    What is “adequate” is what survives.

    A bowl of gruel, an animal skin, and a hole in the ground. Now, you’ve got to figure out why people are trading “idle time” for chicken chow mein, trousers and a brick house, and why those rather than nut roast, a skirt and a caravan. That’s the problem.

  13. Frank Davis says:

    It’s like me coming at subatomic physics without reading all that quantum mechanics crap,

    I dearly wish economics was as rational as subatomic physics. But it’s not. And that’s why there is such a plurality of economic opinions. And always will be, until economics becomes as rational a discipline as physics. And maybe not even then.

    you’ve got to figure out why people are trading “idle time” for chicken chow mein, trousers and a brick house, and why those rather than nut roast, a skirt and a caravan. That’s the problem.

    Assuming that the former are useful tools, and the latter amusements, then: Chicken chow mein, trousers and a brick house, all these generate idle time. Nut roast, a skirt and a caravan, all these use up idle time. It’s not one or the other, but both at the same time. If we have no idle time, then we can have no luxuries or amusements either. Because these luxuries are the product of idle time. They are the kinds of things that people with plenty of idle time can afford to make and enjoy.

    Let me give an example. Suppose that in condition A, a man spends all day gathering food and water and wood and whatever else he needs to survive for exactly one more day. He lives a life of zero idleness. If someone comes along and gives him an axe, he finds that he can cut wood far more quickly then he could before, and that he now (call it condition B) has several hours of idle time each day, during which he sits around doing nothing. But then, after a while, he decides he’d like a guitar to play in his idle hours. So he makes one, and during his idle hours each day, he plays his guitar (Condition C). Now, if instead of somebody coming along with an axe while he was in condition A, they came along with a guitar, it would have been no use to him at all, because he would have had no idle time in which to play it. He can’t go from from condition A to condition C and miss out condition B. He has to have idle time first, whatever he may want to do. If he has no idle time, he can do nothing. So it’s not a choice of idle time or guitar.

  14. Tim Newman says:

    It’s even worse than that. Even if we supposed the Labour Theory of Value could be applied, you’d at least need to incorporate R&D costs into the final price. This dickhead seems to think manufacturing is the only cost input.

  15. Ian B says:

    Frank, you’re just describing “opportunity cost” by a roundabout means and eccentric terminology.

    I understand the desire to think for oneself and not be influenced by others, I do that too. But it runs a great danger of reinventing the wheel, and ending up talking a language that merely confuses debate since you’re not using the common jargon. It’s like somebody thinking up their own physics, and they describe motion based on a property called Notmovingness, and then eventually after much confusion, the physicists say, “oh, you mean inertia!” and our original thinker has just discovered Newton’s Laws but couched in odd terminology and framed in terms of Inertia instead of Mass, as a basic unit.

    So, your “idle time” is just what everybody else calls “opportunity cost”; it’s the time and effort Robinson Crusoe could spend on increasing production, or sitting playing the guitar, or writing a journal, or anything else. That’s the very thing that subjective value theory understands, because marginal utility describes Robinson’s decision making process as to whether cutting down the trees or not has the greater utility. If he wants to cut down the trees- if he desires to- the axe has a certain utility and therefore a price he’ll pay for it. The guitar hasn’t got any utility because he hasn’t got time to play it. But if he’s planning to cut down the trees and have time later to play the guitar, it has. And so on.

    From your earlier bizarre characterisation of marginal utility and failure to recognise the correspondence between it and your own theory, I think you haven’t really understood it properly.

  16. Ian B says:

    Tim: hadn’t noticed that. Well spotted!

  17. myqui says:

    Ian B, your 3.23am post is bang on. It feels to me that there was the pre-internet me, who, I was certain, was very knowledgeable and the post-internet me who has never felt quite so ignorant before in all my life. An occasional foray, by yourself and fellow posters, into Captain Obvious territory is, I am sure, doing wonderful things for many other n00bs, not just me

  18. Frank Davis says:

    But it runs a great danger of reinventing the wheel,

    I’ve lost count of the number of times I’ve been accused of that. It’s become something of a badge of honour.

    and ending up talking a language that merely confuses debate since you’re not using the common jargon.

    If, of course, I actually am talking about the same thing.

    So, your “idle time” is just what everybody else calls “opportunity cost”

    No. That’s just your way of characterising what I think, in order to fit it into your frame of reference. And that’s just what you were accusing me of doing a few comments earlier (and were quite rightly accusing me of doing, because I was translating what you were saying back into my own terminology).

    For I don’t agree that it’s as if I’ve thought of something called Notmovingness instead of inertia. If I had, I would see it immediately. For it would be essentially no different from French people calling bread pain and Czechs calling it chléb, all of which confuses debate no end, particularly now that everyone speaks Filipino, and knows that it’s really tinapay that they’re talking about.

    Our debate has rapidly become something comparable to the debate between, say, an early Christian Donatist and an early Christian Docetist about the nature of God or the Trinity or something. Each tries to understand the other using his own terms, and fails.

    So let it end there. There is nothing further to be said. We will only go round and round in circles. Or rather, I should say, bilogs.

  19. ian says:

    The Labour Theory of Value treats cost of production as if it was equivalent to value. That’s why the Soviet Union produced the Lada and even our strangulated version of a market produced the Mini and the Cortina. They had no mechanism available to tell them ‘bugger the cost of production, it isn’t worth it!’

    I have a problem nevertheless with the concept of value being set by what people are willing to pay, because so much of that is spun out of thin air – as with iPods etc. I don’t have an answer except not buying an iAnything, but I can never know for sure that something else I’m buying isn’t equally 90% hype and 10% production.

    Psychologically that disturbs me, but I don’t know why, especially since as an artist I’m in a business that creates value pretty much out of nothing! There is a production cost of course, even in art, which is why I can’t afford to use Golden brand acrylics because the value of my work at the moment isn’t high enough to cover my costs.

  20. Ian B says:

    Ian, it’s that instinctive emotional feeling that costs ought to be proportionate to some measurable tangible thing which is the problem. Pure subjectivism just doesn’t *feel* right, even though it is, that’s why people keep trying to link value to labour, or land, or Frank’s “idle time”.

    The purist answer is that value is generated by an unimaginably complex function in the human mind incorporating numerous variables. In theory, if we could create a perfect model of a specific human mind and precisely measure all the inputs we could predict the values it will arrive at, this hugely complex function of “want to be fashionable-ness” and “I feel like a cheese sandwich right now-ness” and so on and “I like pictures of country scenes-ness” and so on. To discover how every value has arisen in the economy, you’d need a perfect model of every mind in that economy.

    But we can’t do that, and it would also be very strange if we could (in some way, if scientists ever can perfectly replicate such a mind, it would surely make the original person feel eerily dehumanised). For all practical purposes, for the conceivable future, the generation of value is an unknown, impenetrable process locked within skulls, which we can describe by the term “subjective”.

  21. NickM says:

    I’d take it further. I agree with your “wants” but the same applies to “needs”. You take the car into the garage and you need a new tyre but they don’t have ‘em. But they can knock you out a half-price gearbox. Well, that’s no use. It might be better “value” but it is no use. What value a vial of insulin?

  22. Hye says:

    In defense of Gartenberg, remember that he was speaking to a journalist so presumably he was having to explain very basic concepts indeed.

  23. ian says:

    We also have to remember that the psychological unease we experience when we know things are being sold for some exorbitant (whatever your value of exorbitant) multiples of the cost of production, is ALSO a part of the process that sets the “real” value.

    On a related tack, I don’t really understand the idea of a gold standard. In the event of some major disaster (for example the situation in Speilberg’s ‘Falling Skies’) gold is not a lot of use, but antibiotics would have a huge value. It always seems to me that the gold standard depends as much on a mystical reverence for the shiny stuff as it does on any use it may have as a means of exchange. This seems to be perilously close to the idea that gold per se has an intrinsic value, whereas if I understand your argument correctly you are saying effectively that value comes from context.

  24. Sam Duncan says:

    Up to a point, ian. Aren’t you mistaking “real value” for price? The price isn’t the “real” or “correct” value. Almost by definition, it isn’t anyone’s exact estimation of value at all: it’s higher than the value the vendor places on the item, and lower than any purchaser does. Certainly, if too many people think the price is too high – that is, they value having the money in their pockets more than owning the item – then the vendor will have to consider lowering it.

    The closest I’d come to accepting “intrinsic” value would be to say that some things have greater capacity to be widely valued by humans than others. Gold is easily worked, fairly unmistakeable, and, unlike other metals, doesn’t tarnish. That makes it widely valued as a medium of exchange; there’s nothing particularly mystical about it. But it’s not intrinsically valuable, so you’re absolutely right:if you were alone on a desert island, for another example, a ton of bullion would have no value to you at all (unless it was your mother’s, who you narrowly failed to save from the shipwreck, or something; then you might want to keep hold of it – that is, you’d value it). Antibiotics, by the same token, are obviously widely valued for their inherent properties, but that value still isn’t intrinsic: they would have none – except perhaps as an exchange medium – to someone with natural immunity to whatever infection they cure.

  25. NickM says:

    Your desert Island example could almost be from “Robinson Crusoe”. He takes it anyway though. Antibiotics have a shelf-life and to someone allergic to penicillin hat drug has a negative value personally though not as a medium of exchange or if for example his or her child (who isn’t allergic) is sick with a disease penicillin is ideal to treat. It’s all very tricky.

    Personally I regard the Gold Standard as a form of fiat money. *Ducks and covers…* Any essentially permanent commodity could do the same job. Indeed silver frequently has. The key point is it has to be something that can be assayed. Diamonds wouldn’t do – how do you rate the 4Cs relative to each other? and as everyone who hasn’t bought crap jewellery from knows a 1C diamond is worth a shed load more than 1C of itty-bitty stones.

  26. Sam Duncan says:

    Good points, Nick, although you’re stretching the meaning of “fiat money” a bit. Assuming “the gold standard” to be paper based on 100% gold reserves, it’s fiduciary money. Which isn’t far off fiat (I think I’m right in saying that for a long time what we now call fiat money was considered a specialized form of fiduciary), but it’s not the same thing.

  27. ian says:

    Sam – I’ve never talked of price so no I’m not. I used the ” around real for a reason. Like t’other Ian I don’t think anything has a fixed value that results from labour input or anything else, hence my use of the words ‘”perilously close” when I talked of intrinsic value.

    That isn’t to say I don’t have views on how to value the labour input into a product, based in part on ideas of fairness, which won’t I suppose go down well here. As an example think of the worker paid 50p a pair to make some trainers in Mexico or Indonesia, that then sell for $120 in Los Angeles or London. I simply don’t believe that the effort put into creating the brand name justifies the huge mark up. Hence again just as I don’t buy iAnything, I don’t buy ‘swoosh’ either.

    That is my choice in what currently passes for a market. For me that choice is as much a moral one as economic. It is based on what I see as exploitation of vulnerable human beings – which I also believe to be a violation of the basic non-agression principles of libertarianism, because the choice offered to these workers is not a real choice but a forced one between starvation and extreme poverty.

    To return to Ian’s point back up the comment thread, this sort of choice is ALSO a part of that “unimaginably complex function in the human mind” which generates value.

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