Friday, November 13, 2015

Value, Again

I addressed value subjectivism awhile back in relation to Bitcoin, but I'm going to do so again, apropos of Steven Horwitz's recent takedown of the "Labor Theory of Value" and Kevin Carson's longstanding "subjective recasting" of the LTV.

Horwitz's treatment of LTV covers the basics, then goes off the rails into a set of objectifications that are opposite from, but just as problematic as those of LTV's defenders:

[T]he real Copernican revolution in economics was how the subjective theory of value related to the value of labor. Rather than seeing the value of outputs being determined by the value of the inputs like labor, the subjective theory of value showed that it's the other way around: the value of inputs like labor were determined by the value of the outputs they helped to produce.
Well, no. The value of labor is determined at the point of exchange of labor for something else. If I work for you for a dollar an hour, it means that that dollar is worth more to me than that hour and that that hour is worth more to you than that dollar at the point of exchange. And that's all it means. You might or might not make an eventual profit on my labor; your educated guess that you will do so affects your subjective valuation of my labor when we're dealing, but it doesn't magically make that valuation objective. Furthermore, the values of the outputs are also subjective.

Meanwhile, back at the ranch, Carson writes:

[T]he expenditure of labor is an absolute cost, regardless of the quantity available. Or to be more exact, the opportunity cost of an expenditure of labor is not simply the alternative uses of labor, but non-labor. The laborer is allocating his time, not just between competing forms of labor, but also between labor and non-labor.

It seems like Carson is being a little tricky here, substituting the word "absolute" for the word "objective." While it's true that labor involves the allocation of a resource that is scarce in an absolute respect (everyone has exactly the same amount of time within a given timeframe), that doesn't make the value of said time either absolute or objective. In fact, it is highly subjective.

If I can spend an hour working for you, or working for myself, or sleeping, or engaged in some kind of recreational activity, the value of that time for any of those uses is not absolute or objective. It is a matter of my subjective preferences. Maybe you're offering me a dollar for that time; maybe I know I could make two dollars doing something for myself instead of for you, or maybe I just like working for myself enough to be willing to do it for less than I'd demand to work for you. Maybe I'm tired and getting some sleep is worth more to me right now than a dollar or two dollars; likewise, maybe I want to go to the park and throw a football around with a friend and that's worth more to me right now than the dollar, or the two dollars, or the sleep. And maybe someone else, faced with the same choices, would value those options differently.

Quick note: "Objective" is not the same thing as "rational," nor is "subjective" the same thing as "irrational." Just thought I'd throw that in there for those of you who might assume otherwise. Feel free to look the terms up.

In some correspondence on this subject, Sheldon Richman brings up a distinction between "use value" and "exchange value." I don't find that distinction very useful. The only real way to determine "use" value -- how "useful" something is -- is to consider what the person possessing it would be willing to exchange it for.

Say I have a cow that I milk every morning. It has "use value" to me. Now you come along and offer me $1000 for the cow. Whether I accept or refuse the offer,  its "use value" to me is clearly the same as its "exchange value" to me. If I accept the offer, the cow's "use value" and "exchange value" -- to me -- were both "less than $1000." If I turn down the offer, the cow's "use value" and "exchange value" -- to me -- were both "more than $1000."

And there's no real way to make that value "objective." It's possible that with that $1000, I could have bought more milk than the cow would have produced over the rest of its life. But maybe I prefer milking the cow every morning to going to the store for milk every day. Or maybe I like the taste of fresh whole milk straight from the cow better than I like the taste of homogenized milk from a plastic jug. There could be any number of reasons for my decision that cannot be objectively quantified.

The value of of good or service is the value that someone who has that good/can provide that service or wants that good/service places on good or service. And that's all the value is. Factors that might contribute to someone's valuation are not always objective themselves, and never make the ultimate valuation objective.



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