Economics: Gold Standard, Silver Standard, Fiat, Miscellaneous?

Well, everything's value is certainly subjective, I'll grant you that. But if a guy sells a car for 20 dollars, that doesn't make it a twenty dollar car. That just means that he was misinformed of the value of his car. There exists such a thing called fraud.

That doesn't mean that there's some abstract "intrinsic inherent value" thing going on, but it's "Less Wrong" (Snicker snicker) to say that the value of the car is more than 20 dollars than to say that it's twenty dollars. That is to say, the value of the car is only twenty dollars given certain arbitrary constraints of an uninformed seller or otherwise limited seller.

Ala, the aggregate of circumstances that could have resulted in transactions of the car are not represented by the actual transaction that took place. I think it is, indeed, possible to mislead people as to the value of things.

And that's not even getting started with regards to such things as buyers remorse!

I don't know that it's as accurate to say that value is subjective so much as it's self-referential. The value of gold is based on the value everyone else has of it, and the value everyone else has of it is based on the value of others. Recursive I guess?

edited 2nd Apr '11 7:28:56 PM by TheyCallMeTomu

Actually the Fed can make paper money it is not unconstitutional. There is nothing in the constitution regulating what material or manner of money the fed has to use. There is one for the states though.

Article 1 section 8

Article 1 Section 10

Notice it begins with NO STATE and the federal government is not noted in this particular section.

edited 2nd Apr '11 7:28:23 PM by TuefelHundenIV

Fraud has nothing to do with subjective value, since fraud is reneging on a contract (So to speak). If I sell you a "brand new watch" that breaks after a day because it is a cheap bootleg, the problem is that I lied about the properties of the watch, not that I changed the "intrinsic" value of it.

The market will eventually reach a point where the price doesn't fluctuate too much, which is about as close as there is to an "objective" price. The price of a gum ball is about 25 cents going by the gum ball machines. It isn't higher because other gum ball machines would undersell it, and it isn't lower because the profit wouldn't be high enough (presumably), so it stays at 25 cents. If it goes higher, it isn't the actual value because it isn't being bought (or at least, not as much as the cheaper 25 cent gum balls), and if it is lower it will be all gone relatively quickly and won't be restocked. It might go up or down in price over time, but it is unlikely to jump from "five cent gum" to "five hundred dollar gum" in a brief period of time barring currency manipulation or some disaster in the gum industry.

On that note, the value of the guy's car is the value of the guy's car.

"deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage"

Well, if I wanted to go metaphysics here, I could argue that the value of his car was 20 dollars at the time he sold it, but that was merely a temporal part of the net existence of his car, and at other times, it is worth more.

It's more precise to say that he perceived that the car was worth twenty dollars, and that that perception may have been the result of deceit on the part of the individual who managed to convince him of such. In other words, even if the "value" of the car is twenty dollars, that doesn't set its market value to 20 dollars.

edited 2nd Apr '11 8:05:00 PM by TheyCallMeTomu

If someone else managed to convince him that his car was worth 20 dollars (and they didn't do it through blatant lies and abuse of their position, such as a mechanic saying it would no longer drive and offered twenty bucks for it as "scrap parts"), then that is what it is worth. Mind, cars in general will never reach that kind of price because the cost of production is higher, and shmucks who sell so low will never be able to keep up with the demand (which would rise to insane degrees even as the seller's supply increased)

As I understand it, that's the Austrian school of thought, but I'm pretty sure that's not universally accepted. We rather discussed this in my Industrial Organization class. I wish I could remember the specific theories on the nature of value. We talked about it in the context of whether or not non-informational advertising actually changed the net value of an object.

Personally, I'd wager no. Utility may well be something rather undefinable and subjective, but snake oil is snake oil.

This is exactly what happens in the stock market every day. Whenever someone underprice something, there is a chance for outsiders to cash in through arbitrage. The market balance is restored, the wise arbitrageur profits, and the only one to lose anything at all is the idiot who underprices his assets.

Marginalism, subjectivity of value, etc are not exclusively Austrian views. Yes, the Austrian school developed both, but that was around a hundred and fifty years ago when the Austrian school was definitively a mainstream school. Keynesians and Neoclassicalists both agree on this. The only economic school I can think of offhand that doesn't believe this would be the Marxists.

I think that we agree on the general concept that worth is subjective. I think that I'm just cautious of saying "Why yes, value is entirely subjective" because I think that there is such a thing as failing to understand the worth of something. I mean, if I give you a 1900 coin, not realizing it's a 1900 coin, and you don't realize it, so there's no deceit, it doesn't mean that that transaction is indicative of the value of the coin.

It might be better said that "value" can be used either as an abstraction of a number of different potential transactions, or can be used to refer to a specific transaction. There's no doubt that, held exclusively in the context of the transaction with the guy and the car above, the car is worth twenty dollars. But it's not just that it's worth twenty dollars-it's that there's a reason it was worth twenty dollars.

And I'm still skeptical of the idea that Coca Cola ads make Coca Cola generate more net utility, which is what it sounds like you're suggesting by saying "The value is what he paid for it!" That's a point I know that is not universally agreed upon, at least, because we specifically went over it, and I was uncertain as to what my position was at the time. It's practically a koan.

The value of the car is what he is willing to sell it for and what someone is willing to buy it for. The car is worth 20$ because it is worth 20$

If you severely undersell something, then it will be obvious when it is resold at a higher price (or when you discover other, identical items being sold for much more). It doesn't give the item some mystical "value", it just means you are a chump for having effectively ripped yourself off.

You're severely oversimplifying the concept of value here.

To be frank, I believe there is more utility to be gained by actually improving a product, compared to simply flushing money into PR, even if the net effect this has on market price is identical.

That being said though, it can be said that value and utility are unrelated concepts.

edited 2nd Apr '11 8:49:02 PM by TheyCallMeTomu

PR results in higher demand but no rise in supply, resulting in a rise in prices. It isn't voodoo.

The Spanish banking system kind of got screwed over by that already. During the bubble, they made a lot of loans backed with land as collateral, and now the land is worthless.

A higher demand doesn't necessarily mean a higher level of utility, if the public is convinced that an item has a higher utility than it actually has.

If that makes me a Marxist, alas, but it's absurd to think that a Coca Cola ad with a sexy woman somehow makes the real utility of Coca Cola rise, and that's the interpretation to "Value is the Demand Curve End of Story" in any sense where utility even factors into our models.

Once, I bought The Alleged Car for $100, roughly the expenses needed for re-registering it as my car.

That's because a friend had just replaced his "prehistoric" beater with a "medieval" one: (Early 80s diesel WV for an early 90s diesel WV.) He basically needed to get rid of the old beater. For him, the old beater was worth *nothing* anymore.

Honestly that was perhaps a foolish move on the part of your friend. Everything has a value to somebody.

edited 3rd Apr '11 2:55:02 PM by tnu1138

An 1984 WV in 2006? It wasn't worth a dime.

He had replaced it with a 1993 WV that had cost him the staggering amount of 300 bucks. The old beater had no value to him anymore. It only meant a wasted parking lot and taxes. Getting the beater off him was almost favor (well, and I was broke and needed a car).

edited 3rd Apr '11 2:54:46 PM by SavageHeathen

It wasn't worth a dime to some people. There are collectors and investors who would be willing to pay a fair sum for that sort of junk.

You know that now. We were 18 and 19 at the time, so we didn't.

Which goes to show that the estimated value of the vehicle to the two of you was not indicative of the value to the market as a whole, and was not necessarily reflective of the true utility that could theoretically be provided by said vehicle.

and i'm twenty so I have a head start on you how old are you anyway man?

He's older than time itself.

And unless we're managing a time-based economy, p'rhaps this'd be better suited to PMs.

Time-based economy, incidentally, would be the result of a literal-minded human reading "time is money".

Time based economy is effectively what a labor based economy is >_>

See the Ithaca Hours in Wikipedia for a time based economy.

Now I'm 23.

edited 3rd Apr '11 3:54:35 PM by SavageHeathen