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Post 0

Friday, September 30, 2011 - 8:07pmSanction this postReply
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Spoiler Alert: I'm going to post quotes from the book in order to get your reactions

Here's one:
Ricardo and Mill thought nothing was more important to economics than clarity on the meaning of value. ... There is little interest in the concept of value today (Sraffa 1926, 535) because the old controversies over its meaning have been buried by equating value with price or market value. The error in this practice is indicated by the fact that market value is a particular kind of value, a subdivision of value in general. Consequently, one cannot grasp the meaning of market value without first grasping, at least implicitly, the meaning of value (and market).(2)
--page 24

Ed


Post 1

Friday, September 30, 2011 - 8:12pmSanction this postReply
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The subjectivist ... expects economic activity to be chaotic and unintelligible and he expects economic knowledge to consist of abstractions cut off from reality (for example, modern model building). In an unusually explicit statement of this viewpoint, Buchanan says "Subjective economics [is] a means of imposing an intellectual order on apparent chaos" (1982, 16).(3)
--page 25

Ed


Post 2

Friday, September 30, 2011 - 8:20pmSanction this postReply
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In opposition to the intrinsicists, the subjectivists hold that no facts of reality cause value. Nothing in reality requires a man to value a house more than an ashtray. Because no facts of reality cause value, whatever people happen to value is arbitrary, and therefore beyond rational analysis or investigation--a view that often is held explicitly. Again, Mises (1966, 95) made the clearest statement: "the ultimate ends of human action are not open to examination from any absolute standard. Ultimate ends are ultimately given, they are purely subjective ..."
--page 30

Ed


Post 3

Friday, September 30, 2011 - 8:28pmSanction this postReply
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Modern economists take preferences as what they call "primitives" (Mandler 1999, 78). A primitive is a causal primary for which no explanation is required or can be offered. "We have to take human preferences as given" is the standard expression that sums up this viewpoint.(7) The consistent subjectivist view is that one's preference for a specific good or service is a simple, unanalyzable fact--an elemental starting point (Jevons 1871, pp. 45 and 65-66). Conceived in this way, preference has the fundamental characteristic of subjective value, that is, value as an emotion, and emotion as a phenomenon of consciousness independent of existence.
--page 30-1

Ed


Post 4

Friday, September 30, 2011 - 8:36pmSanction this postReply
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And this one is for Bill. It has to do with "economizing" -- a topic we earlier, but only briefly, discussed:

As an indication of the need for a new concept of value, consider what is probably the original economic action--economizing. To economize means to reduce one's use of a good or service by using it more carefully or by substituting an alternative. Why would someone do this? The intrinsicist would say that it is forced on the individual by reality, by something outside his control, perhaps by a crop failure. The subjectivist would say that it is his choice, that there is nothing to say beyond the fact that he chooses to use less, perhaps because he has lost his taste for the good.

Economics needs a theory of values--a theory of how economic values come into being and of what they consist--as grounding for its subject matter--so that we can understand economic actions such as economizing.
--page 31

Ed


Post 5

Friday, September 30, 2011 - 10:40pmSanction this postReply
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Post 2: In opposition to the intrinsicists, the subjectivists hold that no facts of reality cause value. Nothing in reality requires a man to value a house more than an ashtray.

I have not read the book, so I may misunderstand his use of the word "intrinsicist" but is it not true that intrinsic does not mean "objective." There are no intrinsic values for a human as all values are contextual against the standard of life.

I point out that a house is not intrinsically more valuable than an ashtray. I can show you whole neighborhoods in Detroit not more valuable, than say an ashtray from the estate of Ayn Rand (or John Kennedy, for that matter). (Use your browser to search "Sothebys ashtray" and "Christie's ashtray" and "Heritage Auctions ashtray." (The last brought me an Hermes signature piece.)


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Post 6

Saturday, October 1, 2011 - 8:32amSanction this postReply
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Mike,

I have not read the book, so I may misunderstand his use of the word "intrinsicist" but is it not true that intrinsic does not mean "objective." There are no intrinsic values for a human as all values are contextual against the standard of life.

Buechner mentions how early economists equated the terms "intrinsic" and "objective" -- and how that was wrong of them to do. Intrinsic values are postulated to reside within objects (in the environment) with no relation to the nature of man (the organism) and subjective values are postulated to reside within individuals (the organism) with no relation to the nature of the environment. Under intrinsicism, value is out there. Under subjectivism, value is in here. And under objectivism, value is in the metaphysical relation of man to reality (organism to environment).

Buechner comments that Marxist economics, with its labor theory of value, is the most consistently-intrinsic of the developed economic theories.


Ed

(Edited by Ed Thompson on 10/01, 8:43am)


Post 7

Sunday, October 2, 2011 - 8:17amSanction this postReply
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Sorry to misunderstand.  It is not like you to troll, but so far, you did not quote Buechner on "objective economics."  Maybe you are not that far along in the book yet.  I have to ask:  What would objectively cause a man to value an ashtray more than a house?  Must all rational men come to the same conclusion? 


Post 8

Sunday, October 2, 2011 - 5:27pmSanction this postReply
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Mike,

What would objectively cause a man to value an ashtray more than a house?
Rare circumstances. Circumstances so rare as to be unimportant. Like the lifeboat analogy in ethics, a situation where men want ashtrays more than houses is a bad starting point for developing a theory.


Must all rational men come to the same conclusion?
No. We have different projects. And we're different from each other, especially in our proportional adoption of reason as the guiding light and of man's life as the guiding standard for the choices that we make.


Ed

(Edited by Ed Thompson on 10/02, 5:29pm)


Post 9

Sunday, October 2, 2011 - 10:04pmSanction this postReply
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Here's another quote that might help, Mike:

Why do people economize? ... Economizing is a means of protecting one's economic welfare, of defending one's standard of living, of preserving ones' business, and more generally, of preserving one's life. Economizing makes no sense unless there is an end at stake, and the only end consistent with the existence of an economy is man's life.

Most economic values are objective; they have an inextricable, positive connection to human survival. That connection is what motivates most of the actions of most of the participants in a free economy.
--page 38

Ed


Post 10

Monday, October 3, 2011 - 6:43amSanction this postReply
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Re the ashtray versus house, clearly you are wrong. I cited the three largest auctioneers to show a market in rare ashtrays. (Also, I point out, stamps, coins, movie posters, comic books, and a million other objects less "useful" than a house.) I warrant that everyone bidding already has a home (house, apt, condo) of some kind and would rather have an ashtray than another house. Again, for the money, you could buy whole streets in Detroit or Cleveland. For the cost of a rare ashtray you could put a down payment on a nice house in a nice town. You could buy maybe a year of meat or five years of bread and a freezer to put it in. What would cause a man to value an ashtray more than food?

I get the point: in academic economics pure subjectivism leads to irrational predictions in preference. It is just that the example was flawed. In fact, I challenge you to come up with an absolute (context free) choice. Objectivism is not absolutism. Choices exist in context. That leads to this second, stronger point you make via Buechner:

Regardless of the choice, the goal is the same: improving one's condition, i.e., economizing. That supposes a goal of self-interest. Starting with that premise, classical economics (including Austrian), drifts off into subjectivism, allowing all choices to be equivalent, rather than explaining why people make bad choices.

Benjamin Franklin's "The Road to Wealth" was a first step along that path. We went down a sidetrack and never found the main line since.







Post 11

Monday, October 3, 2011 - 7:52amSanction this postReply
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In opposition to the intrinsicists, the subjectivists hold that no facts of reality cause value. Nothing in reality requires a man to value a house more than an ashtray. Because no facts of reality cause value, whatever people happen to value is arbitrary, and therefore beyond rational analysis or investigation--a view that often is held explicitly. Again, Mises (1966, 95) made the clearest statement: "the ultimate ends of human action are not open to examination from any absolute standard. Ultimate ends are ultimately given, they are purely subjective ..."
This is a distortion of the meaning of "subjective" as typically used in economics. It does not mean "subjective" in the sense Ayn Rand used it. In economics it means dependent on an individual's evaluation. "Personal" would be a good substitute. To illustrate, desiring food is "objective" in that it applies to all, but desiring liver or broccoli or wheat is "subjective."

Post 12

Wednesday, October 5, 2011 - 6:21amSanction this postReply
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Yesterday I learned Buechner uses the term "optional values" in his book. I suspect he uses it like Tara Smith did in Ayn Rand's Normative Ethics: The Virtuous Egoist. (You can use Amazon's "Look Inside" feature to see her meaning). If my suspicion is correct, then his "optional values" and other economists' "subjective values" (link) would have many, many common referents. So it seems he uses labels to give the appearance, of a big contrast, but it vanishes with a closer look.

Ed, I for one would appreciate your testing my suspicion.
(Edited by Merlin Jetton on 10/05, 12:18pm)


Post 13

Wednesday, October 5, 2011 - 3:37pmSanction this postReply
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Merlin,

Here are some quotes (p 35-7) which probably go a long way in answering your question:

Optional values are optional on the standard of the survival requirements of a rational being. Optional values are not required to live, but they do objectively support man's life. Indeed, mandatory values on the standard of man's life are unusual. They seem to be limited to medical treatments that are necessary to ameliorate a life-threatening disease or physical defect.
...
Nonobjective values are values based on something other than man's life (for example, unconsciousness, the environment, global warming, self-sacrifice, being green, the needs of others, God's will, nirvana, death), and/or values that orginate in something other than a rational grasp of the facts (for example, faith, hope, fear, self-hatred, fantasy, the opinion of others, arbitrary commitment).
...
Nonobjective values are not subjective in the philosophic sense. They are not phenomena of consciousness independent of existence. Even nonobjective values proceed from an evaluation by consciousness, of something, according to some standard. They are nonobjective because the evaluation is not based on reason and/or the standard is something other than man's life.

However, nonobjective values are subjective in the sense that the valuer does not know or care about the value's relation to reality.
...
The phenomenon of subjective value as proclaimed by the subjectivists does not exist. Nonobjective values are as close as men can come to pure subjectivity in their value choices. If subjective value means anything in reality, it means nonobjective value.
...
The modern concept of subjective value developed, in large part, as a reaction against and in answer to intrinsic value--a reaction that intrinsic value deserved. However, early advocates of subjective value had no concept of objective value, and therefore made no distinction between subjective value and objective value.
...
Not all economic values are objective. Some are nonobjective--they do not support human life and/or do not originate in a rational grasp of the facts, for example, charms, love potions, divining rods, religious articles--the things Menger called "imaginary goods" (1871, 53).
Ed


Post 14

Wednesday, October 5, 2011 - 8:53pmSanction this postReply
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Thanks, Ed. That was helpful. Still, the last two quotes don't quite jive. Menger was an "early advocate" and maybe he didn't distinguish between "subjective value" and "objective value" using those labels. However, the last quote says Menger made a distinction that looks very similar -- value of "imaginary goods" versus their opposite.
(Edited by Merlin Jetton on 10/06, 7:08am)


Post 15

Thursday, October 6, 2011 - 6:18amSanction this postReply
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Good point, Merlin.

Ed


Post 16

Friday, October 7, 2011 - 6:46amSanction this postReply
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Buechner in Objective Economics says: “Capitalism is a system of producer sovereignty. Usually changes in the structure of production do not originate with changes in consumers’ demand, but with changes in producers’ ideas” (244).

I haven't read the book, and Buechner may say more about this. I think capitalism involves both producer and consumer "sovereignty." I also suggest that qualitative changes originate more with changes in producers’ ideas and quantitative changes depend more on consumer demand. Consider, for example, smart phones such as the iPhone. The qualitative changes in wireless phones were driven by producers. The quantitative change in the structure of production -- to large scale manufacture of smart phones -- depended very much on consumer demand.

On the same topic Stephen Boydstun wrote here:
[T]he point of general economics by the Austrians—the particular point that consumer value is the value from which capital value is imputed—is not really at odds with Rand's display of capitalism in her novel notwithstanding the great emphasis in Atlas (and in Fountainhead) on the originative value intelligent producers bring to production. At time T3 present consumer demand will determine the previously indeterminate economic worth of capital outputs at the earlier time T2; that is Mises, Rothbard, et al. It is imagined future consumer demands at T3 (not past demands at T1), imagined future demands multiplied by probabilities, that drives development of new capital goods at T2. (It remains, of course, that capital goods in a developed market are possible at all only because consumers have saved something for lending, rather than consuming all their wealth.)

(Edited by Merlin Jetton on 10/07, 8:58am)


Post 17

Friday, October 7, 2011 - 10:18amSanction this postReply
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I also haven't read the book, but it seems from the quotes above that the author is to some extent conflating the concepts of methodological subjectivism (also known as 'methodological individualism' in Austrian parlance) and ethical subjectivism. 

The first concept is the important one for descriptive economics. 
Per Mises, "Value is not intrinsic, it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment. Neither is value in words and doctrines, it is reflected in human conduct. It is not what a man or groups of men say about value that counts, but how they act." (Human Action, p. 96)

That conception of subjective (or 'personal') value doesn't negate the fact there are certain things that are better for a certain man's life and flourishing in certain situations - those are what we would call the objective values.  They are context-dependent, not intrinsic to the things in themselves, but their relation to acting man is still a fundamental and identifiable aspect of objective reality.  As Rand says, "the concept 'value' presupposes the question, "Of value to whom, and for what?"

Also per Rand, "A value is that which one acts to gain and/or keep."  It's not what one should act to gain/keep - an 'objective value' as described above - but what one does act to gain/keep.  This definition is perfectly compatible with Mises' conception of subjective value.

Rand seems to have recognized this distinction between value as such - being a personal choice, anything which a given actor acts to have, what Mises considers the base, unanalyzable unit of economic study - and objective value, or those values that will serve the man's life and flourishing qua man.

From this perspective, Buechner's criticisms of subjectivist/marginalist economics appears off-base (though, again, I haven't read the book).  Thoughts?


Post 18

Friday, October 7, 2011 - 12:17pmSanction this postReply
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Merlin,

I haven't read the book, and Buechner may say more about this.
On page 175, he said this:
Businessmen do not sit and react passively to outside events. Successful businessmen work actively to change the facts their businesses face ...
Ed


Post 19

Friday, October 7, 2011 - 12:32pmSanction this postReply
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Luke,

I also haven't read the book, but it seems from the quotes above that the author is to some extent conflating the concepts of methodological subjectivism (also known as 'methodological individualism' in Austrian parlance) and ethical subjectivism. 
I don't get the same impression. In this quote from above:

Nonobjective values are not subjective in the philosophic sense. They are not phenomena of consciousness independent of existence. Even nonobjective values proceed from an evaluation by consciousness, of something, according to some standard.
... Buechner denies that methodological subjectivism is or can ever be ethical subjectivism.


From this perspective, Buechner's criticisms of subjectivist/marginalist economics appears off-base (though, again, I haven't read the book).  Thoughts?

Buechner thinks marginalism, or the law of diminishing marginal utility -- i.e., the solution to Adam Smith's 'diamond/water' paradox -- is appropriate in a few circumstances (e.g. monetary policy), but not overall, because of the unreal assumption it makes with regard to various units of economic value being equal, uniform, or identical (p 295):

It is valid for the farmer Menger imagines with two hundred bushels of wheat (1871, 129). It would be valid for other crops that are largely uniform, like corn and rice. ...

Nevertheless, this necessity of uniformity leads us to the one economic value in a money economy for which the law of utility is valid. That is money itself. Money is uniform.
Ed

(Edited by Ed Thompson on 10/07, 12:40pm)


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