What We Really Mean When We Talk About Values And Prices In The Marketplace

In the popular way of thinking, people are characterized as if a scale of preferences is hardwired in their heads. Regardless of anything else, this scale remains the same all the time. This thinking does not characterize human beings but robots. The humanoid robot chooses goods because the valuation scale has told him to. The valuation scale somehow knows which good offers the best utility without letting us know how it knows that.

If the valuation scale is part of the human mind, then it makes a lot of sense to attempt to extract this scale by means of either questionnaires or various psychological tests and laboratory experiments. Once the valuation scale is extracted, social scientists can establish how to allocate scarce resources in the most efficient way.

It makes little sense that a valuation scale should reside in the mind of an individual irrespective of the facts of reality. After all, the difference between a robot and a human being is that a human being can change his mind regarding the importance of a particular good to him.

The priority of ends is also likely to change along with an individual's pool of resources. For instance, with an increase in his pool of resources, an individual who previously assigned a high ranking to having a secondhand car might now decide that a new car is much more important, while the secondhand car will not feature at all on his priority list.

In addition, there can be no valuation without things to be valued. Value is established once an individual's mind has interacted with a particular thing. The evaluation process then establishes for what end, or purpose, a particular thing could be of use. On this Carl Menger wrote,

Value is thus nothing inherent in goods, no property of them, nor an independent thing existing by itself. It is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well being. Hence value does not exist outside the consciousness of men. It is therefore, also quite erroneous to call a good that has value to economizing individuals a "value," or for economists to speak of "values" as of independent real things, and to objectify value in this way.1

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