Summations Only

I don't think value is the same as price. If you read through my recent posts to Crash you'll see where I outline one way to view the relationship between price and value.--Percy

Hi Dr Adequate,I had no trouble following your math, but your presentation left me a bit confused. Let me explain.I think the core of your idea is represented by this paragraph: But before this paragraph you said, "Let's concentrate on actual goods with a value expressed in a positive number of dollars," then after this paragraph you use the example of oxygen, which except for hospitals and space stations and the like is free and is not an actual good.So I'm left not being sure I follow your point entirely because of the ambiguity about when you're talking about goods valued in dollars and when you're not.But in any event, it appears you have been poking about reading up on economics and have therefore clearly learned that in mainstream views price and value are linked, but that there are many views on how best to think about value. The way you present it as "A =_you $x" where it doesn't matter either way whether you have the money or the object seems not all that different to one of the formulations of value from neoclassical economics: This formulation is trying to get at how individual consumers make purchasing decisions. As cost goes down our perceived incremental value goes up, assuming the perceived benefit for a given good is constant. When perceived incremental value is 0, then perceived cost is the value in dollars of the good to that consumer. You average across the purchasing decisions of many consumers and you get an aggregate measure of value.--Percy

Oxygen has a price of $0, it has a value of $∞. As I made clear, pretty much anything can be valued in dollars whether or not it has a price, is for sale, is considered a good, exists, etc. For the last decade or so, yes. Well, it has an equals sign in it, so I guess there is a point of similarity.

I think basically all definitions of value are useless, in economic terms anyway, because there's no way to rigorously connect them to any tangible quality. In our own day to day experience, we intimately grasp the concept that price and value are only loosely related. What gives, I guess, is that you keep agreeing that price and value are not identities, but you keep treating them like identities and supplying quotes from Wikipedia articles that equate them.But they can't be equated. Which means that your very first line in the thread:

quote:

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In economics the question "How much is something worth?" has a simple answer: what someone is willing to pay.

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is wrong. "How much someone is willing to pay" is the price, not the value. And the price cannot be the answer to "how much is something worth?" if price and value are only broadly linked. And yet one can quite reasonably expect to see prices in a wide range around something's assumed "value"; that's the basis of comparison shopping, looking for deals, going to auctions, etc. Everybody is intimately acquainted with these behaviors because we expect that the price of something might vary quite widely around our perception of its value. We see that on an imaginary graph? Percy, I'm truly at a loss for words - I could imagine and describe a graph that showed the exact opposite, that as price rose relative to value, sales volume increased, but what on Earth would that prove? It would be an imaginary graph!I'm not a student of economics, exactly - I'm more of a student of students of economics - and I wonder to the extent that this sort of thinking - "look, here's a graph produced by a mathematical model I created; thus, the truth of my model is demonstrated" - is endemic to economics. Of course, I could find examples to support my model, such as the time online clothing retailer Banana Republic advertised a price increase,, or a dozen articles on how raising your prices can actually increase your sales volume.Those would be anecdotes, but at least they would be real anecdotes as opposed to showing me the decaying exponential function and asking me to imagine axis labels. No, you should. It's entertaining. It's up on Netflix.And, you know, it might get you to chill out long enough to pull the stick out of your ass. Seriously, Percy, watch the goddamn show. It's practically the catchphrase - "You just heard my expert tell you it was worth $1000; I'll give you $300 for it." You can watch people literally go agape at Rick's lowball offer literally seconds after they've just been told what it's worth. It's such a frequent feature of the show that it's an Internet meme.Now, is it really worth $15,000? Like I said, that's what the expert says, and he's says he's basing that off what he's seen at auction. Maybe he's lying, but it stands to reason that if he was going to put a finger on the scale, it would be to Rick's benefit, not the benefit of the random customer, and that therefore his appraisal would be low, if anything. I don't see why Rick's "buddy who's an expert on things like this" (that's usually how the expert is introduced) has any incentive to overvaluate something Rick is trying to buy. Except that, 3 out of 4 times, Rick isn't out of luck. He gets the $15,000 gun for $4000. (Usually he gets negotiated up a bit.) And then the item goes on sale for more than double what he paid. Clearly your "neoclassical economics" is utterly foundering on how this real-world behavior can be explained, but The World-Famous Gold and Silver Pawn Shop was apparently an incredibly successful business even before the show started.

If you're talking about oxygen in the air for breathing then it has a price and value of $0 because free oxygen does not change hands anywhere for any price. It's free.By the same logic you could just as foolishly argue that food and water has an infinite value, or that any essential nutrient like calcium or iron has an infinite value. Threaten to lock me in a box and give me no food containing vitamin C until I die of scurvy and I will certainly give you everything I own, but the value of vitamin C is actually in the neighborhood of a couple pennies per milligram. People make their purchasing decisions about this vital nutrient based upon it's perceived value as weighed against the price for which it is being offered.The relevant point actually concerns supply and demand. If for some reason the supply of vitamin C became limited in a region of the world (including in available food) then its perceived value would increase and the price would rise.Speaking of oxygen, that reminds me, if you ever feel the need to actually pay money to breath it there actually do exist oxygen bars that will sell you oxygen administered through those funny nose things you see patients on TV shows wearing all the time. Plain or scented.--Percy

In point of fact, I didn't say it; the customer did. (It's not infrequent in the show to cut to an aside by Rick about the statutory difference between pawn and sale in the state of Nevada, or to show Rick's efforts to deal with nonpayment of the loan, or the inventory management necessary to make sure they don't sell pawned merchandise until the loan is in arrears.)

It is possible to have a vertical demand curve, where absent market controls, the market-clearing price for something approaches 100% of one's worldly possessions and a lifetime of indentured servitude.The increase in price of American medical care over the years - even as Americans consume less care overall - is one such example. http://www.healthcostinstitute.org/2010reportImplicitly, we understand why this is - when you need medical care, you have to pay what they're asking for or you die. The nature of the transaction gives providers incredible power to extort higher prices. Historically, medical care has always commanded a premium price but it's only been in the past century that medical care has actually delivered nonzero value to the consumer. "Medicine" used to be synonymous with "prayer."

As you've already acknowledged my reply about oxygen, I sha'n't add this example by edit as I planned, but make a new post.We are now in a position to put a value on free software. If Open Office serves my needs just as well as Microsoft Office, then clearly they have the same value. If we want to put a dollar value on this, it is just the amount with which my fairy godmother would be able to just compensate me for not having any office software.This makes more sense then your claim that it has no value because it has no price. For one thing, my way allows us to make sense in English, for another thing, it explains why I want free software, and for a third thing, it lets us see why the efforts of the Free Software Foundation should be encouraged more than people who actually produce nothing of value.

Oh look, you're conflating price and value again.The price is what people pay for it. The value, to you, of having oxygen, is the least price someone would have to pay you to induce you to not have oxygen. Unless there is some finite amount of money for which you would die, that is indeed infinite. And so according to you it must have value, since it has a price. Indeed, anyone who's figured out how to sell oxygen must be "creating value" hand over fist.

No; its scarcity would increase, and this would cause the price to go up. The way to make the value of something increase is to make it able of providing greater percieved benefit to the consumers.A scientific discovery showing that vitamin C has health benefits no one ever knew of before would increase its value to consumers. Falling back on the claim that oxygen has a value of $0 should be a clear sign that your position is in serious trouble.Jon

Hi Dr Adequate,I bow to your power to misrepresent.I can't repeat myself from scratch in every post. As I said before, my recent posts to Crash outline one view of how value and price are related in mainstream economics, and in another of my recent posts to you I described another, the one you dismissed without any intelligent comment.In mainstream ecomomics value and price are very closely related. People will pay according to the value they assign. If the price rises above what they perceive as the value they will be less likely to buy, or will buy less. If the price drops below that value they will be more likely to buy, or will buy more. Perceptions of value play a significant role in marketing strategies. It's why stores become crowded during sales. This isn't rocket science.I understand that you guys have a concept of value that bears little or no relationship to price, but in the world where real people live that isn't true.--Percy

So I should hope. It is quite impressive, isn't it? I am, so far as I know, the only person in the world who can misrepresent someone by repeated in-context word-for-word quotation of what he said. No-one else can do this. I'm awesome. Did you miss post #194? It is perfectly "mainstream" to associate value with utility rather than price. Also, it's non-stupid. Would you like to ask some real people if oxygen has no value to them? Or if free software has no economic value?You're pretty much surrounded by perfectly real people who are telling you that value and price are two different things. You are also told this by those "mainstream economists" who aren't an anonymous person of unknown qualifications editing Wikipedia.

The issue is that people where using this graph to make points in that other thread: But now they're arguing against the principles that the graph uses. If you don't like those principles, then don't use the graph that is based on them. Except, in the other thread you guys were all about using the IQ tests and now you're arguing against them.

Well, gotta give you credit for honesty if nothing else. I just in the previous message described how value and price are connected, more about that later. Since I just in the previous message described a price/value ratio that is not a constant value 1, how is it that I am treating them like identities?I can't help the Wikipedia site's use of the word "equates", but you're making the wrong interpretation. Those with a larger vocabulary than provided by the favorite online dictionaries know that equate can mean "to make comparable or show the relationship between" (Webster's Third New International Dictionary, Volume 1), and it seemed obvious to me from the outset that that's how it was being used.Yes, as I said in Message 1, the simple answer is that something is worth what someone is willing to pay. That was a starting point and point of departure, not the whole shebang with all the details. We're getting into the details now. Yes, of course this is true. I've been describing value as an aggregate across the totality of prices paid by all consumers. In a small community of 3 supermarkets that don't use promotions the price of a bag of peas is $.90, $1.00 and $1.10. During a given week the supermarket sales are represented in this table: The lower the price/value ratio the greater the bargain and the greater the sales, and if you graph those numbers they'll come out looking something like this: Gee, what do you know, it's the same graph you said showed an imaginary relationship!Anyway, this is just a simple inverse relationship showing that the greater the bargain as measured by a decreasing price/value ratio the greater the sales, which is exactly what happens in the real world. (Again, the y-axis label should be price/value, and ignore the numbers on the hash marks.) Well, not necessarily in a wide range, but yep, that's it, you got it, except you don't need quotes around value because its a very familiar term in mainstream economics. Well, yeah, the price might possibly vary widely around the value, but not all that often or that much. I can usually buy a can of soda from a machine for between $1.00 to $1.50. I'm sure those are neither the highest nor lowest vending machine prices people can find, but variations are usually an issue of supply/demand and maximizing profits. Seriously, Crash, a reality show? Really? This is where you're learning your economics? Did you know that at least some reality shows are in part planned/scripted? Do you know for a fact you can trust everything you see on this show? Could I recommend Jersey Shore to you (no, I haven't actually seen it, but it sounds like it might be your kind of thing).Well, anyway, you present it again, so let's go through it again: So you're telling me that the expert tells the customer the gun is worth $15,000 and that the customer knows he can get $15,000 (or heck, even just $10,000) by selling it on eBay or traveling to the auction, but he instead sells it to Rick for $4000. What aren't you telling me here? Are the loan sharks threatening to break his legs if he doesn't pay them by noon?Come on, get real. I can believe selling to Rick for a discount of maybe 10% or 20% or whatever is standard for go-betweens these days so that you can avoid the hassle and rigamorale of possible restoration costs, travel, having to spend your free time, etc, but a 70% or 80% discount? Come on, no one's that stupid. Get real.--PercyEdited by Percy, : Punctuation.