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Author | Topic: Economics: How much is something worth? | |||||||||||||||||||||||||||||||||||||||
Percy Member Posts: 22505 From: New Hampshire Joined: Member Rating: 4.9 |
Dr Adequate writes: 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,... I thought you said you'd been studying economics for a decade. Sure doesn't seem like it. You remind me of creationists complaining about the terminology of evolution, or ever better, like the creationists who come here claiming to know all about evolution before stating that everyone knows you can't get a cat from a dog.
...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. The question you're posing here is how we can assign a zero economic value for something like free software from the FSF which is so clearly worthwhile. But the fact of the matter is that if someone were to enter an amount on the accounting ledger for free software the amount would be $0, meaning that the contribution to the company's expenses would be $0. It's not a commentary on the usefulness and importance of FSF software, it's just an accounting and economic reality. Free software groups get money in other ways, donations, grants and so forth. Their usefulness and importance is widely recognized, just not by paying them money for their products. If you ran a business taking some advantage of free software, where would you enter it on your company's balance sheet? Where should it appear that would justify your claim that it has some tangible economic value? You could make a donation to the FSF and then add that amount to the expense column, but that's all I can think of that you can do. Any better ideas? Remember, your expense and income columns still have to balance, you can't just insert figures willy-nilly. --Percy
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Percy Member Posts: 22505 From: New Hampshire Joined: Member Rating: 4.9 |
Dr Adequate writes: Oh look, you're conflating price and value again. Did I really? If I did it certainly wasn't intentional. Anyway, let me take a look at what you quoted and see what I can find... You quoted a bunch. Are you referring to where I said, "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." Is that it? If so then that's pretty silly of you. Price and value both have units of dollars (or choose your currency), and given that one is an aggregate of the other it would be impossible for no situations to ever arise where they were the same. In the case of something for which no market exists, the price and value are both zero. You've studied economics like a creationist studies evolution. It isn't that you understand mainstream economics but reject it - you just have no concept of it whatsoever.
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. This is just you making things up while being annoying at the same time since I just finished explaining how the same logic leads you to conclude that the value of food and vital nutrients like vitamin C must also be infinite. But things in virtually infinite supply like the oxygen in the air are free, while goods like food and vital nutrients in fairly good supply have finite values far less than infinity.
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. Oxygen bars are creating value to the extent that their income exceeds their costs. If the oxygen bar were located in Europe then they would pay a value-added tax on the amount of that created wealth. See the connection there? (Hint: it's right in the name.) --Percy
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Dr Adequate Member (Idle past 314 days) Posts: 16113 Joined: |
I thought you said you'd been studying economics for a decade. Sure doesn't seem like it. Or, alternatively, it seems like I have studied economics and you haven't. That would also explain why the two of us are in disagreement given the fact that I have actually studied economic textbooks and you are disagreeing with me based on your understanding of something that some anonymous person posted on Wikipedia.
You remind me of creationists complaining about the terminology of evolution, or ever better, like the creationists who come here claiming to know all about evolution before stating that everyone knows you can't get a cat from a dog. Mmm ... that analogy would be better if we were talking about something that you'd studied and I hadn't, rather than the other way round.
The question you're posing here is how we can assign a zero economic value for something like free software from the FSF which is so clearly worthwhile. But the fact of the matter is that if someone were to enter an amount on the accounting ledger for free software the amount would be $0, meaning that the contribution to the company's expenses would be $0. Meaning that the price they paid for it was $0. Now, what is the contribution to the company's revenue?
If you ran a business taking some advantage of free software, where would you enter it on your company's balance sheet? I would enter the price as $0 and the return on investment as whatever it actually was. This is how companies do business. Well, the ones that don't go bankrupt. Do you really think that companies calculate the value of a transaction to them as the price they pay for it? They don't. Otherwise they'd calculate their profits as having negative value, since when they make money people are paying them. Edited by Dr Adequate, : No reason given.
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Straggler Member (Idle past 95 days) Posts: 10333 From: London England Joined: |
Percy writes: You thought it perfectly reasonable that someone who makes a $100,000 on an idea... Ideas. Innovation. These are the life blood of a capitalist economic system. But they don't appear on your balance sheet. So you deny they have any economic value. This is madness.
Percy writes: ....idea from a book should value the book at $100,000. The book example in your link assigns value based on the Return On Investment (ROI). Obviously you cannot know the return on an investment before making the investment. Furthermore in the real world discerning how much a particular factor contributed depends on the complexity of the situation at hand. If, for example, a particular educational programme is implemented and is broadly deemed economically successful (i.e. it boosts the earning power of the participants) there may well be a broad consensus amongst economists that the programme in question has economic value. But if you ask ten different economists to place a value on that educational programme you will get ten different answers. If you have ever seen two economists arguing you will know that the entire discipline involves people endlessly wrangling over which particular factors are responsible or relevant to a particular economic outcome. But I have never yet seen any economist claim that the economic value of an educational programme is the same as it's price.
Percy writes: I am explaining the dominant paradigm in economics today, one where many, as Wikipedia explains, "equate the value of a commodity with its price." You insist you are taking a mainstream economic position. But can you find me a single mainstream economist who says that the economic value of education is the same as the price of education? Or that unpaid work has no economic value? Or that free software has no economic value? I suggest you type into Google the words 'economic value of unpaid work' and see what you get. Similarly type into Google 'economic value of education' and see what you get. If you ideas are so mainstream you should be able to provide a plethora of sources as a result of these searches that agree with you. I challenge you to find a single one.
Percy writes: I am explaining the dominant paradigm in economics today, one where many, as Wikipedia explains, "equate the value of a commodity with its price." I looked up Investopedia definition of 'value' on the basis that this might be sympathetic to your notion. But even that seems to contradict everything you are saying. Here is what Investopedia says about value:
quote: How can you buy something for less than it is worth if price and value are the same thing? Edited by Straggler, : No reason given.
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Percy Member Posts: 22505 From: New Hampshire Joined: Member Rating: 4.9 |
Hi Jon,
I think you must have misunderstood something along the way. I said that a drop in supply would cause a price increase, and you said, "No, it's scarcity would increase..." How is a drop in supply not the same thing as increasing scarcity?
A scientific discovery showing that vitamin C has health benefits no one ever knew of before would increase its value to consumers. Yes, this is true.
Falling back on the claim that oxygen has a value of $0 should be a clear sign that your position is in serious trouble. Actually, it should be a clear sign to you that your position is in trouble. I can find people all around the world willing to pay $0 for the oxygen in the air (I'll just call it air from now on). Commodities in virtually infinite supply will always have a very, very low value. The problem with your valuation of infinity for air is that it never changes hands at that value and never will. Even if you drop the price to a mere $10,000 for a year's supply you won't get any takers, though you might check with Dr Adequate who would apparently consider it a bargain. The only way you'll be able to get people to assign a higher value to air is if you somehow limited the supply (it's that old law of supply and demand again), but how are you going to do that? Will you start taking people prisoner one by one and lock them in airtight boxes? Let's get real, air is free. --Percy
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Straggler Member (Idle past 95 days) Posts: 10333 From: London England Joined: |
CS writes: The issue is that people where using this graph to make points in that other thread: The graph shows definitively where the proceeds of growth are ending up. The problem is, as this thread has clearly shown, is that the justification for this is based on equating ownership with wealth creation in a way that bears absolutely no relation to how actually wealth is actually created.
CS writes: 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. The graph illustrates the point being made very well.
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Percy Member Posts: 22505 From: New Hampshire Joined: Member Rating: 4.9 |
Dr Adequate writes: I bow to your power to misrepresent.
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. Actually, and I hate to keep bringing this up but there's just no way around it, you're right up with the best creationists at quote mining and taking things out of context, not to mention failing to quote any of the many places where I clearly described ways of thinking about the relationship between value and price. Look, if your goal is to just work as hard as you can to not understand what I'm saying (something creationists also do) then there's no point in continuing any dialog with you.
Did you miss post #194? It is perfectly "mainstream" to associate value with utility rather than price. Ah, come on, give the stupidity a break, will ya? That little snip doesn't even mention price. It's clearly not trying to say anything about price. Whether value is determined by cost or utility makes no difference to the fact that value is related to price.
You're pretty much surrounded by perfectly real people who are telling you that value and price are two different things. And I agree they're two different things, but like wheels and tires they're closely related. --Percy
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Dr Adequate Member (Idle past 314 days) Posts: 16113 Joined: |
Did I really? If I did it certainly wasn't intentional. Anyway, let me take a look at what you quoted and see what I can find... You quoted a bunch. Are you referring to where I said, "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." Is that it? If so then that's pretty silly of you. Price and value both have units of dollars (or choose your currency), and given that one is an aggregate of the other it would be impossible for no situations to ever arise where they were the same. Ah, the strawman. I never said that they could never be the same. I have also never said that someone's height in centimeters and his IQ could never be the same. I would however say that you should not conflate the two.
In the case of something for which no market exists, the price and value are both zero. And yet you do not think that your oxygen supply is without value to you, except when you wish to talk nonsense.
You've studied economics like a creationist studies evolution. It isn't that you understand mainstream economics but reject it - you just have no concept of it whatsoever. Ah, personal abuse. The finest kind of argument if you don't have an actual argument. OK, let's try this. Without looking it up, tell me what contribution Walras made to neoclassical economics. This is a man who in his field has been compared to Isaac Newton. Without looking it up, what did he do? No? OK, one of us has studied neoclassical economics and the other hasn't. That would be me and you, respectively.
This is just you making things up while being annoying at the same time since I just finished explaining how the same logic leads you to conclude that the value of food and vital nutrients like vitamin C must also be infinite. As indeed they do. The same logic does lead me to that conclusion. That's the great thing about employing logic and being right. You talk as though you've led me into a reductio ad absurdum. No, you've lead me into a reductio ad being right.
But things in virtually infinite supply like the oxygen in the air are free, while goods like food and vital nutrients in fairly good supply have finite values far less than infinity. No, they have finite prices less than infinity. Like oxygen.
Oxygen bars are creating value to the extent that their income exceeds their costs. If the oxygen bar were located in Europe then they would pay a value-added tax on the amount of that created wealth. See the connection there? (Hint: it's right in the name.) And creation science is science, right? It's all in the name. Edited by Dr Adequate, : No reason given.
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Dr Adequate Member (Idle past 314 days) Posts: 16113 Joined: |
Actually, and I hate to keep bringing this up but there's just no way around it, you're right up with the best creationists at quote mining and taking things out of context, not to mention failing to quote any of the many places where I clearly described ways of thinking about the relationship between value and price. Look, if your goal is to just work as hard as you can to not understand what I'm saying (something creationists also do) then there's no point in continuing any dialog with you. If all you have are ill-chosen insults, then there is indeed little point in the dialog. You keep quoting WP saying that in mainstream economics price is the same as value, and even when you try to nuance that statement you say yourself that the difference between economists who say that it is and economists who say that it isn't is as trivial as the distinction between people who say that the earth is spherical and the people who are slightly more precise in their statements.
Look, if your goal is to just work as hard as you can to not understand what I'm saying (something creationists also do) then there's no point in continuing any dialog with you. As I have often remarked to creationists, I understand what you're trying to say perfectly well. That is exactly why I disagree with you.
Ah, come on, give the stupidity a break, will ya? That little snip doesn't even mention price. It's clearly not trying to say anything about price. Whether value is determined by cost or utility makes no difference to the fact that value is related to price. So, where the quotation in that post says: "It is often incorrectly assumed that a good’s market price measures its economic value. However, the market price only tells us the minimum amount that people who buy the good are willing to pay for it. When people purchase a marketed good, they compare the amount they would be willing to pay for that good with its market price. They will only purchase the good if their willingness to pay is equal to or greater than the price. Many people are actually willing to pay more than the market price for a good, and thus their values exceed the market price" ... it doesn't even mention price? Look, let's leave alone your deficiencies in economics, can you tell the difference between zero and six? As for the other quotations in that post, I'm not sure that your argument holds water. Suppose you said that a giraffe was a reptile. Then I provide three quotes from zoologists saying that it's a mammal. Would it be a snappy comeback to say: "That little snip doesn't even mention reptiles. It's clearly not trying to say anything about reptiles"? No, two people I quoted explaining the concept of value in neoclassical economics don't even mention price. That should actually tell you something. Instead, they're talking about utility. They are indeed "not trying to say anything" about ways in which you might choose to be wrong. Why would they? They've never met you or heard of you. When they explain the concept of value in neoclassical economics, they don't even have to refer to any mistakes which some guy called Percy who they've never heard of made somewhere on the internet after they published their webpages. If your lack of status as an acknowledged giant of economic theory didn't clinch it for them, then the fact that they don't own a time machine would surely be the deciding factor. Edited by Dr Adequate, : No reason given.
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Percy Member Posts: 22505 From: New Hampshire Joined: Member Rating: 4.9 |
Dr Adequate writes: Or, alternatively, it seems like I have studied economics and you haven't. That would also explain why the two of us are in disagreement given the fact that I have actually studied economic textbooks and you are disagreeing with me based on your understanding of something that some anonymous person posted on Wikipedia. Oh, yes, that must be it, all the little Wikipedia articles have it wrong, and the rest of the Internet just has it all wrong, and only Dr A in his own private economic studies with his own economic texts has it right. Now, if he could just find the place where his books explain how goods in virtually infinite supply also have virtually infinite value. Where oh where is that section on the infinite value of air?
Now, what is the contribution to the company's revenue? I don't know, Dr A, where is it? While you're at it why don't you tell us where the janitor's contribution to revenue appears in the company's revenue column. Come on, Dr A, tell us, surely the janitor made a contribution, one I respect, by maintaining a healthy, clean and productive work environment, plus the company paid real dollars for his services. Where does his contribution show itself in the revenue column? Let's say it's a software company? The programmers get paid lots of money, they wrote all the software that gets sold, where is their entry in the revenue column. Please tell us, Dr A, with all your brilliance and all your economic texts, what is their contribution to the company's revenue? When you find that line you let us know. The reality is that the revenue stated on a company's balance sheet does not in any way specify how the things they paid for contributed to generating that revenue. You can add an entry for $0 to the cost column for free software just beneath the $1,000,000 entry for Microsoft software, but there is no indication anywhere of what revenue was generated by what cost. I hope you can get your money back on those economic textbooks. --Percy
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Straggler Member (Idle past 95 days) Posts: 10333 From: London England Joined: |
Percy writes: Oh, yes, that must be it, all the little Wikipedia articles have it wrong, and the rest of the Internet just has it all wrong.. You think the rest of the internet agrees with you? The economic value of education is the same as the price of education? Unpaid work has no economic value? Free software has no economic value? I suggest you type into Google the words 'economic value of unpaid work' and see what you get. Similarly type into Google 'economic value of education' and see what you get. If you ideas are so mainstream you should be able to provide a plethora of sources as a result of these searches that agree with you. I challenge you to find a single one. Edited by Straggler, : No reason given.
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Dr Adequate Member (Idle past 314 days) Posts: 16113 Joined: |
I think you must have misunderstood something along the way. I said that a drop in supply would cause a price increase ... No, you said it would cause an increase in its value. Which is clearly what Jon is objecting to.
Actually, it should be a clear sign to you that your position is in trouble. I can find people all around the world willing to pay $0 for the oxygen in the air ... Can you find anyone who says that it has no value?
The problem with your valuation of infinity for air is that it never changes hands at that value and never will. Even if you drop the price to a mere $10,000 for a year's supply you won't get any takers, though you might check with Dr Adequate who would apparently consider it a bargain. I would advise you not to make obviously false statements about my clearly expressed opinions. If considerations of your personal integrity do not suggest this to you, then there is also the fact that you're going to be found out. Do you suppose that nonsense like this is going to impress Jon, who can read what I've actually written?
The only way you'll be able to get people to assign a higher value to air is if you somehow limited the supply ... No, that's how to jack up the price.
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New Cat's Eye Inactive Member
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The graph shows definitively where the proceeds of growth are ending up. Yeah: to everybody except those on minimum wage. But min. wage is a function of legislation not growth.
The problem is, as this thread has clearly shown, This thread hasn't clearly shown anything.
is that the justification for this is based on equating ownership with wealth creation But that basis is how the graph was generated. So if you don't want to do that then you can't use the graph.
in a way that bears absolutely no relation to how actually wealth is actually created. But you want to have that as a qualitative assessment and then use it against the quantitative one, however, you can't point to the qualitative value in anything that can be used to assess the situation.
The graph illustrates the point being made very well. The graph shows that everyone except those on minimum wage has benefitted from the growth, and that the top have benefitted more than others. That's all it shows. You want to then use a qualitative assessment of value to say that those who've benefitted more have not contributed enough to the growth, but none of that is shown in the graph. In fact, none of that is shown anywhere, because you can't measure the contribution in a meaningful way.
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Straggler Member (Idle past 95 days) Posts: 10333 From: London England Joined: |
The graph shows that the wealthiest have overwhelmingly appropriated the gains of increased productivity.
This thread has clearly demonstrated that the justification for this is that in blinkered book-kepping terms at least the wealthy are the "wealth creators". Because the things that actually create wealth (such as innovations which lead to transformative technologies which boost productivity) don't show up on balancesheets. Only the ownership of increasing assets which such innovations lead to show up on balancesheets. So we have clearly seen that the appropriation of increased productivity by the wealthiest has everything to do with balancesheet accounting and little to do with the human activities that actually create wealth.
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Dr Adequate Member (Idle past 314 days) Posts: 16113 Joined:
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Oh, yes, that must be it, all the little Wikipedia articles have it wrong, and the rest of the Internet just has it all wrong ... Oh, goodness, did the rest of the internet say I was wrong? Then I wonder how it is that I managed to find articles on the internet agreeing with me, and you just keep harking back to that same Wikipedia article.
... and only Dr A in his own private economic studies with his own economic texts has it right. I'm sure that other people besides me have read the same economics textbooks. They can't have published them just for me. That would be ... well, for starters it would be uneconomical.
Now, if he could just find the place where his books explain how goods in virtually infinite supply also have virtually infinite value. Where oh where is that section on the infinite value of air? You see where people explaining neoclassical economics say that value is to be equated with utility?
I don't know, Dr A, where is it? I said what is it, not where. And the answer is obvious. It's the increment in revenue compared with what they would have gotten without any software.
The reality is that the revenue stated on a company's balance sheet does not in any way specify how the things they paid for contributed to generating that revenue. And yet curiously enough companies do not select their strategies solely on that basis. They do not say: "Well, since just looking at the figure stating our revenue doesn't tell us how we made our money, we have no idea how we did it, so we might as well just act at random. Next fiscal year, therefore, our strategy will be to dress up as clowns and throw custard pies at our prospective customers, because for all we know by looking at the one figure that constitutes our bottom line this might work just as well as anything else."
The reality is that the revenue stated on a company's balance sheet does not in any way specify how the things they paid for contributed to generating that revenue. You can add an entry for $0 to the cost column for free software just beneath the $1,000,000 entry for Microsoft software, but there is no indication anywhere of what revenue was generated by what cost. You're serious? There is "no indication anywhere" of what business decisions make money? Then does the board of directors get paid the big bucks for their powers of spinning a dreidel, or for their skill at doing "eenie-meenie-minie-mo", or what? Only if so I think I should like that job, since I can flip a coin with the best of 'em. Really, you have to deny that it's possible for businessmen to gauge the value of anything at all just so's you can deny that they can gauge the value of free software to their company? You'll throw out an ocean of bathwater just so you can get rid of one little baby? Edited by Dr Adequate, : No reason given.
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