> The price of something and the value of something were never expected to be the same
While I agree with you (quite firmly: it’s a great starting point to put on the table to challenge orthodoxy in this space), and think you’re agreeing with the parent comment, it is a fundamental tenet of mainstream economics and the political arguments of neoliberal (aka current mainstream) policy that [price == (market averaged) value], or at the very least [price ~= value].
Another interesting line of argument is to explore things that are valuable that don’t typically get a price: for example household labour, or love and friendship (at least directly: I’m sure a Friedman acolyte would reduce all relationships to exchange and reframe gifts and acts of love as investments).
As an aside for the parent comment: thanks for sharing this, it’s one of the top category of comments/quotes I’ve seen on HN in being useful, insightful, and challenging of conventional understanding in a way that improves understanding and future prediction.
Mainstream economists believe that value >= price. This is where economic surplus comes from. This is why trade is not zero sum, and it's why trade causes societies to get wealthier. Friendship and love fit into this framework just fine, as the price is $0, but the value is greater than $0.
How often is "You should pay me much more, it will make both of us wealthier" a winning argument when asking for a raise?
Trade very much is zero sum, at least some of the time. Prices are set by power disparities, not by abstract concepts of relative value.
One of the many problems with mainstream econ is that gloms together a whole set of unrelated interactions in a single crude concept of "price."
In reality share dealing, corporate wage bargaining, negotiations between farmers and supermarket chains, lemonade stands, and tourists haggling with craft vendors on vacation are all completely different kinds of interactions.
They end up with a price because they're mediated in currency, but their differences are far more interesting and economically revealing than their very superficial similarities.
Prices are set by supply and demand, which you may choose to label as "power" as a matter of a priori definition, and to some extent that will be a suitable label, but you would be throwing a way a whole deal of explanatory power by insisting on such a rhetorically loaded framing.
> How often is "You should pay me much more, it will make both of us wealthier" a winning argument when asking for a raise?
A great deal. If you don't pay me, I will quit, and you will be worse off, so it's a win-win proposition for you to give me a raise. That's what labor market competition is about.
> They end up with a price because they're mediated in currency, but their differences are far more interesting and economically revealing than their very superficial similarities.
Hence microeconomics, labor economics, financial economics, and the various other mainstream economics disciplines that do try to split those hairs.
Other theories of price setting (non-classical and non-marginalist) exist, for example the sample chapter of this book, which describes how the existence and prevalence of markup pricing was discovered independently several times over the past century.
I think we’re using different terms for value but I agree with your argument about comparative advantage and non zero sum trade, while also noting the other comments here that price is intended to correlate with marginal value in a suitably free market, to the degree that individual measures of value can be mediated through a price mechanism.
This is perhaps the broader point, which is that to the degree economics acknowledges non-priced value it’s a hand wave to “there’s some economic surplus here otherwise these people wouldn’t reach agreement to exchange”.
But to the degree that senses of value are the motivating factor behind economic exchange it’s oddly absent from the discussion. I get the reasons: philosophical inquiries about value and aesthetics are a lot more challenging to work through than concepts of utility reflected by measurable actions, but this goes to the overall point about the limitation and overreduction of current mainstream economics, and the criticism of people like Graeber of its politicised and somewhat arbitrary intellectual grounds.
To the degree mainstream economic reduction is useful to support understanding that’s fine - it absolutely allows reasoning and insight in many scenarios, especially microeconomics - but to the degree that decision-makers double down on it (especially macro) despite it being incomplete or absolutely wrong in certain environments and contexts because it promotes certain power structures and power plays that is highly problematic, especially when people jump to its defence out of misplaced loyalty to a school of expertise.
Note that in orthodox microeconomic theory, price is equal to the marginal value of the last exchanged unit. To use the above example of food:
> What's the value of food? If you have none you die, so the value is quit of high, but the price is much lower than that because there are many competing suppliers.
The first calories of the day, the ones that prevent you from dying, have a very high subjective value - but you pay them at the value of the 3000th calorie of the day, the extra drop of ketchup on your fries, which has a very little value.
And thus of course average value x volume is very different from (marginal value of last unit) x volume.
> While I agree with you (quite firmly: it’s a great starting point to put on the table to challenge orthodoxy in this space), and think you’re agreeing with the parent comment, it is a fundamental tenet of mainstream economics and the political arguments of neoliberal (aka current mainstream) policy that [price == (market averaged) value], or at the very least [price ~= value].
For mainstream economics, this is true in a very specific technical sense; all averages lose information, and the "market average" is a very particular form of average that doesn't behave the way most people think of an average behaving—particularly, it is not like a mean, the normal "average" that people think of, that is sensitive to changes in any individual values, it is somewhat like a median in that it is insensitive to changes in existing values that do not cross the "average"; e.g., if you take an existing market for a commodity with a given clearing price, and reduce, by any amount, the value of the commodity to any proper subset of sellers who would sell at the current market clearing price, the market clearing price does not change. The assessment of value across the market has decreased, but the output of the particular averaging function performed by the market has not.
While I agree with you (quite firmly: it’s a great starting point to put on the table to challenge orthodoxy in this space), and think you’re agreeing with the parent comment, it is a fundamental tenet of mainstream economics and the political arguments of neoliberal (aka current mainstream) policy that [price == (market averaged) value], or at the very least [price ~= value].
Another interesting line of argument is to explore things that are valuable that don’t typically get a price: for example household labour, or love and friendship (at least directly: I’m sure a Friedman acolyte would reduce all relationships to exchange and reframe gifts and acts of love as investments).
As an aside for the parent comment: thanks for sharing this, it’s one of the top category of comments/quotes I’ve seen on HN in being useful, insightful, and challenging of conventional understanding in a way that improves understanding and future prediction.