What Is It Worth?
by Dr. Doug Cardell
The notion of value is one of the most misunderstood concepts in economics. Without understanding value, very little about economics will ever make sense. The critical question is, where is value created? Most people seem to believe that things have some intrinsic value, or they agree with Marx, who says that all value comes from labor. Both these ideas are wrong. First, let's deal with Marx's idea that value comes from labor. Marx had a very naïve view of the world. We value lots of things that have nothing to do with labor. We value our families, our friends, the beauty of nature, exercise, problem-solving, achievement, and so on. The first important thing to understand about value is that we each have an internal list of how much everything in our life and the world around us is worth. Our list is different from everyone else's. Marx and other socialist theorists think they can devise a list of values everyone agrees on. Making a list acceptable to two people would be hard enough; ask any married couple. Making a list for everyone is impossible. It is equally false to believe that value is intrinsic. Value is not innate; it is not in things or ideas. It is within us; it is how each of us reacts to the conditions in our environment. Take a few minutes and reflect on your family and friends. Do you all drive the same kind of car, shop at the same stores, belong to the same churches, and eat the same diet? Do you all watch the same television programs, listen to the same music, read the same books, work the same jobs or pursue identical recreational activities? Why not? Because each of your friends and family has different values. It is these individual values that create a market economy. In its simplest form, a market economy is a trade between two people. For example, Jim has something that Sue values more highly than he does, and Sue has something that Jim values more highly than she does, so they swap. In a free market, every exchange is voluntary. Trade occurs solely for acquiring something you want more than something you have. We use money to facilitate these exchanges. So, when we work, we trade our time and effort for money that we use to buy things of greater value to us than the time and effort we spend. When someone says something is too expensive, they are not making a statement about the world but their values. It may be true for them, but no one else. Nothing is valued solely for only practical reasons. Think about pencils; an internet search will return thousands of different kinds. They all write on paper. There are thousands of different ones because people have other criteria besides "does it write." Some people like thick lead, some people like thin, some like red, some blue, and some are looking for a particular aesthetic, feel, or weight. Some are looking for fashion, others tradition. The simple choice of a pencil requires variety to address the diverse wants and needs of the populace. That is what a free market provides. Work, things, ideas, music, and art only have value to those who value them. When many people value something, and it's in limited supply, its monetary value rises. That's how the law of supply and demand works. Gold is valuable because many people want it, and there isn't much of it. We all value the air we breathe, but, at least for the time being, it's not in short supply, so it has low monetary value. Garbage, on the other hand, has negative monetary value for most people. It's plentiful, but no one wants it, so we pay people to take it away. Why do The Beatles have more hits than The Grateful Dead? Do Beatles' songs have greater intrinsic value than Dead songs? No. Nothing has inherent value. The Beatles have more hit records than The Grateful Dead because more people like their songs, and they are in greater demand. It doesn't mean their songs are 'better'; it just means more people like them. The Beatles' songs have greater value to more people—some people like the Dead better than the Beatles but more people like the Beatles better. Some say we have no right to value one thing or idea more than another. In a sense, that is true; we only have the right to assign value for ourselves but no one else. A critical part of freedom is the freedom to assign your value to things and work; the value you assign is a unique part of being you. You will never find another person that has exactly the same values you do. And that's wonderful! For a more in depth discussion see my article "Value and Worth". When government attempts to alter the value consumers have placed on a product or service by trying to control wages or prices, there are always unintended negative consequences. The market is the people; let the people decide.
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