The
question “what is value” must first be addressed outside the
field of economics; it is one of the fundamental questions in the field of
philosophy. It is the core of the branch of philosophy known as
ethics. For millennia, philosophers debated the nature of value.
One view was that value is intrinsic—given by a supernatural being, or
given in the nature of things (a variant of this is that value is created by
the labor that goes into making something). The other was that it was
subjective—whatever any person wanted it to be.
Of
course, these views are a false dichotomy. The flaw with the intrinsic
view can be seen with the example of a drowning man, to whom water is not a
value. The flaw with the subjective view can be seen with the example
of the madman who tries to eat lead and drink petrol.
Ayn
Rand defined value, in philosophy, as “that which one acts to gain or
keep.” She noted that living things are fundamentally
different from non-living things. They have an attribute that can go
out of existence: their lives. Life requires of every living thing that
it act to gain or keep values. Even a plant must grow its roots towards
water, and its stem towards light.
And man is distinguished from all other animals in that he has a
choice. Unlike animals, which act on instincts that are pre-programmed
in, man has a choice. This choice extends to values. Values
are not automatically given as a result of instincts, revelations, or any
other process outside of consciousness. And man can make
mistakes. And some values are “optional”: the preference
for vanilla vs. chocolate ice cream, for example.
The
proper approach to value in man, therefore, begins with recognizing value is
determined by an act of consciousness. Man’s nature is to think
and act based on his conclusions. But it is also necessary to recognize
that value is not arbitrary. Value is not any whim that a drunk,
stoned, or dysfunctional consciousness can dream up. There is a beat
poem “Storm” (http://www.youtube.com/watch?v=HhGuXCuDb1U) which makes the point,
among many others, that one is not free to walk out the second story window.
A
value, therefore, is based on an act of consciousness and also on
reality. One recognizes that something in existence will sustain or
further one’s life.
One
cannot ask the question “of value?” without first answering; to
whom and for what.
This
is where economics begins, after philosophy has done its job as described
above. Carl Menger was the first to apply this approach to
value—that it is the individual who is the unit valuer. It is
meaningless to speak of nations, societies, or collectives. It is as
meaningless to speak of value as being intrinsic to an inanimate thing.
And it is as meaningless as speaking of value being arbitrary, capricious,
spurious, or disconnected from reality, life, and reason.
This
is what I think Menger meant by “subjective”: the individual is
the proper subject of economics, not the class of the laborers or the nation
of the British.
I
think one will find with this concept clearly defined that it does not change
the meaning of Menger’s ideas, nor economic analysis. But it will
help explain numerous phenomena, for example that marginal utility declines.
Why
is this so? Why does everyone value the 11th unit of wheat
less than the 1st unit? It is because they value wheat for
eating. But one’s need to eat is finite and once it is satisfied,
one moves on to satisfy other needs.
I
think this issue is important because Austrian School economics is about free
markets and freedom generally. The statists have a very different (and
dishonest) view of economics. There is a philosophy that leads to and
proves that free markets and freedom is not only the way to prosperity but
also the only moral kind of system. I plan to write more about this
connection between gold, liberty, and philosophy in future pieces.
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