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Encyclopedia > Subjective theory of value

Economic subjectivism is the theory that value is a feature of the appraiser and not of the thing being valued. That is, things do not have inherent value, but have value only insofar as people desire them.


Subjective value theory was developed in the late 19th century as an attempt to overcome the shortcomings of classical economics. The most influential value theorists were members of the Austrian School of economics such as Carl Menger and Eugen von Boehm-Bawerk.


Those who endorse subjective value theory (including mainstream modern economists) believe it is a refutation of intrincisist value theories, such as the labor theory of value, which is a cornerstone of Marxism. Behavioral economics theorists explicitly seek to research and model how subjective framing of decisions affects the value an individual places on goods and outcomes.


The theory can be illustrated as follows: Imagine you are very hungry before dinner and see a piece of candy sitting on the kitchen counter. The candy seems very desirable to you, but you forbear on the candy, and wait for dinner. Dinner is very good and you end up stuffing yourself on three helpings. Afterwards, you again see the candy sitting on the counter but now you have no desire whatsoever to eat it because you are so full. The candy went from being of value, to being of no value, even though the candy has not changed. But you have changed, illustrating that the value of the candy is a property of you, not of the candy. If one accepts absolute intrincisim, then the change in the value of an unchanging piece of candy represents a paradox. If, on the other hand, a thing's intrinsic attributes influence but do not determine its value, the changes in value according to changing circumstances present no surprise to the observer.


This argument is rejected by opponents of economic subjectivism, who claim that the determining factor in the value of the candy bar as being the amount of labour or effort that went into producing it. They believe that the candy bar would still cost the same in the local store, whether you were hungry or not, and that therefore its value is unchanged. According to this view, values would only depart from intrinsic values on a temporary basis.


Economic subjectivists point out, however, that price is not the same as value, but an outcome of the interaction between supply and demand.


External link

  • Excerpts from Austrian Economists on the Subjective theory of value (http://mason.gmu.edu/~tlidderd/menger/aus_1_1.html)

  Results from FactBites:
 
Subjective theory of value - Wikipedia, the free encyclopedia (902 words)
The theory contrasts with intrinsic theories of value that hold that there is an objectively correct value of an object that can be determined irrespective of individual value judgements, such as by analyzing the amount of labor incurred in producing the object (see labor theory of value).
The subjective theory contrasts with intrinsic theories of value, such as the labor theory of value which holds that the economic value of a thing is contingent upon how much labor was exerted in producing it.
The subjective theory of value is a denial of intrinsic value.
An Introduction to Austrian Economics (4023 words)
Valuation consists in preferring a particular increment of a thing over increments of alternative things available; the outcome of valuation is the ranking of definite quantities of various goods and services with which the individual is concerned for purposes of decision and action.
Theory resorts to the hypothetical concept of the scale of values in seeking to explain and understand the nature of human valuations.
It may appear that the concept of exchange value introduces a departure from the subjective theory of value, yet this is not the case.
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