And a similar argument could be made that Bitcoin creates value for its customers. You might disagree with that but the people buying bitcoin would probably disagree with you. To me that seems like subjectivity.
Similarly for AAPL and MSFT - the stock price is a measure of a gamble on future earnings not how much value they create for their customers. Indeed high margin businesses like AAPL shouldn’t even exist under an intrinsic theory of value because a large part of the 30% markup is because of social cred and network effects. That’s not really value creation.
> I beg to differ.
Can you please describe it in more detail because this directly contradicts what little I know about economics.
If I’m understanding your position, it seems like you’re arguing that value is some intrinsic property.
That mechanism however is rejected in the Wealth of Nations, because of things such as the diamond-water paradox. Diamonds are fairly useless (or at least were moreso when the treatise was written) but still cost more than water which is crucial to life. If value is represented of the intrinsic value, why would that be?
This paradox is interestingly resolved by the subjective theory of value which has a similar solution to marginalism which says basically that while the first units of water are valuable, if you have excess of what you need it you won’t want more. Whereas because diamonds are rare you will want more of them and are only bounded by your storage constraints.
> A combination of both labour and subjective theories can be seen in the formulations of English economist Alfred Marshall. He argued that prices are determined by both the objective costs of production, the supply, and the subjective utility of consumers, the demand. This approach is in line with the modern conception of how market prices are determined, where both the demand and supply curves intersect.[9] This is in contrast to other 19th century theories which view costs through a type of subjective value lens. Since the subjective value holds that buyers use their own value judgements, the same goes for sellers, and thus the mechanism of production. Austrian economist Ludwig von Mises believes that production costs are determined by a seller's evaluations of their opportunity costs, or the sellers "marginal utility lost of having fewer of that good".[10] Under this, supply curves are also set by subjective preferences.
So it’s pretty well established economic theory that the important factors for value are the perceived value of something (demand) and the cost to produce it (supply). But there’s no objective intrinsic way to measure value because it doesn’t exist as it’s a product of supply (objective based on cost to produce) and demand (subjective based on perceived value).
And a similar argument could be made that Bitcoin creates value for its customers. You might disagree with that but the people buying bitcoin would probably disagree with you. To me that seems like subjectivity.
Similarly for AAPL and MSFT - the stock price is a measure of a gamble on future earnings not how much value they create for their customers. Indeed high margin businesses like AAPL shouldn’t even exist under an intrinsic theory of value because a large part of the 30% markup is because of social cred and network effects. That’s not really value creation.
> I beg to differ.
Can you please describe it in more detail because this directly contradicts what little I know about economics.
If I’m understanding your position, it seems like you’re arguing that value is some intrinsic property.
That mechanism however is rejected in the Wealth of Nations, because of things such as the diamond-water paradox. Diamonds are fairly useless (or at least were moreso when the treatise was written) but still cost more than water which is crucial to life. If value is represented of the intrinsic value, why would that be?
This paradox is interestingly resolved by the subjective theory of value which has a similar solution to marginalism which says basically that while the first units of water are valuable, if you have excess of what you need it you won’t want more. Whereas because diamonds are rare you will want more of them and are only bounded by your storage constraints.
https://en.m.wikipedia.org/wiki/Subjective_theory_of_value
> A combination of both labour and subjective theories can be seen in the formulations of English economist Alfred Marshall. He argued that prices are determined by both the objective costs of production, the supply, and the subjective utility of consumers, the demand. This approach is in line with the modern conception of how market prices are determined, where both the demand and supply curves intersect.[9] This is in contrast to other 19th century theories which view costs through a type of subjective value lens. Since the subjective value holds that buyers use their own value judgements, the same goes for sellers, and thus the mechanism of production. Austrian economist Ludwig von Mises believes that production costs are determined by a seller's evaluations of their opportunity costs, or the sellers "marginal utility lost of having fewer of that good".[10] Under this, supply curves are also set by subjective preferences.
So it’s pretty well established economic theory that the important factors for value are the perceived value of something (demand) and the cost to produce it (supply). But there’s no objective intrinsic way to measure value because it doesn’t exist as it’s a product of supply (objective based on cost to produce) and demand (subjective based on perceived value).