Reply To: Economic calculation: prices vs. values


Valuation does play a role in all action. But calculation cannot be done in subjective value. Arithmetic operations can only be performed in a common unit. In decisions on the market, the common unit in which calculation can be done is the monetary unit. So, for actions on the market a person uses economic calculation and subjective value in making decisions. For example, Tim Cook decides to produce the iPad Mini on the basis of his calculation of the profit from its production and his subjective valuations concerning the production and its alternative. He can calculate, i.e., use arithmetic operations, with respect to profit, but not with respect to his valuations. Apple earns $12 billion dollars in profit, but Cook cannot calculate that he receives 6 utils of value from choosing to produce the iPad Mini. He just knows that he values producing the Mini more highly than the alternative and therefore, he chooses to produce the Mini.