Subjective value and prices

Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
  • #18922

    How are prices, and the fact that individuals value goods and services subjectively, related? Or aren’t they? How do people’s subjective values create an objective price measurement?

    I know supply and demand are the primary forces determining price (objective cardinal number, right) and I understand value is subjective (ordinal rankings), but they seem somewhat in conflict with each other.

    Thanks for your time.


    Subjective value just means that the goods being valued are arrayed by a person in rank order. The highest-valued good ranked 1st, the second-highest valued good ranked 2nd, and so on.

    Let’s say Crusoe has 1 quart of berries and Friday 2 coconuts and that Crusoe ranks Friday’s 2 coconuts above his own 1 quart of berries and that Friday ranks Crusoe’s 1 quart of berries above his own 2 coconuts. Because their ordinal rankings are in reserve order, they can mutually benefit from trade and they will trade at the objective exchange ratio of 2c/1b.

    For an extended discussion, see Murray Rothbard’s book, Man, Economy, and State in Chapter 2.

Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.