Good points. This post is related to a talk at Atlas and I have a very short time to get points across. The Austrians' subjective value idea logically leads to the idea that ethics is subjective (Which most objectivists - the audience for the talk - understand). I normally point out that when the Austrians say subjective they do not mean each person makes up their mind individually, they mean people's choices are totally disconnected from reality. In another post I have a link to an Austrian economics professor making exactly this point.

Interestingly the same professor in the same lecture explains marginal utility and inherently admits that people's values are grounded in reality - it is impossible to be perfectly subjective or perfectly irrational.

Those three questions are not basic, and they are still rooted in collective considerations. I understand your personal insight into the value of capitalism in raising the standard of living. That is consequential. The fundamental questions in economics must begin with the individual.

Given that you know what you need to survive, how will you decide what to produce at what time?

Robinson Crusoe faced that problem no less than General Motors. (Crusoe was more successful.) Crusoe needed money, just as he needed morality and language.

Beyond the island, in society, economics still asks and answers the same questions. The answers are more complex. Alone on an island, I could not feed myself by writing. You would have no clients with patents to be protected. We made and make conceptually complex decisions every day. But you do not produce the goods you consume. "What goods will be produced?" is beyond your control, except for the goods (services) that you produce to trade with others for what you want.

A complex society like ours is necessarily a monetized economy. At this level of abstraction, other questions are asked after those are settled.
("Numismatics: the standard of proof in economics" here: http://necessaryfacts.blogspot.com/20...

(And economics is a science. It is just that most of its practitioners are not scientists.)

How would you measure that? I believe that Robinson Crusoe needs money. Most people disagree with me on that.

"Now, if I was Robinson Crusoe, first I would build a fish trap/pen so the fish could be caught without my continued effort and also be kept longer thus freeing my time for more profitable pursuits. :)"

How do you know what is more worth your time than something else?

Thanks! I see here that you have a long row to hoe. Your explanation of objective, subjective, and intrinsic is without context for most of the readers here. They don't "get" it. You need to explain objective better, certainly here, if not at your conference. Arguing A and non-A here as with jdg is not productive.

Moreover, as with "selfishness" your use of the word "subjective" is at odds with the common understanding. You need to clarify that better, as opposed to "objective." By common understanding "objective" means "independent of the observer." How is that not "intrinsic"? (I know the answer. They don't. It is your discussion, not mine. You tell them.)

I think what screws people up the most is the idea of something created out of nothing.

You might note that science is always directed outward, never inward. The human psyche is so variable and complex that it cannot be relied upon to give the same results two times in a row. When trying to predict a result by formulating rules relative to humans the result will always be variable. I call that "Herbie's Theorum." However, there are a few outward directed laws such as supply and demand that give the illusion that economics can be a science. That's what screws people up as badly as the Big Bang.

Subjective here and in philosophical discussions means disconnected from reality. According to the Austrians our economic choices are totally disconnected from reality.

You are contradicting your self. It is impossible to make any progress unless you recognize that A cannot be non-A and A at the same time.

Not at all. My point was that the value of each thing that might be traded is subjective, because if it were objective then no one would ever want to trade away thing X for thing Y if X is worth more than Y.

Hello dbhalling,
This is a great discussion. In regards to number 3: I agree; values are decided by each individual. If both traders do not believe they are each getting more benefit from the trade, they would not follow through. Every person that trades their dollars for anything they buy at the store has done so and believes they have benefited. No one is a loser. If the dollars were worth more than the loaf of bread, one would trade them for another product or substitute. The baker values the dollars more than the bread... I do believe "market prices" (as may be on the price tag) may fluctuate and reflect an estimate of the "collective value" or a snapshot of the market. No doubt marketers or market experience regarding the price the target consumers will pay for any product is well... what the market will bear. I suppose in a way this is a "collective" value, but it is an end not a means and tomorrow it may change. If a producer does not produce a product for a price enough consumers will pay, then the product, as is, will not sell and the producer must adapt.

Now, if I was Robinson Crusoe, first I would build a fish trap/pen so the fish could be caught without my continued effort and also be kept longer thus freeing my time for more profitable pursuits. :)

Regards,
O.A.

So you point above was that economics can only work if all trades are subjective

They you are retracting this statement? "But the belief that a good's value is objective will certainly create problems if accepted -- because it would mean that every trade has a winner and a loser, and therefore that all trading is predatory."

Yes, it is. So?

Really so poorland and richland's exchange is not objectively in both their advantage?

I understand and agree with the principle of comparative advantage, but if you're trying to argue that value is objective I fail to see the connection.

So you are saying that for a trade to objectively provide a profit for both sides it has to be subjective. I think you need to read Ricardo's example on trade. http://www.econlib.org/library/Enc/bi...

Were is the relevant portion:
Say, for example, Poorland can produce one bottle of wine with five hours of labor and one loaf of bread with ten hours. Richland’s workers, on the other hand, are more productive. They produce a bottle of wine with three hours of labor and a loaf of bread with one hour. One might think at first that because Richland requires fewer labor hours to produce either good, it has nothing to gain from trade.

Think again. Poorland’s cost of producing wine, although higher than Richland’s in terms of hours of labor, is lower in terms of bread. For every bottle produced, Poorland gives up half of a loaf, while Richland has to give up three loaves to make a bottle of wine. Therefore, Poorland has a comparative advantage in producing wine. Similarly, for every loaf of bread it produces, Poorland gives up two bottles of wine, but Richland gives up only a third of a bottle. Therefore, Richland has a comparative advantage in producing bread.

If they exchange wine and bread one for one, Poorland can specialize in producing wine and trading some of it to Richland, and Richland can specialize in producing bread. Both Richland and Poorland will be better off than if they had not traded. By shifting, say, ten hours of labor out of producing bread, Poorland gives up the one loaf that this labor could have produced. But the reallocated labor produces two bottles of wine, which will trade for two loaves of bread. Result: trade nets Poorland one additional loaf of bread. Nor does Poorland’s gain come at Richland’s expense. Richland gains also, or else it would not trade. By shifting three hours out of producing wine, Richland cuts wine production by one bottle but increases bread production by three loaves. It trades two of these loaves for Poorland’s two bottles of wine. Richland has one more bottle of wine than it had before, and an extra loaf of bread.

These gains come, Ricardo observed, because each country specializes in producing the good for which its comparative cost is lower.

I have argued it is not a science, but now I think I have hard evidence. Adam Smith as a good friend and philosophical companion of David Hume, who argued that there was not cause and effect. Both Hume and Smith argued that emotions were valid epidemiological tools.

The Austrians were most influenced by Franz Brentano (philosopher) who argued that we could not trust our senses, he also argued that our emotions were valid valid epidemiological tools.

So economics was never intended to be a science.

Which is why economics isn't a science.
There are many more questions that must be asked before any sensible perspective can be obtained. Production is only one phase of economics whereas it cannot exist without the other questions that need to be asked.

A science is defined by the questions that it asks. The most important question in all of economics is what causes real per capita increases in wealth? the second most important question in economics is: What caused the Industrial Revolution?

Unfortunately most of economics has been asking the wrong questions. Here are the standard questions of economics
1) What goods will be produced?

2) How will the goods be produced?

3) For whom are the goods produced?

Hi Straight,

1) Did you read Rand's passage on subjective, intrinsic, and objective values? (Posted above)
2) Prices/values in a free market are determined by valuer and the object. As Rand states above Fundamental to an objective theory of values is the question: Of value to whom and for what? So the value is based on the value to the person doing the valuing based on an objective rational standard of value. The price is set by the actions of the valuers
3) No it is not a collective evaluation the facts, it is a decision by each person. The price may be set by the individual decisions.
The problem with this discussion is that it is starting in the middle of the subject, which is common for economics. Man needs to obtain a minimum number of calories (plus nutrients) to survive. Failure to do so results in death. These needs are objective and they do not disappear when we escape subsistence living nor do our choice suddenly become disconnected from reality. Just because you have enough to eat today does not mean a rational person assumes they will have enough calories tomorrow or next week or next year or next decade. Just because a man is healthy today does not mean he can ignore that people get sick and just because a person has a roof over his head does not mean he can ignore that houses can be destroyed by hurricanes, earthquakes, termites, tidal waves etc. Our needs may become more contingent or pushed into the future but as long as we mortal we have objective needs.
Now if Robinson Crusoe has three fish and he cannot preserve fish to eat more than a day later, it may make no sense to continue fishing that day. (Marginal utility) Crusoe then needs to determine what other project will provide the most return for him, such as digging a well or planting corn or building or improving his dwelling or making more fish hooks or inventing a net or inventing a way to preserve fish for more than a day.
For more see http://hallingblog.com/2016/02/29/eco...

The only thing that makes an economy work is the fact that value is subjective, so that it's possible for each side to make a profit on the same deal.

Marking prices does not mean that the good being sold has an objective value; it is merely a style of negotiating with a large number of people, many of whom aren't comfortable with haggling. You can bet that those marked prices will decrease within days if that good fails to sell as expected, or will increase if it sells out fast.

But the belief that a good's value is objective will certainly create problems if accepted -- because it would mean that every trade has a winner and a loser, and therefore that all trading is predatory. I hadn't heard until now that Objectivists believe such a thing -- and if they do, then how can they live with themselves?