Is Economic Value Subjective?

Objects have no value without a valuer. It is a valuer's desire for an object that allows us to impute that object with a value.

We have the economists of the Austrian School of Economics to primarily thank for this “subjective theory of value.” Their insight explains how the market enriches those who trade. Each time a trade occurs in the market, each party to the transaction values what he receives more than what he gives.

Subjective valuation serves as a basis of modern economics because it is so right as a first approximation of what is happening, but to go further with the brilliance of the Austrian School's economics, we need to reexamine some objective contributions to economic value.

Value is relational – as important as its subjective character is, it is ultimately about a relationship that exists between the valuer (the subject) and the valued (the object). Sometimes it has the very subjective nature of a simple desire of the valuer, but sometimes it also reveals the specific relationship between the valuer and the object.

For example, the Austrians explain interest as the difference between having a good in the present and having that same good sometime in the future. They call this difference “time preference.” The amount of time preference is a result of the subject's mind, but the fact that it exists and must exist is a result of the object's location in time.

Like time preference, it can be said that there is also a space preference. A subject naturally prefers a pizza from a certain chain restaurant near his home in Denver to the same pizza from the same chain restaurant in New York. Because of the objective condition of space, the one in New York is virtually valueless to him.

Murray Rothbard would say that the pizzas are actually different and their different values can be attributed solely to their being different objects. He argued that ice in winter is a different object than it is in summer, explaining why it is valueless in winter and refreshingly valuable in summer. If it has a different value it must be a different object. But, preserved in a freezer, it is, in fact, exactly the same object. In this case, Rothard, genius though he was, was stretching subjectivity in vain to explain all value differences. The ice's value has changed because it is the relationship between the subject and object, between a man and the ice positioned in time, that has changed and it is the relationship itself that creates the value.

Time preference is a preference for the SAME object located at a more proximate point in time. The object is not a different object because the subject has to wait for it.

Economic value comes from a relationship – a relationship that could not exist without the subjective intent of the valuer but must also involve the object's existence in time and space.