I'd like to present a theory on value; let me know what you think. I'll call it "Zach's Theory of Value"; someone else has most likely come up with it first, and as soon as someone points out who it was, I'll gladly note that in this topic. As far as I know, the work is original, but who knows-- I might have heard it in passing one day and forgot my source.
I argue that all value is subjective, and most value is subjectively relative. Let's stay with the simple, primary element for now, subjectively relative value. Rather than give a definitional or axiomatic argument, I'll argue by example.
Say that there are two parties: Band X and the Groupie. For now, assume that Band X directly sells the tickets; while in actuality the process is much more complex, the complexity can be accounted for by this system. For Band X, a ticket is worth, say, $30; considering their time and their investment(s), that's about the price point per ticket where it's worthwhile to them to have the concert. For the Groupie, a ticket is worth $75; they love Band X, and it's absolutely worth 10 hours of work to go hear the band. If Band X sells the ticket for $50, Band X gains $20 in subjective value (they sold a $30 ticket for $50), while the Groupie gained $25 in subjective value (they acquired a $75 ticket for $50).
Say that a ticket scalper decides to get in the fray. He purchases all the tickets from Band X for $50; thus, Band X acquires $20 in subjective value (they sold a $30 ticket for $50). The ticket scalper then sells the tickets to Groupies, for whom the tickets are worth $75, at $60 a pop. The ticket scalper gains subjective value (they sold a ticket that they paid $50 for at a $60 price point), and the Groupies gain subjective value (they gain a ticket that's worth $75 to them for $60).
I'm arguing that mutually beneficial voluntary free market transactions, such as the ones I described, generally result in the net creation of subjective value. The first transaction, without the ticket scalper, netted $45 of subjective value-- $25 for the Groupie and $20 for the Band. The second transaction, with the ticket scalper, netted $45 in value as well-- $20 for the Band, $10 for the Scalper, and $15 for the Groupie.
Therefore, transactions are capable of generating subjective value. Adding middlemen to the mix, such as ticket scalpers, redistributes that subjective value, but it does not actually decrease the subjective value generated.
There's all sorts of fun implications from this argument, and several places where we could go, but I'd like to start with that, and perhaps go further if there's interest in the issue. Thoughts?
Wednesday, October 7, 2009
Posted by Zach Sherwin at 4:31 PM