"But computation demands units. And there can be no unit of subjective use-value of commodities. Marginal utility provides no unit of value. the worth of two units of a given commodity is not twice as great as one--although it is necessarily greater or smaller than one. Judgments of value do not measure: they arrange, they grade."
I don't understand. How does marginal utility have no "unit of value"? For instance, my utility of something could be entertainment per price or food per price. Are these not units? What I think he means is that there is no set unit of value, that it varies from person and from good to good such that there is an infinite number of possible units of value. But this is different than saying there are no units of value. I could be misinterpreting this so any clarification would be nice.
"Money calculations have their limits. Money is neither a yardstick of value nor of prices. Money does notmeasure value. Nor are prices measured in money: they are amounts of money."
What does money measure if not value? This is thoroughly confusing to me. Is money not the exchange ratio between different goods? And how else do goods exchange except by perceived value? The only thing I can think of is that the same way a yardstick doesn't not measure yards, it measures distance, money does not measure value, just quantities of value... but how is this different? I don't think I'm right, but thats all I can think of. Again, clarification and explanation would be appreciated.
"It has been well said that, while we used to suffer from social evils, we now suffer from the remedies for them."
F.A. Hayek, The Constitution of Liberty
ChroMattic: As I pointed out everyone can have a different value scale"
Sure, and I guess taking that stance we can assign arbitrary values to anything. But such values are not concrete, but instead are derived arbitrarily, and are incomparable to others. What good is a value if it cannot be measured against other comparable values? Ultimately they are worthless in the context of comparison. Now to yourself, your value system may make perfect sense. You know that you enjoy Phil Collins just as much as you enjoy Michael Jackson, but generally do not like Slayer. To you this ordering system makes sense, to someone else it does not. I believe this is what Mises is referring to and I think he clarifies it in HA.
Also to expand on Jon and Caley's point, price is not in any way a reflection of one's value.
A) Valueation is different from person to person, but price generally may remain consistent. A bottle of water is sold for the same price to the man dieing of thirst, and the man who drank too much.
B) Market prices are formed from a catallactic process and sum a number of criteria. Individual valuation is one of those criteria(including the scarcity of resources, production, ect....) but it is weighed and measured across the entire market, not determined by one single man's activities, but by all men's activities in concert. I wrote up a diagram here....
Another example is this. Simply because a corvette costs 60,000 does not necessarily mean that in all cases it's valued more than food, or water. It also does not necessarily mean it's more preferable to a 50,000 lotus. The costs involved are just but one part of the subjective valuation process.
Also see this
There are no units; its just an ordering of preferences concerning each marginal quantity.
1rst Apple preferred to 2nd Apple preferred to 3rd apple.
That is the logical form all A = some B, all B = some C.
1rst apple C = 6 utils, 2nd apple B = 2 utils, 3rd apple A = 1 utils. Or C = 4 utils, B = 3 utils, A = 2 utils. Or...
Its just a logical indefinite relation. Any numbering will do, so long as C > B > A. The unit C-B does not equal unit B-A, but the ordinal preference ranking holds.
I refer you to Mises' own Theory of Money and Credit, 2nd chapter.
And prices are quantities of one good exchanged for another. They are ratios on which people base decisions of what to produce. Not measurements of ordinal utility.
Alright, another question thats unrelated but I thought of it because of your "less than" and "greater than" brackets.
According to Walter Block I can prefer apples to oranges and oranges to grapes but that does not necessarily mean I prefer apples to grapes, because time has elapsed, or something. Does this affect your answer at all? Or is it just me being silly?
That's Mises's own argument regarding the non-diachronic nature of preference consistency. Preferences change so orders of preference that held before will not later. They're only consistent for a given time.
Freedom of markets is positively correlated with the degree of evolution in any society...
I'm still unsure why marginal utility can't have a unit of value. When I got to a movie my unit of value for that movie is E/P or entertainment per price... is this not a unit of value?
ChroMattic: I'm still unsure why marginal utility can't have a unit of value. When I got to a movie my unit of value for that movie is E/P or entertainment per price... is this not a unit of value?
Describe to me in units how much more valuable chocolate cake is to you over vanilla cake.
3 units of enjoyment over time
Price is not value.
Caley McKibbin: Price is not value.
Than price is...?
What are "units of enjoyment"? You're basically saying, 3 units of utility... Also, prices are ratios of exchange, i.e. one person values the good they're trading away less than the one they stand to gain from the exchange and vice versa for the counterparty. That's all prices indicate, the ratio at which the exchange took place.
ChroMattic: 3 units of enjoyment over time
How did you derive that, and how is not arbitrary? And how can your system be applied to others?
Now you have eaten 5 pieces of chocolate cake, your on the brink of vomiting.
Describe to me in units how much you value chocolate cake now?
IMO put socialism down and read the first 6 chapters of Human Action. Then pick socialism backup.
filc: ChroMattic: 3 units of enjoyment over time How did you derive that, and how is not arbitrary? And how can your system be applied to others? Now you have eaten 5 pieces of chocolate cake, your on the brink of vomiting. Describe to me in units how much you value chocolate cake now?
I derived that from my subjective value scale. My system cannot be applied to others. As I pointed out everyone can have a different value scale, but this is different than saying there are "no units of value". This is what I'm trying to clarify.
After 5 pieces it is -3 enjoyment per time.
filc: IMO put socialism down and read the first 6 chapters of Human Action. Then pick socialism backup.
I would... but I'm already about 100 pages in... thats like 1/5th of Socialism... So I might as well finish.
Jon Irenicus: 3 units of enjoyment over time What are "units of enjoyment"? You're basically saying, 3 units of utility... Also, prices are ratios of exchange, i.e. one person values the good they're trading away less than the one they stand to gain from the exchange and vice versa for the counterparty. That's all prices indicate, the ratio at which the exchange took place.
I said, and I quote, "Is money not the exchange ratio between different goods? And how else do goods exchange except by perceived value?"
And isn't what you're saying just a roundabout way of measuring value?