1. Subjective Value
Economists say that value is subjective. But what do they mean by that? Why is this concept so significant? In the above video, Prof. Don Boudreaux demonstrates the concept by comparing a Che Guevara t-shirt and a Milton Friedman t-shirt. Most people would value these shirts differently, and would be willing to pay more for one than the other. Yet the shirts are identical in terms of the labor and resources required to produce them. So what accounts for the difference in value? As Prof. Boudreaux explains, the key factor is consumer preference.
- Artwork and the Subjective Theory of Value [Article]: Yumi Kim emphasizes that the "value we place on goods and services is determined by the individual who is evaluating."
- Subjective-Value Theory [Article]: Robert P. Murphy explains how individual subject valuations lead to the formation of prices.
- The Relentless Subjectivity of Value [Article]: Max Borders emphasizes the importance of time and context when conducting economic analysis.
- Unearned Riches [Article]: Leonard E. Read masterfully demonstrates the subjectivity of value and the blessings of trade.
- How Markets Work [Article]: Eamonn Butler explains the fundamentals of markets and the benefits associated with market transactions (found on pp. 17-25).
- Principles of Economics [Book]: In this book, first published in 1871, Carl Menger was one of the first intellectuals to explain subjective value theory.
Use these questions to enhance your understanding of the topic. We recommend watching the featured video first; the suggested resources will also help.