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.

5 Comments

  1. asexymind

    and because our subjective valuations are different, trade is made of each of us “winning” that difference in every transaction. 

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