tag:blogger.com,1999:blog-6619808580341005853.post226976280234721335..comments2010-11-15T22:40:18.895-08:00Comments on Dynamic Equilibria: Economic theory, part the firstAnonymoushttp://www.blogger.com/profile/11029125710273972322noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-6619808580341005853.post-89772086103122700382009-01-30T13:51:00.000-08:002009-01-30T13:51:00.000-08:00Value may be intangible, but it can be consumed, j...Value may be intangible, but it can be consumed, just as it can be created. Value is not an intrinsic property of an object, but instead is an intrinsic property of the relationship of an individual to a good or service. So the transformation of a good from one form to another, or a difference in the quality of a service, will make either a positive or negative difference in the value any individual places on that good or service. With reference to a population, this manifests itself as a difference in the integral of the percieved value over the population, constrained to the effective demand. A change in the nature of a good will effect a change in the distribution of rational pricing. If I buy an apple, I collapse the cost distribution to a single point represented by the price I paid. The value distribution among the market for people who may want to buy that apple may well include people who are willing to pay more than my cost. It's rational for me to resell that apple to one of those people at a profit. Presumably, those people did not have access to or knowledge of where I bought my apple, thus providing me an opportunity for profit via arbitrage. If I polish that apple, or bake it up with some cinnamon and sugar, then it's very possible that the population of those willing to pay more than my cost will expand, making it rational for me to increase the price I charge. Thus, value has been created. If, on the other hand, I eat the apple and pass it through my digestive tract, then the distribution of how the population will value what remains is almost certain to fall entirely below the cost I paid for it, thus meaning that value has been consumed.<BR/><BR/>So, the universe isn't in a steady state with respect to value, because it can be both consumed and created. There is an important thing to note that I failed to emphasize. Money flows in the opposite direction to value, and is also a unit of measurement for value, but the flow is necessarily asymmetric. Given freedom, no one will pay more money for something than the value they place on it. They will, however, pay what the market demands if the value they place on the good is larger.<BR/><BR/>I can easily visualize the graphical representations of these distribution graphs in my head. Someday I hope to find software that will let me share those mental images with everyone else. So far, that search has been fruitless (although, in all fairness, it hasn't been a particularly aggressive search...)Anonymoushttps://www.blogger.com/profile/11029125710273972322noreply@blogger.comtag:blogger.com,1999:blog-6619808580341005853.post-62394403920826520172009-01-28T06:19:00.000-08:002009-01-28T06:19:00.000-08:00Very good. If you're so inclined, go have a perus...Very good. If you're so inclined, go have a peruse of mises.org<BR/><BR/>Some few comments - <BR/>value is, as you noted, in the eye of the beholder. It is not an intrinsic property of the thing being considered, else there would never be any question as to price or trade.<BR/><BR/>"...consume value at the same rate as it is created." I disagree. Value is a perception, an intangible, and cannot be 'consumed'. There is no limit to the amount of value I can invoke at will, merely a limit on my ability to demonstrate it with money, time, or the ultimate measure of time, my life. Likewise there is no limitation on my ability to change my Value arbirtarily, at whim. You could try to define other terms for this 'Stuff' you're trying to find, the Goo which flows the other way from money, but 'value' is close enough for now. If it were consumed then the universe would be in a 'steady state' with a balanced equation and (this is the important part) nobody's standard of living would ever increase. The outward evidence of value is wealth, which is the increase in the standard of living. As this is being noticeably improved over time the equation must not be balanced - and this is a Good Thing. This is the magic which most economists completely fail to understand: it is NOT a zero-sum game.LWOhttps://www.blogger.com/profile/08520112114484448267noreply@blogger.com