no third solution

Blogging about liberty, anarchy, economics and politics

Value is Imputed Backwards

August 10th, 2006

Craig Depken understands Wieser’s (and Menger’s) theory of imputation.

[T]he car made gasoline more valuable to the end consumer, i.e., the end consumer was willing to pay more for gasoline given its new use.

Before the car gasoline was, perhaps, only used for light and heat. However nice light and heat, the ability to motor across the countryside was and is a very valuable alternative use of the same product.

The theory of imputed value suggests that the value of an object is determined subjectively by consumers at the margins – and it is this subjective valuation that determines the prices entrepreneurs are willing to pay for factor inputs. This contrasts greatly with the classical economists from which Marx borrowed in forming his “Labor Theory” of value, that labor was the only factor capable of adding value to a good or material, and consequently there was a fundamental value of a thing based on the amount of labor expended in its production or procurement.

This line of reasoning suggests, of course, that digging holes and subsequently filling them in is “valuable.” Politicians’ and paving contractors’ opinions notwithstanding, it is clearly not the case. Unfortunately for the rest of us the argument persists.

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no third solution

Blogging about liberty, anarchy, economics and politics