I’m interested in any ideas on a good name for a firm that values commercial and industrial real estate, machinery & equipment, and intangible assets based on Austrian value theory. I’ve come up with two ideas: Austrian Valuation Consultants and Capital Structure Valuation.
They value it subjectively?
No, only consumer goods are valued subjectively. This firm would value production goods. However, the values of these assets are based on the subjective value of consumer goods (as per Austrian value theory). This would differ from other valuation approaches based on the classical theory, where cost is used as a basis for value.
From a marketing perspective, I’d go w/ a one word name. E.g., an Atlanta businessman started a temp/staffing agency and was fiddling around with the word “standard” and came up with “Randstad.” Maybe you could bowdlerize your original concepts: AVAC, Valcap. You could also bowdlerize an economic term of art. There’s a large engineering firm called Metric, which I always thought sounded pretty slick. You get the idea.
Everything is valued subjectively, including capital. I forget who said this and exactly how it goes, but it was something like “both blades of the scissor [that is, supply and demand] are subjective.”
Shh. Don’t let anyone know about my bad habit of horribly misquoting people.
By the way I think he’s referring to this:
Isn’t that already used, like, every single day?
Yeah, but that’s all I can think of that he may be talking about.
No, all goods are subjectively valued. Capital goods are valued for the wealth they can be exchanged for.
-Jon
Allright, I guess I was a little unclear about what I was looking for.
First of all, I’d like to thank Byzantine for his comment. This is the type of thing that I was looking for.
In regard to how various assets are valued, I’ll use Rothbard’s Man Economy and State as a reference. Rothbard explains the market value of consumer goods in chapter 4: Prices and Consumption. Here he describes how the market value of a consumer good is based on its marginal utility. The firm that I am describing would not be estimating the market value of consumer goods.
Commercial and industrial real estate, machinery & equipment, and intangible business assets are all factors of production. They provide very little utility to the owner apart from the income that they can generate by being incorporated into a production process. For this reason, the value of these assets is based on their discounted marginal value product (DVMP). Rothbard explains this in chapter 7: Production: General Pricing of the Factors, and chapter 9: Production: Particular Factor Prices and Productive Incomes.
Thanks to everyone for your interest.
Yeah but that isn’t to say it’s not subjective valuation. It’s merely instrumental in its nature.
-Jon
I was just being a smartass…really.
How do the non-Austrian firms value factors of production that would make you stand out from the herd?
All firms use one or more of three approaches: the cost approach, the sales comparison approach, and the income capitalization approach. In a nutshell, the cost approach consists of estimating the replacement cost of an asset and subtracting physical deterioration, functional obsolescence, and external obsolescence. This approach is based on the classical school of economics. The sales comparison approach consists of finding simiar assets that have sold recently and adjusting the sale prices to reflect the differences between these sales and the property being appraised. The income capitalization approach consists of calculating the expected net operating income for the property appraised and capitalizing this income at a market capitalization rate. This approach is based on Austrian economics.
My firm would place far more emphasis on the income capitalization approach than on the cost approach and would look at all of the approaches from the point of view of the contribution of the asset to the step in the production process following that in which the asset is used rather than the costs involved in producing the asset.