Was hoping a scholar here could help me out. Can someone do me the great favor of explaining intrinsic value in terms of Austrian Economics? An Austrian would not believe something has intrinsic value correct? I have been reading Rothbard so I believe he states subjective theory of value is the way to go. Does something have intrinsic value? Gold? No? Either way could someone provide a short sweet explaination?
On top of that could someone also clear up the differences between money and currency? I understand money is a function but can’t currency be a function as well? What are the differences? Short and sweet explainations would really help me out a lot.
“Intrinsic value” depends on the context. The ultimate worth of an object is subjective. If nobody wants it, it has no value.
However, when contrasting fiat money to gold, one can say that gold has intrinsic value compared to paper money. In that context it means that, stripped of its use as money, paper fiat money would have almost no [subjective] value, certainly not even close to the number printed on it. Gold on the other hand has [subjective] value even if it is not legal money.
money is market created… history shows people have used gold,silver, crops,animals, rare rocks, etc. as money…
in a free market system, or atleast somewhat free market, currency may represent money… for example, you used to be able to cash in your dollars(currency) for gold (money)… in today’s banking system, the US currency is backed up by nothing… if government, somehow, vanished tomorrow, do you think your currency is useful? Maybe, if someone chooses to accept it, but that would be bad choice for that person because the currency is backed by nothing…
If i gave you a loaf of bread for some gold and you accept the trade… you are valuing the bread more than the gold, and i am valuing the gold more than the bread… then if i go to a different person and offer the bread for the same amount of gold as i did to you and the person rejects the trade, he obviously values his gold more than my bread, but you value my bread more than your gold… therefore, gold, as well as everything, has subjective value…
here, http://mises.org/journals/qjae/pdf/qjae13_2_5.pdf, no less an expert than Mark Thornton in the Quarterly Journal of Austrian Economics, uses “intrinsic value” when discussing coins exactly as I described, both in the body of the article and in footnote 1.
in this article, http://mises.org/daily/4800, Rothbard uses the phrase the way I said. He was stating John Law’s ideas, and clearly disagrees with them.
here, http://mises.org/daily/3803, Mises himself discusses the concept I mentioned, although he calls it “industrial demand”.
Apparently “intrinsic value” is a very convenient phrase, and the users of it when discussing currency and fiat money assume some sophistication on the part of their audience, so that they will not be confused
Dave, why do you cite a passage of Mises’ in which he does NOT use the phrase “intrinsic value” to support your contention that “intrinsic value” is a convenient phrase?
Aww, Danny, you know better than that. The other links were to show its use as I described. The Mises link, as I clearly pointed out, was to show he agreed with the concept, though he called it by a different name.
As an example of what is going on, a “strike” in baseball means one thing, and in bowling means something completely different. It all depends on the context. Are you talking about baseball or bowling.
So too, “intrinsic value” means two different things, depending on the context. Are you talking about how the value of an object is determined, or about the advantages and disadvantages of various types of currency.
Dave, appeals to authority are a waste of our time. I welcome Mark Thornton to join us in the community and explain what he means by 'intrinsic value".
Value cannot be intrinsic and subjective at the same time. And we, as good Misesians and Austrians, know that value is subjective.
No, technically speaking, the concept is absolutely meaningless. At the same time, though, people use the term because it can be convenient, especially when talking to the general public (which is typically unfamiliar with economic doctrine). What they’re trying to express is that the supply of gold is not arbitrarily controlled by some central authority.
All values are subjective from an Austrian perspective.
The “intrinsic” value of a 100 dollar bill is next to nothing because it is valued mainly for its value in exchange. That value is still subjective though.