So it’s impossible for you to imagine why a producer would lower his price in order to attract more of this "demand"? Because such a situation would provide an example where the volume of demanders influenced the price? We would have to ignore the fact that this occurs every day as a normal/standard practice on the market in bargaining, exchange, and negotiating the consumers interests over various products?
It’s only obsured if you ignore reality I guess. Clicky the linky!
market prices are formed by bargaining between marginal pairs of buyers and sellers.
True
It seems that you are disputing the insight that subjective value for economic goods motivates activity in the market
No not at all. subjective value does indeed ‘motivate activity’, but such an ambiguous term could mean all sort of things.
and is the most fundamental force…
Subjective valuation is a nessesary condition for a good to be bought to market. I would not say it is the only condition, and I do not know which of the conditions are most fundamental
Production processes come to carry costs only because other entrepreneurs would bid away your capital goods to fulfill what they expect are their customers needs, and so to overcome this competition of theirs for the capital goods (if you will!) you must bid more than they would.
I’m not comfortable with the metaphorical language of ‘bidding’. I would go with your initial definition - “production processes come to cary costs (prices) because of bargaining between marginal pairs of buyers and sellers of capital goods”
The cost prices (capital goods prices) are emergent due to subjective valuations of buyers and sellers. Both blades of supply and demand as you conceive them are formed by the more fundamental phenomena of subjective value…
So you claim. But I did not get anything from your post that proved this claim to me. All that I get from your post is a shifting of the question back to the arena of capital goods rather than consumer goods. But we just enter an infinate regress.
Is the Austrian theory of prices just an arbitrary assertion to overcome this infinite regress? That’s what it looks like to me.
What is more fundamental then subjective prefernece of the consumer? Can you provide an example of another factor that might be more fundamental? In which situation could you imagine where the subjective valuation was not to buy but other factors caused a consumer to buy anyway? Without losing our grounding in logic there is no case where that would occur.
I would again, recommend reading Lessons For Young Economists, which I linked to previously. He covers a basic example of 4 people, and how their subjective preferences combine to get an objective price on the marketplace.
The cost prices (capital goods prices) are emergent due to subjective valuations of buyers and sellers. Both blades of supply and demand as you conceive them are formed by the more fundamental phenomena of subjective value…
Sorry, I am having trouble understanding what you arent understanding… Why do prices exist for any goods at all? If you accept that coal has a price because this guy thinks he might want it to heat his house and that guy thinks he might want it to make steel with then you understand that the ‘príce-cost’ of a capital good has emerged because of subjective valuations of buyers and sellers. What else is there to say?
Recognise, this analysis is a huge improvement (by virtue of being true!) over failed approaches such as labour theory of value… The coal does not command a price simply because it has stored up labour in it… with stored up labour being somekind of bizarro world objective cost…
Divers dive for pearls because pearls are valued, and people pay divers to overcome the divers opportunity costs( they could have dont other work). It is not the case that pearls are valued because people dive for them …
Here you set up a thought experiment with an exogenous variable (price) and allow the endogenous variable (demand) to vary as you adjust the former.
but you could have easily set up the exactli inverse experiment…
But from the perspective of the individual, price IS exogenous. Now you may claim that for a producer demand is exogenous, but producers still have to bear in mind the prices they pay for capital goods - which to the individual producer is also exogenous.
So, you say that I could set up an inverse experiment. Lets do that together.
A producer is selling a good at a certain price, he has a given number of demanders. Suddenly the amount of demand increases because people want more of it. Now let me ask you a question - are we talking about an increase in demand due to a general increase of effective demand (i.e a shift in the demand curve to the right)?, or are we talking about unchanged effective demand but a change in preferences (i.e a change in the quantity of goods demanded)?
@the OP, I think it’s important to note that Austrians(at least not all of them) don’t entirely deny the influence costs have in determining prices, especially for factors with many uses, though they do not constitute an ultimate causal factor in price formation, as everything eventually boils down to valuation and appraisement. Cf. George Reisman and Eugen von Bohm Bawerk on the Law of Costs.
business people are incentivised to enter into the market of steel production… this is called responding to consumer valuation…the entrepreneours that move out of their prior activities and into steel production do so in an attempt to satisfy what they perceive as a revolution in consumer valuation and hence in the structure of production necessary to serve that…
It is not as you might have had it, that consumer values chase production restoring an equilibium properly ascribable to some fixed ‘mode of production’ to which consumer valuation responds … rather production chases anticipated consumer valuation and this process does not cease, it is endless…
In which situation could you imagine where the subjective valuation was not to buy but other factors caused a consumer to buy anyway?
There is no situation in which the valuation was ‘not to buy’ yet the good gets bought anyway. That’s why I said it was a neccesary condition. But ‘without losing our grounding lin logic’, a condition that is neccesary is not neccessarily fundamental (a definition of ‘fundamental’ is probabley needed here). That is to say, there could exist other neccesary conditions. On what grounds do we say that one neccesary condition is more ‘fundamental’ than the other?
Is Labour not a neccesary condition? Have Austrians now adopted the labour theory of value? I’m guessing not. So on what grounds is subjective valuation ‘more fundamental’ a condition than anything else?
In the case of labour, there is a clear heirarchy because of causal structure…
labour is employed because of subjective valuation…
Subjective Valuation leads to examples of labouring…
There is a clear fundamental and a secondary phenomena.
Is this so hard to agree to?
Austrians(at least not all of them) don’t entirely deny the influence costs have in determining prices, especially for factors with many uses, though they do not constitute an ultimate causal factor in price formation, as everything eventually boils down to valuation and appraisement.
See my last post for a response that is applicable to this. My question is about why subjective valuation is claimed to be more important than any other determining factor. It appears artbitrary.
does that help?
Example being?
For if there was no prior subjective valuation from both the side of the purchaser and the seller all of the production that goes into the product and all of the effor that goes into even considering an exchange would never even have existed. It is at the bottom. From subjective valuation comes everything else. You cannot have anything else without a preference to do so first.
But you would never consider the act of labor without first having a preference/desire to produce and foster someone else’s prefernece to buy.
In which situation can you describe where labor is present but that subjective valuation did not drive that labor into existence in the first place?
Can you provide an example of a condition that does not depend on the prior existence of some type of subjective valuation? I doubt you could imagine such a thing.
It is not as you might have had it, that consumer values chase production restoring an equilibium properly ascribable to some fixed ‘mode of production’ to which consumer valuation responds … rather production chases anticipated consumer valuation and this process does not cease, it is endless…
I have not said that consumer valuation chases production. Consumer valuations determine what percent of the overall capital infrastructure is dedicated to a given task. But price is not linked to how much somthing is ‘prefered’. Think of it this way
There is an economy with 10 producers, 3 goods (toasters, kettles and hair-dryers), and 100 consumers.
50 consumers want to buy toasters, 30 want to buy kettles, 20 want hair-dryers. Given a competitive market, the proportion of productive energies spent making these goods should be 50%, 30%, 20%.
This is a good example of how preferences determine the structure of production. However, there is nothing in this story that tells us what the price of each good will be. It is not true to say that kettles are a third more expensive that hair-dryers, or that a hair-dryer is two fifths the price of a toaster. The prices of each are unknown and cannot be duduced from a set of preferences even if we know them.
In the case of labour, there is a clear heirarchy because of causal structure…
You will have to explain this a bit more. I am not sure what you mean.
labour is employed because of subjective valuation…
labour is employed because of subjective valuation…
Subjective Valuation leads to examples of labouring…
There is a clear fundamental and a secondary phenomena.
Is this so hard to agree to?
Yes it is VERY hard to agree with because it is circular logic. You are telling me that subjective valuation is more fundamental than labour because labour is subjectively valued.
My question is about why subjective valuation is claimed to be more important than any other determining factor.
Because consumers determine the direction of production.
However, there is nothing in this story that tells us what the price of each good will be. It is not true to say that kettles are a third more expensive that >>hair-dryers, or that a hair-dryer is two fifths the price of a toaster. The prices of each are unknown and cannot be duduced from a set of preferences >>even if we know them.
You are right and wrong. in your example with your limited info there is nothing that tells us what the price of each good will be. But if you could know the resources available, and if you had everyones set of preferences and expectations then you would be able to arive at the price solution. This is not feasible in reality, but heyho.
The prices of each are unknown and cannot be duduced from a set of preferences even if we know them.
because we lack other info…what do you think is left out? I want to check that what you come up with is not subjective value or an outcome of it…
Yes it is VERY hard to agree with because it is circular logic. You are telling me that subjective valuation is more fundamental than labour because >>labour is subjectively valued.
No dude. read it slowly. people labour , they perform acts only because stuff happens in the meat in their heads.
Preferences (Preference Scales) are not just an ordinal ranking of the consumer (final) goods, they are an ordinal ranking of the good TIED with a value (what someone is willing to give up for this good). For the third time, go check out the example in Lessons For The Young Economist.
Edit: I will also look up a Salerno speech, I remember him explaining Preference Scales really well in one of them.. I should have the link a little later.
And I do remember Rothbard writing/drawing examples of them somewhere, I just forget exactly where.
Go start back at the basic Crusoe Economics and build up from there.
You cannot have anything else without a preference to do so first.
But you would never consider the act of labor without first having a preference/desire to produce and foster someone else’s prefernece to buy.
In which situation can you describe where labor is present but that subjective valuation did not drive that labor into existence in the first place?
Can you provide an example of a condition that does not depend on the prior existence of some type of subjective valuation? I doubt you could imagine such a thing.
OK, I will admit you are correct on this point. Prefering one act over another is prior to labouring in causality, and this would make it more ‘fundamental’ so to speak. However, being causally prior to labour does not imply that prices are DETERMINED by ‘valuation’ whatever that means.
I think the Austrians rejection of ‘utils’ is very insightful, but the conclusion is that Preferences can only determine ratios of productive activity, not prices themsleves.