Value in a Free Market

Here is a response to a comment posted by TheOneSpam on May 30, 2016, on “What If There Were No Prices?“, a Learn Liberty video by Tomasz Kaye and me:

+TheOneSpam I’m one of the authors of this video; I like much of what you say; here are my responses to your comments:

  • “how “value” could be estimated without capitalism.” – Value, we economists say, is subjective, meaning different people value things differently; hence there is no “true value” for anything. What free markets give us is not some “true value”—that makes no sense because value is subjective—but a decent approximation of its value to the person next most willing to buy one more and its cost to the person next most willing to sell one more, at that particular time and place. That piece of information, that market price, is extremely valuable because we have no better way to estimate how much others value the good or service.
  • I agree that lots of people spend money they don’t have on crap they don’t need, and I regret it as you do. But I also think 1) they should be free to act so unwisely with their own and 2) no one else is more likely to know what a person wants or needs than that person herself.
  • I have to disagree with you on the power of marketing to get people to buy what they really don’t want (e.g. an “over-priced Apple product”). Yes, marketing sometimes does that, but more often it provides people very useful information about what’s out there, so that they can make an informed choice. I see no way to make sure the valuable information gets out to people who need it without inducing some unwise people to buy what really won’t be worth to them the money they spend on it. People make mistakes.
  • “How about government subsidies and grants?” you ask. That’s easy. The more of them, the less free the market and the more prices are distorted. We oppose all government subsidies and grants; they have no place in a free market.
  • Your point about environmental costs is well-taken. People should not be permitted to impose environmental harms on others. The best general rule for reducing such environmental harms is to define and enforce property rights to everything possible, including lakes and rivers and even air, where that is possible, so that those harmed can sue and those that do the harm must pay. The worst general rule for reducing such environmental harms is to have resources commonly owned. So here again, the closer we can get to a true free market, meaning a set of rules that maximizes private ownership and freedom of exchange, the healthier our environment will be.
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