Settle a bet- more likely; enrich a debate.

A friend of mine (a philosophy PhD with a penchant for economics) and I have been arguing for some time on the same topic. He is a libertarian with Austrian-perspective economics, I am a left leaning liberal with Keynesian economics. It should not take a genius to guess at the bone of contention. Every time we meet up: we drink and eat, and perhaps there is a while- an entente cordiale- in which more mundane things are discussed, but inevitably; unfailingly, we will find a way to touch on it- some news story, or some reference to my teaching, and we are off: the remainder of the evening is reserved for argument. All is friendly, of course, nothing personal. But what follows is certainly spirited.

Last week, I think I got him.

Or at least I got close enough to make him sweat- close enough to think I was on to something: close enough to, I think, merit further research. My argument, heavily precised, was this:

  1. The Austrian perspective treats the market as a processor of value information: from producer to consumer and back, there is a flow of information in prices and in demand about the value of things; transferred in such a way that things are produced and distributed in proportion to their value.

  2. But, for some, the 'real value' of most of what they purchase does not reflect the price on the ticket.

  3. The ability to recognise 'real value' strictly increases by education.

  4. I appeal to evidence: the continuing failures of the free market model (and this is the part most heavily precised), as well as to the internal logic of the system, to claim that the buying in crowds of fools, and misguided attempts to second guess them, stop this 'processor of value information' from working correctly. The machine makes mistakes, when its inputs are faulty.

  5. Realistically, markets will never produce even close to 50% private education.

  6. Therefore Austrian perspective economists should demand better public education

His reply

My grasp of economics is perhaps not as bad as my friend would often have me believe, as he did not attack my economics. Instead he claimed that there is no such thing as 'real value', that value was value by definition, as both parties enter an exchange voluntarily. He also claimed that education does not have constant value, but this is, by a slightly convoluted route, contingent on his first point.


What I'm after

The reader will note that, hitherto, 'real value' has appeared in this question in inverted commas. This is because the conversation rather petered out after his reply, as I have never been anywhere near ontology- I simply could not come close to justifying my view: that real value represents as much a reality as truth itself- varying in time, place and possibly perspective, but all but demonstrably real.

I have a naive conception of 'real value' as 'noumenon to the mind of the market' and a copypaste of Kant's arguments are as close as I could come to defending my view.

I am looking for a survey on the ontology of 'real value' as I have implicated here. Readability (for a relative novice in ontology), relevance to the argument and available-for-freeness are all good criteria. Comments on the wider argument are welcome, but please be aware that this is the condensed banter of an evening and is, as such, not a full argument. I am also not looking for other, disjoint, criticisms of libertarianism- If you know of one that would convince a libertarian, I urge you to take it to your nearest politician: otherwise it is of no use as far as I am concerned.

  • I have reformulated your title I hope somewhat more clearly (though feel free to improve or rollback of course) as well as maybe get it a little bit more attention. Just in passing -- maybe you can trim or narrow it down a bit? You are always welcome to ask more questions :)
    – Joseph Weissman
    Aug 26, 2011 at 1:59

4 Answers 4


Would it be useful to begin where Marx begins, with the idea that each commodity has a Use-Value, an Exchange-Value, a Value and a Price?

I realize that Marx may not be the best authority to bring in from a tactical perspective, but I think that he gets at the heart of the value problem.


As with so many topics in philosophy, I am unconvinced that we yet know what value is in any meaningful sense, and I am deeply skeptical that the answers will come purely from philosophy alone. The reason is that we complicated partly-rational organic beings are the ones doing the valuing, and we are not consciously aware of everything we value (and thus cannot merely introspect), and do not know in detail how value is computed in our brains (though dopamine neurons are clearly extremely important).

So I think if you really want to get to the truth of the matter, one simply has to wait (possibly becoming a neurophilosopher, cognitive scientist, or the like, if one wants to shorten the wait a little) until we understand the cognitive foundation upon which value is built.

If one merely wishes to have some entertaining conversations, and perhaps dispel some of the more outlandish ideas regarding value, then a survey text would be useful. I don't know of any (aside from Wikipedia), and would also be interested in references.


if i understand what you said (which i may not have)

your friends argument is eating it's own tail,

he is saying that the system determines real value and then when you ask him to clarify how he defines real value he is saying "it's whatever the system decides it is"

i hope your friend believes in god because he's using the same argument that i use when i want to get a rise out of an atheist.

if any of what i just said offends anyone then please feel free to edit it out, i will not take offense as it is not my intent to offend.

i think what may have been missed is exactly what he accused you (if i understood correctly) of saying, that real value is defined by a persons own perspective.

so, increasing education would bring that value that the described market places on goods more in line with the value that an educated person would put on them.

there may be an objective value when you are talking about life or death, painful or pleasurable, chaos or order,

but objectively speaking there is no difference between two buck chuck and whatever you guys were drinking at that party.

the market is determining the value of luxury goods using the same formula it is using to determining the price of grain, heating costs, and law enforcement salaries.

hope that helps ... hope i understood your question correctly. :)


I would say that there are three kinds of 'value' at play here.

1) The price that is charged for a commodity. This is what your friend was referring to in 1. Usually, it closely approximates the intersection of the supply and demand curves, but that is not always the case. In somewhat simplistic terms, the value of a commodity is what people are willing to pay for it.

2) The price that a particular individual is willing to pay for a commodity. Of course, this price may be higher or lower than what the average consumer is willing to pay. Obviously, this kind of value is closely related to 1).

3) The third kind of value is different than the first two and, essentially, is the benefit that a commodity will have to a person. Of course, benefit is a bit of a difficult philosophical problem. To me, it is, within applied philosophy, satisfactory to say that benefit is the difference in pleasure, brought about by some factor X, from what a person would have obtained without X. Ie. benefit = (pleasure with X) - (pleasure without X). Benefit can therefore of course be negative if X makes your situation worse. It's important to note that pleasure is calculated as the total pleasure that a person will experience over the remainder of their life (and thus shortening your lifespan decreases pleasure), and also that pleasure is calculated as (pleasure - pain) so that pain factors in as well.

If I understand your reasoning correctly, the concept of benefit is equivalent to your concept of 'real value'. Thus interpreted, the concept of real value/benefit is referred to as utility within economics and philosophy, and is probably most fully explored within the philosophy of utilitarianism. However, you will find that in both fields, especially economics, defining exactly what utility is is often neglected. You will also find that, if you scrutinize the concept of utility, it comes down to pain and pleasure (see also hedonism).

You seem to be taking the utilitarian perspective here and saying that we should adopt policies that maximize the collective benefit. There are multiple reasons why, for a particular person, values 2) and 3), as ascribed to a particular commodity, might not be congruent, but they all come down to a failure to accurately evaluate the benefit of the commodity relative to other available commodities (see opportunity cost). A special case where people fail at this evaluation is when they erroneously bias immediate pleasure over long term pleasure (which happens largely due to evolutionary reasons that reflect (and over-bias) the reality that neither future life, nor the success of long-term efforts, are guaranteed). More generally, failure at this evaluation results from ignorance: ignorance of the benefit of commodity A, of the benefits of commodities other than A, and ignorance of even the existence of commodities. Ignorance, in turn, can result from lack of exposure to information, inability to interpret information, or deception. Since education addresses most--I would argue all--of the above stumbling blocks to accurate assessment of utility, I would guess that you already have a good awareness of those.

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