When you define value by how much people are willing to pay for something in a market, then yes. Itâs very much an empty tautology.
You can criticize other notions of how much something ought to be worth as nebulous, but saying we ought to treat everything as worth its price tag is only an improvement in that itâs easy to measure a number. Em, easy to measure once you have a market organized. In retrospect once sales have taken place. Without any non-market factors distorting things, and making some simplifying assumptions that donât really match real world conditions very well. So, not actually easy at all.
It also leads to very perverse concepts of value at odds with most intuitive notion. Say I have a painting by Raphael that is priced for millions. But one day an expert looks at it, and they conclude itâs actually a forgery worth a few hundred at best. Has he cost me anything? Iâd say no; the forger suckered me, and all the expert has done is told me the truth that my painting was never worth much. Yet stick to the market notion of value, and youâd have to say yes, my assets dropped millions in value because of what this jerk said.
This sounds stupid for rare paintings, because it is, and yet you can see it come up in practice. For instance there are the various cases where companies offered security services that didnât work, and when people stood a chance of finding out, they tried to sue them or use contracts to muzzle them. Because the market value in a company isnât from what it does, just what people think.
Whole economies are subject to this. To hear some economists describe it, the subprime mortgage crisis was a complex and subtle problem, and if any mistakes were made it can only be the way the government tried to allow poor people to get houses. But the heart of it seems really simple. Banks were trading a ton of assets they were pretending were worth a lot, and when people checked they werenât; not a loss, but a discovery that there was nothing there. That might also suggest ways to prevent similar problems, but not to those who treat all market values as right by definition.
And, of course, it amounts to covering your ears and screaming when faced with possible value that canât be traded in a market. Having a healthy and educated population is extremely worthwhile by any other standard; even if you canât see past budgets, governments that invest in it still get positive returns. But those things arenât really fungible, so if you only accept market value, you must assume all those benefits away. And surprise: people who ignore them end up giving nonsensical advice about them.
âEverything is worth what is purchaser will pay for itâ makes for an ok first approximation on a small scale, but it really doesnât work well in general. The various failures of classical economics predictions to agree with observed reality makes that plain, and at that point, deriding any other notions as âhardly scientificâ is just an ironic joke.
