Subjective vs Objective Theory of Value

Economics
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I recently watched these two web-comic slide shows on Ludwig von Mises’ Human Action which described one of the cornerstones of Austrian Economics: Subjective Theory of Value and Marginal Utility.

http://anthropica.blogspot.com/2009/10/hum…ive-theory.html

http://anthropica.blogspot.com/2009/10/hum…nal-theory.html

I’m not sure I understand the difference between Ayn Rand’s Objective Theory of Value other than it seems to be a semantic difference between one being described as “irrational whim worship” versus “that which an individual judges to be in his self interest.” Isn’t the latter what Mises meant by his Subjective theory anyway? Or is there some elaborate epistemological difference?

If values are that which one acts to gain or keep, aren’t values subjective by definition?

What is the difference between Rand’s Objective Theory of Values and Mises’ Subjective Theory of Values?

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If values are that which one acts to gain or keep, aren’t values subjective by definition?

Objective/subjective are theories about the thinking process that leads up to you valuing certain things. (Of course, once one accepts one theory or the other, it can then affect your future thinking.) Saying a value is subjective means that you chose it without regard to any facts in reality, you simply felt like it… so, if you are choosing to eat food today you might choose to eat poison tomorrow and there is no way to say that one is right and the other is wrong.

As for Mises, try search; there is a thread specifically about his subjective theory. Basically, one should simply ignore Mises the philosopher and read Mises the economist.

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First off you are equivocating Austrian economic theory of value with Rand’s ethical theory of value, which are two different contexts.

All values imply and require the existence of a valuer, so in this sense all values are held by a subject and are subjective. But just as the arbitrary must be rejected in the search for truth, arbitrary values must also be rejected. An objective value is one held for a reason, a valid rational life-supporting reason. You should know how you came to hold a particular value and how it relates to your other values. This is true in ethics, and it remains true in economics.

Value-free economics explicitly disavows all such calculations. Value-free economics tries to keep itself segregated and compartmented away from other human knowledge, violating the need to integrate all knowledge.

All values are subjective, but a subset are also objective. A value purported to be objective but not held by any subject would be an intrinsic value, but there are no such values (value requires a valuer).

2 Likes
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“I’m not sure I understand the difference between Ayn Rand’s Objective Theory of Value other than it seems to be a semantic difference between one being described as “irrational whim worship” versus “that which an individual judges to be in his self interest.” Isn’t the latter what Mises meant by his Subjective theory anyway? Or is there some elaborate epistemological difference?”

The definition of the subjective theory of value is, “the view that economic value is not inherent property of a good. Rather it is determined by the preferences of those who wish to aquire it.”

So in other words there is no pre-existing value that is intrinsic to a good that is independent of human judgement and preference. A good can posses no value beyond that which one can utilize it for their purposes. This is why it is a subjective theory of value, because I can tell you that I prefer one lobster to one crab, but I can’t quantify how much more I prefer it. The customers values are ordinal rather than cardinal, in other words ranked, not numbered. I cannot say that one lobster has X amount more units of utility than one crab. It is impossible to compare my preference for lobster with yours for crab. Therefore you cannot make interpersonal utility comparisons.

That is what subjective refers to in austrian economics.

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So in other words there is no pre-existing value that is intrinsic to a good that is independent of human judgement and preference. A good can posses no value beyond that which one can utilize it for their purposes. This is why it is a subjective theory of value, because I can tell you that I prefer one lobster to one crab, but I can’t quantify how much more I prefer it. The customers values are ordinal rather than cardinal, in other words ranked, not numbered. I cannot say that one lobster has X amount more units of utility than one crab. It is impossible to compare my preference for lobster with yours for crab. Therefore you cannot make interpersonal utility comparisons.

That is what subjective refers to in austrian economics.

LogicsSon has this right. The Austrians recognized that the intrinsic theory of economic value was wrong, just as the recognized that the labor theory was wrong. They, however, did not have Ayn Rand around and thus didn’t have access to the concept of objective value. They did realize that value was connected to the individual and his decisions. Subjective was all that was left. I don’t think that they thought that the individual’s decisions were irrational, necessarily, but they could be. In their theory, the goods that were demanded, that had economic value were whatever individuals wanted, regardless of what an “outside authority” would judge.

You still see the confusion stemming from intrinsic value, for example, when people complain that basketball players earn more than teachers. Somehow on a Platonic level, intrinsically, teachers are more valuable but foolish people won’t pay teachers enough.

It is probably not a correct application to call economic choice an objective choice, since the individual actor may be making a good or bad decision. Using the term subjective is misleading, too. Let the economists battle it out.

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It is probably not a correct application to call economic choice an objective choice, since the individual actor may be making a good or bad decision. Using the term subjective is misleading, too. Let the economists battle it out.

I actually think the original Austrian theory of value propounded by Carl Menger is very close to Rand’s model of objective value. Consider Menger’s definition of a good, from his Principles of Economics:

If a thing is to become a good, or in other words, if it is to acquire goods-character, all four of the following prerequisites must be simultaneously present:

  • A human need.

  • Such properties as render the thing capable of being brought into causal connection with the satisfaction of the need.

  • Human knowledge of this causal connection.

  • Command of the thing sufficient to direct it to the satisfaction of the need.

Only when all four of these prerequisites are present simultaneously can a ting become a good.

Compare that with Rand’s description of the objective theory of the good from Capitalism: The Unknown Ideal:

The objective theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but an evaluation of the facts of reality by man’s consciousness according to a rational standard of value. (Rational, in this context, means: derived from the facts of reality and validated by a process of reason.) The objective theory holds that the good is an aspect of reality in relation to man—and that it must be discovered, not invented, by man.

I think the overlap here is obvious. The good is an evaluation (‘human knowledge of the causal connection’) of the facts of reality (‘such properties as render the thing’) relative to man (‘a human need’). Rand and Menger are clearly identifying the same basic phenomenon in reality using slightly different terminology. Unfortunately, at the time Menger was writing, the term ‘objective value theory’ was already attached to the labor theory of value – which is actually intrinsicist. Menger’s theory thus got saddled with the label “subjective” because it held that value depends in part on human consciousness, which it does. Later Austrians have often put more emphasis on the subjectivist element, but there is certainly a basis for saying that Austrian value theory is ‘objective’ in the sense in which Objectivists use the term.

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“…just as the recognized that the labor theory was wrong.” Amen! Sorry Karl, lol.

The Austrians are not subjectivists. David Gordon, in his Introduction to Economic Reasoning explains:

“It is important not to fall into fallacy here. Because the uses of a good depend on subjective preferences, and because these uses determine what you consider relevant amounts of the good, it does not follow that the good itself is subjective. You have certain uses for ice cream. But ice cream is a real physical good, “out there” in the world. You don’t create it by your act of preference… this preference scale does not determine what constitutes a physical quantity of ice cream. That, once more, is a matter of fact.”

This isn’t to say that perhaps some are subjectivist in the non-economic sense but that is different than this.

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First off you are equivocating Austrian economic theory of value with Rand’s ethical theory of value, which are two different contexts.

All values imply and require the existence of a valuer, so in this sense all values are held by a subject and are subjective. But just as the arbitrary must be rejected in the search for truth, arbitrary values must also be rejected. An objective value is one held for a reason, a valid rational life-supporting reason. You should know how you came to hold a particular value and how it relates to your other values. This is true in ethics, and it remains true in economics.

Value-free economics explicitly disavows all such calculations. Value-free economics tries to keep itself segregated and compartmented away from other human knowledge, violating the need to integrate all knowledge.

All values are subjective, but a subset are also objective. A value purported to be objective but not held by any subject would be an intrinsic value, but there are no such values (value requires a valuer).

You are incorrectly distinguishing the concepts of objective and subjective. The fact that a value is held by a subject is no basis to classify it as subjective. One could just as easily say that all values are intrinsic because they are aspects of reality independent of anyone. Objective is not a subset of subjective, the two concepts are mutually exclusive. In the context of values, the concepts refer to the methods by which one acquires values and the means of maintaining the value.

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You are incorrectly distinguishing the concepts of objective and subjective.

I think it’s more that all values are subjective in the sense that all people value things differently, and sometimes values may be entirely irrational and based on whim alone. All values are “agent-relative” may be a better way to phrase it. However, a proper value is always objective in nature.

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You are incorrectly distinguishing the concepts of objective and subjective. The fact that a value is held by a subject is no basis to classify it as subjective. One could just as easily say that all values are intrinsic because they are aspects of reality independent of anyone. Objective is not a subset of subjective, the two concepts are mutually exclusive. In the context of values, the concepts refer to the methods by which one acquires values and the means of maintaining the value.

I disagree. You cannot point to an intrinsic value because none exist. You can point to a subjective value, all values which are irrational or or otherwise unjustified fail to be objective and default to being subjective. A drug addict’s relation to his drug is a valuing relationship. The subjective and the objective both are personal perspectives while the intrinsic is an impersonal perspective. An impersonal value is a contradiction in terms. The methodological distinction you make is valid but is not the only thing that is to be said on the matter.

I have an entire thread explaining this issue with a helpful diagram. I welcome further responses over there.

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The definition of the subjective theory of value is, “the view that economic value is not inherent property of a good. Rather it is determined by the preferences of those who wish to aquire it.”

So in other words there is no pre-existing value that is intrinsic to a good that is independent of human judgement and preference. A good can posses no value beyond that which one can utilize it for their purposes. This is why it is a subjective theory of value, because I can tell you that I prefer one lobster to one crab, but I can’t quantify how much more I prefer it. The customers values are ordinal rather than cardinal, in other words ranked, not numbered. I cannot say that one lobster has X amount more units of utility than one crab. It is impossible to compare my preference for lobster with yours for crab. Therefore you cannot make interpersonal utility comparisons.

When you talk about values, but you do not define an objective standard of valuing, what are you saying about those values? That they are subjective, right? And you mean exactly that. You don’t mean that they are objective, but personal. Isn’t that exactly what the Austrians did?

I think you are redefining the meaning of the word subjective to mean something other than the opposite of objective (to mean the opposite of intrinsic), without a good reason. There is no reason to suspect that Austrian economists held one’s hierarchy of values to be ppotentially objective. If they did, they would’ve said so.

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I think you are redefining the meaning of the word subjective to mean something other than the opposite of objective (to mean the opposite of intrinsic), without a good reason. There is no reason to suspect that Austrian economists held one’s hierarchy of values to be ppotentially objective. If they did, they would’ve said so.

There is a sense in which subjective is the opposite of intrinsic. You too are invited to bitch at meover here.

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I actually think the original Austrian theory of value propounded by Carl Menger is very close to Rand’s model of objective value. Consider Menger’s definition of a good, from his Principles of Economics:

You’re not the only one. Dr Beuchner noted this a while back, too, (1995 - Objective Value). He said he was very big on Menger as a result of that. He also noted that it was a tradgedy that other Austrians were translated to English long before Menger was, and that a large part of the idea that Austrian school is inherently subjectivist stems from that lack of translations of Menger.

Moreover, von Mises’ subjectivism at the level of consumer goods is real subjectivism, not merely labelled as such by the intrinsicists. His view on subjective and objective value matches the view of subjective and objective concepts espoused by Kant: there are core concepts/values that are subjective, and all other values are objectively derived from those at the core. In von Mises, the latter then translates into objectivity in business practice but placed in the service of soverieng consumers whose desires are not to be questioned, and in whose service the entrepreneurs are but servants who make profits by better responding to consumer demands. The result of Misesan subjectivism in values is the conclusion that the entrepreneur is but a jumped up “chiselling arbitrageur” (in Salsman’s words) - and after reading Israel Kirzner’s book on entrepreneurialism, which expressly equates the entrepreneur with the arbitrageur, it is not just an aberration on von Mises’ part or an unfounded slur on Salsman’s part.

Edit: there is nothing inherently wrong with arbitrage, only that it is of secondary importance and that the entrepreneur is and does much more than that.

JJM

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There is a sense in which subjective is the opposite of intrinsic.

Certainly - and in the same vein there is no such thing as subjective value just as there is no such thing as intrinsic value.

You too are invited to bitch at meover here.

Invitation accepted :stuck_out_tongue:

JJM

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I disagree. You cannot point to an intrinsic value because none exist. You can point to a subjective value, all values which are irrational or or otherwise unjustified fail to be objective and default to being subjective. A drug addict’s relation to his drug is a valuing relationship. The subjective and the objective both are personal perspectives while the intrinsic is an impersonal perspective. An impersonal value is a contradiction in terms. The methodological distinction you make is valid but is not the only thing that is to be said on the matter.

I have an entire thread explaining this issue with a helpful diagram. I welcome further responses over there.

The question of whether you can point to a value or not is irrelevant to its assessment of intrinsic or subjective. Many religious people act in accordance with their beliefs because they hold that the actions are good because God said so or the priest said so, independently of their own evaluation or judgment. Those values are being held intrinsically. As are those values of people who act because it is their duty to do so.

The subjective is not a personal perspective. It is an emotional, whimsical perspective. The objective is personal in that values are recognized in the proper context: an evaluation of things or aspects of reality that is independent of us by a living being who must act to live. The drug addict’s relationship to his drug is not as a value, but as a means of destruction. To equate the personal with the subjective is to give too much to the opponents of reason.

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The question of whether you can point to a value or not is irrelevant to its assessment of intrinsic or subjective. Many religious people act in accordance with their beliefs because they hold that the actions are good because God said so or the priest said so, independently of their own evaluation or judgment. Those values are being held intrinsically. As are those values of people who act because it is their duty to do so.

The subjective is not a personal perspective. It is an emotional, whimsical perspective. The objective is personal in that values are recognized in the proper context: an evaluation of things or aspects of reality that is independent of us by a living being who must act to live. The drug addict’s relationship to his drug is not as a value, but as a means of destruction. To equate the personal with the subjective is to give too much to the opponents of reason.

It actually could not be independent of their judgment, since it requires someone to actually do the valuing. An intrinsic values is simply impossible. Having a viewpoint that values are intrinsic is not to suggest that “intrinsic value” could even exist. To say only objective values exist would be say that no one values destruction. But people *do* have such values, and those values are most certainly not objective. (partially in response to John too). Such an assessment does matter from an economic perspective.

Values can (and of course should) be objectively decided upon, but values will always come from an individual perspective, regardless if the value is good or not. That’s why I prefer “agent-relative” to simply saying “subjective”, but subjective does work for common usage of the word.

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The question of whether you can point to a value or not is irrelevant to its assessment of intrinsic or subjective. Many religious people act in accordance with their beliefs because they hold that the actions are good because God said so or the priest said so, independently of their own evaluation or judgment. Those values are being held intrinsically. As are those values of people who act because it is their duty to do so.

Because the conceptual faculty is fallible, it is possible and common for men to think or say in one manner and then act in a contradictory manner. Therefore it is necessary to distinguish between the actual and the normative. An actual value is that which one does acts to gain or keep. A normative value is a value one thinks he should act to gain or keep. A man performs actions of valuing because he thinks he should have that value.

To say there is no value apart from a valuer is to say all values are subjective, literally meaning the actions of a subject toward an object. This is a description not an evaluation. The subjective theory of value is the idea that even for man, a being of fallible conceptual consciousness, merely acting is necessary and sufficient to identify values, and that nothing more need be considered.

The nonexistence of intrinsic values is relevant to their not being values. There are intrinsicists, but things in themselves have no value apart from a valuer so an intrinsic value is a contradiction in terms. Contradictions do not exist, therefore there is no actual intrinsic value. The examples of values you provide are examples of normative values first, and only actual values to the extent the religious act toward them. Religious values are actual subjective values.

The subjective is not a personal perspective. It is an emotional, whimsical perspective. The objective is personal in that values are recognized in the proper context: an evaluation of things or aspects of reality that is independent of us by a living being who must act to live. The drug addict’s relationship to his drug is not as a value, but as a means of destruction. To equate the personal with the subjective is to give too much to the opponents of reason.

You agree the objective is personal, but deny the subjective is personal. Emotions and whimsy are examples of the subjective which are not personal. But if emotions are not personal then what are they? Are emotions external to consciousness, of the body? Is the body not personal? What is personal?

If you start with ‘the objective is personal’ and then move to ‘the personal is objective’ you are committing the fallacy of the converse error, also known as Affirming the consequent. To claim the personal is equal to the objective denies fallibility.

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It actually could not be independent of their judgment, since it requires someone to actually do the valuing.

An intrinsic values is simply impossible.

If someone else makes a judgment for another person who then blindly follows what he’s told without evaluation, that is independent of that person’s judgment. You might say, well that is the judgment he has made. But he still has not evaluated the value in relation to his own life. One does not have to consciously value something in order to pursue it. A Kantian who does what he’s told because someone told him to do it is not using his judgment of the value of the object to himself in order to pursue it. If a person believes that it is his duty to continue in the family business because that is what his parents told him was important as a child, and he refuses to consider the real values that he thinks are important to him, then the family business is an intrinsic value to him.

Having a viewpoint that values are intrinsic is not to suggest that “intrinsic value” could even exist. To say only objective values exist would be say that no one values destruction. But people *do* have such values, and those values are most certainly not objective. (partially in response to John too). Such an assessment does matter from an economic perspective.

Values can (and of course should) be objectively decided upon, but values will always come from an individual perspective, regardless if the value is good or not. That’s why I prefer “agent-relative” to simply saying “subjective”, but subjective does work for common usage of the word.

The identification that intrinsic and subjective values are really two sides of the same coin is something that is a unique identification in Objectivism. There are two contexts that must be kept clear when discussing values. The one context is with the definition of value: that which one acts to gain and/or keep. On this basis, anything someone pursues may be called a value. One the other hand, one must keep in mind that the concept value depends upon the concept life. One can only regard objective values as proper values on this standard. Subjective or intrinsic “values” are, in fact, disvalues because they are not supportive of a rational person’s life. To pursue something that does not support one’s life as a rational being does not make it a value just because it is being pursued. THAT is what subjectivism holds.

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When you talk about values, but you do not define an objective standard of valuing, what are you saying about those values? That they are subjective, right? And you mean exactly that. You don’t mean that they are objective, but personal. Isn’t that exactly what the Austrians did?

I think you are redefining the meaning of the word subjective to mean something other than the opposite of objective (to mean the opposite of intrinsic), without a good reason. There is no reason to suspect that Austrian economists held one’s hierarchy of values to be ppotentially objective. If they did, they would’ve said so.

All I did was post the definition to answer someones question. I didn’t even assert that the Austrian method was correct, although I think it is. I’m not redefining anything. That definition comes straight from the Mises Institute. It specifically states that the value of a good is not intrinsic, which I agree with. It states that all goods, like other things, are in fact real entities that exist “out there” in the world and are not created by the preference of the human mind. In my opinion, in one sense a good can be evaluated as an objective value because it can be shown to add to the quality and prosperity of a mans life. For instance, food is an objective good. Not only does really good food provide us with a form of pleasure, but also nutrients and energy, which are nessicary for life. Therefore I feel we could consider that good as objective due to its relationship to the qaulity of a mans life, both physically and esthetically. The subjective aspect of the value is in ones preference for some of these objective goods over another. As I wrote earlier: “This is why it is a subjective theory of value, because I can tell you that I prefer one lobster to one crab, but I can’t quantify how much more I prefer it. The customers values are ordinal rather than cardinal, in other words ranked, not numbered. I cannot say that one lobster has X amount more units of utility than one crab. It is impossible to compare my preference for lobster with yours for crab. Therefore we cannot make interpersonal utility comparisons.”

So I could consider food an objective good (unless it comes from sysco, lol!), but why it is I prefer chinese over mexican is simply my preference. Its not an objective fact that chinese is better, its my subjective preference.

“There is no reason to suspect that Austrian economists held one’s hierarchy of values to be ppotentially objective. If they did, they would’ve said so.” (Non-sequitor)

I find this to be a wide sweeping judgement for which I have no evidence to believe. Perhaps some are moral subjectivists. And? They are brilliant when it comes to economic theory and how markets function. Thats my interest in them.

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Because the conceptual faculty is fallible, it is possible and common for men to think or say in one manner and then act in a contradictory manner. Therefore it is necessary to distinguish between the actual and the normative. An actual value is that which one does acts to gain or keep. A normative value is a value one thinks he should act to gain or keep. A man performs actions of valuing because he thinks he should have that value.

To say there is no value apart from a valuer is to say all values are subjective,

No it isn’t.

literally meaning the actions of a subject toward an object.

That’s not the correct definition of subjectivism.

This is a description not an evaluation. The subjective theory of value is the idea that even for man, a being of fallible conceptual consciousness, merely acting is necessary and sufficient to identify values, and that nothing more need be considered.

But something more must be considered. What is the goal of such action? By what standard and purpose do you evaluate the action as aiming toward a value? Why does one make an evaluation in the first place? Why does one need the value? If I eat poison, nothing more must be considered to identify that the poison is a value to me? If I need to graduate a university in order to get a good job, but I spend the night before finals getting drunk, nothing more must be considered to identify that alcohol is a value to me? If “merely acting is necessary and sufficient to identify values” then everything is a value in relation to action, thus invalidating the need for the concept: there is nothing to distinguish one action from another. Are there no disvalues?

The nonexistence of intrinsic values is relevant to their not being values. There are intrinsicists, but things in themselves have no value apart from a valuer so an intrinsic value is a contradiction in terms. Contradictions do not exist, therefore there is no actual intrinsic value. The examples of values you provide are examples of normative values first, and only actual values to the extent the religious act toward them. Religious values are actual subjective values.

You agree the objective is personal, but deny the subjective is personal. Emotions and whimsy are examples of the subjective which are not personal. But if emotions are not personal then what are they? Are emotions external to consciousness, of the body? Is the body not personal? What is personal?

The fact that contradictions cannot exist is a metaphysical statement: they can not have physical reality. Contradictions do exist, however, in people’s thinking, i.e., their epistemology. People can hold values intrinsically, and have done so for centuries. Heaven is not a subjective value, it is an intrinsic value. However, as I mentioned in my post above, “the identification that intrinsic and subjective values are really two sides of the same coin is something that is a unique identification in Objectivism.” That does not mean, however, that you are entitled to wipe out the entire category.

Emotions are subconscious evaluations based upon one premises and values.

If you start with ‘the objective is personal’ and then move to ‘the personal is objective’ you are committing the fallacy of the converse error, also known as Affirming the consequent. To claim the personal is equal to the objective denies fallibility.

That’s not what I was claiming, so there is no logical fallacy. Whether one’s values are subjective or objective depends upon the type of person you are.

To be subjective means to hold the view that values are created, i.e., brought into reality, by the action of consciousness apart from the nature of the object or idea. To be objective means to hold the view that values are created by a process of identification of the facts of reality and how they stand in relation to the life of the person, and then identifying the actions needed to acquire the value. And more, to be objective means to view that the values are judged by the standard appropriate to a rational life.