Thursday, October 1, 2020

Objective Value in Economic Theory?

This is really a thinking-out-loud piece.  Something simmering in my mind for quite some time, brought to the fore by a couple of recent essays.  But I will come to those essays later.

The subjective theory of value is a theory of value which advances the idea that the value of a good is not determined by any inherent property of the good, nor by the amount of labor necessary to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of his desired ends. The modern version of this theory was created independently and nearly simultaneously by William Stanley Jevons, Léon Walras, and Carl Menger in the late 19th century.

So, why my title?  Am I about to turn economic theory on its head?  Hardly.  I think my quest began here:

Value in the sense of valuation or utility is purely subjective, and decided by each individual. This procedure is perfectly proper for the formal science of praxeology, or economic theory, but not necessarily elsewhere.  For in natural-law ethics, ends are demonstrated to be good or bad for man in varying degrees; value here is objective—determined by the natural law of man’s being, and here “happiness” for man is considered in the commonsensical, contentual sense.

-          The Ethics of Liberty, Murray Rothbard

This rings quite true.  At the same time, something about this didn’t sit right.  The quite true part: in economic goods, we each place different “value” in various goods; if we did not, a trade could never occur.  Of course, that value is expressed objectively, in the price.  But each party in the transaction believes that what is being received is of more value than what is being given.  In ethics, without objective values we will drift into meaninglessness and nihilism.  So, the distinction Rothbard makes holds.

The part that didn’t sit right: Why?  Why the difference?  This question sat, but in a very low-temperature mode.  In the back of my mind, perhaps a related issue…the economic explosion that came after the liberalism of Enlightenment thinking was accompanied by a decline in ethical standards and, therefore, a decline in liberty.

The low-temperature mode would start to change when I came across the following, from E. Michael Jones:

After Foucault made his pact with the devil in 1975, he began teaching Austrian School Economics….

Michel Foucault is identified as a post-modernist, although, apparently, he rejected the label.  Post-modernism is a philosophy that deconstructs without offering anything to fill the void:

Postmodernism is generally defined by an attitude of skepticism, irony, or rejection toward what it describes as the grand narratives and ideologies associated with modernism, often criticizing Enlightenment rationality and focusing on the role of ideology in maintaining political or economic power.

I have done my share of this, being skeptical of many of the grand narratives of the West and criticizing Enlightenment rationality that is devoid of any higher authority.  But post-modernism does more…or less:

Postmodern thinkers frequently describe knowledge claims and value systems as contingent or socially-conditioned, framing them as products of political, historical, or cultural discourses and hierarchies. Common targets of postmodern criticism include universalist ideas of objective reality, morality, truth, human nature, reason, science, language, and social progress. Accordingly, postmodern thought is broadly characterized by tendencies to self-consciousness, self-referentiality, epistemological and moral relativism, pluralism, and irreverence.

Post-modernism tears down without replacing.  It deconstructs without constructing.  It takes away the narrative and says “there are no narratives,” albeit, that is a narrative.  So, what does a post-modernist have to do with the Austrian School of economics?

I looked into this further, considering that the connection could be the idea of subjective value – extended beyond the economic theory of Austrians and others, and into ethics.  This would be meaningful to a post-modernist.  I found the following, from the Jacobins:

Neoliberalism, being more open to pluralism, seems to offer a less constrictive framework for the proliferation of minoritarian experiments.

And the following, from a book by Jean-Yves Grenier and André Orléan:

On the occasion of this course [Foucault] takes another step, in a certain sense an ultimate step, in his rejection of sovereignty. He does so on the basis of a thesis inspired in part by Hayek’s thought: “The market economy escapes any totalizing knowledge.”

I continued my examination of this interaction of Foucault with the Austrians here.  The detail is too much to repeat in this post; I will offer my conclusion:

I can understand the connection of Foucault to the Austrian thinkers: as subjective value liberates markets, applied to ethics it liberates from all constraints of ethics.  Subjective ethics provides no check on the growth of state power.

Rothbard would note this problem, and wrote of this decades ago.  Those who value liberty should take note.

Which takes us back to the opening quote from Rothbard.  What is appropriate in economic theory is not necessarily appropriate for ethics.  And this comes back to my question: Why?  Must this be so, despite seeming contradictory?

Recently, David Gordon wrote a piece, Mises and Moral Relativism.  The pot started boiling a bit more rapidly at this point.  You will rightly imagine that I read it through the lens of the Rothbard quote, and in the comments, I even noted this quote when asking Gordon for some further background.  Even more directly on point, I asked the following:

I begin with two statements from the piece: 1) “[Mises] says that almost everybody values peace and prosperity.” 2) “[Mises] thinks this entire argument is strictly scientific and value-free.”

It strikes me that Mises is making a statement of absolute value here; it is not “value-free.” Is there a reason that it should not be understood this way?

To which Gordon replied:

…I'm not seeing why the claim "Almost everybody values peace and prosperity" is a statement of absolute value. It is claim about what values people have, and this is a descriptive statement. Someone could say, "peace and prosperity are absolute values," but that's another statement from the one Mises made.

I thought at the time that this was reasonable, that Gordon parsed the meaning better than I did.  I still believe so today.  So, this didn’t bring me any closer to squaring what appeared (and appears) to be a circle – back to my question: objective value?  Economics, no; ethics yes.

Then I read this: The Core of Austrian Theory, by Lew Rockwell.  To start:

Because economic value is subjective to the individual.

This, of course, is the problem!  I know it is a true statement for economics, but then why is it not true for ethics?  And then two brief statements jumped off of the page:

… the hallmark of Austrian economics is a profound appreciation of the price system. … But prices must be generated by the free market.

Austrian theory sees private property as the first principle of a sound economy.

Of course, I knew this.  But I hadn’t really thought about it in terms of this now violently boiling pot.  Are these not objective values – derived from man’s nature?  Private property is necessary for a well-functioning a freely-derived price system – which is also necessary?  I am way out of my depth here – both in economics and in ethical philosophy – but it seems so to me.  We do not get to violate private property and the price system – these must be accepted unquestionably, derived from man’s nature and premises to “the hallmark of Austrian economics.”  Given that I am out of my depth, the rest of this is going to be a bit rambling…

Given private property and the price system, humans are free to exercise their subjective choices in the market.  Here the value placed on any economic good is subjective, and subjectively determined by each individual.  Right-down-the-middle economic theory, at least for the Austrians.  So how does this relate to the issue of objective ethics?

Man is made with a purpose, end or telos.  This is happiness: beatitudo, best translated as fulfillment through other regarding action.  From this, various objective ethical norms can be derived.  Objective, because these are based on man’s nature – his purpose.

How this nature or purpose is exercised is subjective, to be determined individually: that which brings fulfillment for one person will be different from that which brings fulfillment to another.  This is determined subjectively – but must not violate the objectively-derived ethical norms of man’s nature, or purpose.

Economic value is determined based on “the importance an acting individual places on a good for the achievement of his desired ends.”  But this is only functional and must occur within the bounds of a private property order with a well-function price system.  Within this objective framework, economic man is free to play.

It is the same in our acting toward our desired ethical ends: happiness, fulfillment.  One may value painting over writing, working in a homeless shelter over a crisis-pregnancy center.  The acting man is free to pursue any one of innumerable subjectively-determined means to achieve such ends of fulfillment, but he cannot do so by violating the objectively derived ethics.


That’s my crack at it.  At least the first baby-step.  I have no idea if it holds water.


  1. Well, I'm certainly not an economist and just barely dabble in ethical philosophy, but it sounds pretty good to me. However,

    "The one who states his case first seems right, until the other comes and examines him."--Proverbs 18:17 (English Standard Version)

    It is good to catch a glimpse of the pot churning. Thank you.

  2. I am going to state right off the bat that I don't have this figured out either, and it is something that bothers me as well.

    I think part of the problem here is an imprecision of language. The value of a loaf of bread and the value of honesty are really two separate things entirely. In other words, we can value 'the value' of honesty in others.

    I think another part of the problem is that although ethical values can be determined objectively, as in derived from our nature as human beings and the ends we should pursue in congruence with said nature, our choice to and how to pursue these values is always going to be subjective, because we have free will.

    Every decision we make we have to subjectively determine whether we are abiding our objective ethical code (if we decide we have one). Every economic transaction we make we have to subjectively determine whether the price is worth the cost to us.

    The third wrinkle I'll throw into this discussion is that perhaps there is something to the idea of a 'just price' or an objective price at any moment in time. If you heard of a sweet old lady in deep financial problems parting with her deceased husband's pristinely kept Lamborghini for $500 to a conniving used car salesman, would you think there was nothing wrong with the transaction? Well, they're both adults. They both voluntarily made the transaction. NAP approved. Period? The end?

    No, of course not. This would be an outrage. And if we had any sense of manliness upon hearing this, at the very least, we'd escort that lady back to the dealership, find the salesman, proceed to give him an earful of just how despicable a person he is, and threaten to go to his manager or the local newspaper about his swindling of this old lady, if he doesn't give the car back. Perhaps even a 'dust up' would be merited.

    Now if there is something of a just or fair price, it cannot be set into government policy, because 1) it cannot be known precisely, 2) even if it could be known precisely, we would be fools to trust the government's appraisal of it, and 3) it is dynamic or ever-changing. The free and open market is the best bet we have at arriving at this just or objective price.

    In parting, I'm going to take a shot at E. Michael Jones' understanding of economics. The guy thinks gold is a Jewish currency, and therefore any talk of a gold standard is evidence of Jewish corruption, despite its history of restraining government spending and all the bad things governments spend money on. He's more or less in favor of government issued paper money (what could go wrong here?). I like E. Michael on cultural issues; this is where he shines. But I think he is a little too hung up opposing the Jews in all matters, and it blinds him to things they have gotten right in history (like Austrian economics).

    There is no denying that Jews have been at the forefront of the worst and most destructive ideas in human history (Communism, post-modernism, critical theory, central banking, etc.), but the same can be said of them and the best and most fulfilling ideas as well (Christianity, economics, NAP).

    1. And then there is Hans Hoppe's use of the phrase, "inter-subjectively ascertainable" below that is intriguing.

      "The idea of protecting value instead of physical integrity also fails for a second related reason. Evidently, one’s value, for example on the labor or marriage market, can be and indeed is affected by other people’s physical integrity or degree of physical integrity. Thus, if one wanted property values to be protected, one would have to allow physical aggression against people. However, it is only because of the very fact that a person’s borders (that is the borders of a person’s property in his own body as his domain of exclusive control that another person is not allowed to cross unless he wishes to become an aggressor) are physical borders (intersubjectively ascertainable, and not just subjectively fancied borders) that everyone can agree on anything independently (and agreement means agreement among independent decision-making units!). Only because the protected borders of property are objective (i.e., fixed and recognizable as fixed prior to any conventional agreement), can there be argumentation and possibly agreement of and between independent decision-making units. Nobody could argue in favor of a property system defining borders of property in subjective, evaluative terms because simply to be able to say so presupposes that, contrary to what theory says, one must in fact be a physically independent unit saying it." - Ethics and Economics of Private Property, p 327

      Maybe prices would be better explained by this phrase, "intersubjectively ascertainable". After all, prices aren't what we personally fancy them to be, but are instead an amalgamation of all the interested and connected parties' fancies. We may subjectively choose whether or not the price is fair, and this has some influence on the price, but by and large, the market price is what it is in relation to the individual.

      But if you notice in the quote above, Hoppe seems to equate intersubjectively ascertainable with objective, at least in relation to physical property boundaries.

      Maybe there is nothing here, but it seems like there is. I just can't put my finger on it.

    2. It's reality. I don't claim to be any kind of expert on the topic, but it's pretty commonsensical that there is such a thing as objective reality, even though our capacity for observing and understanding it is limited and colored by our specific circumstances. These limitations and particularities are also facets of reality, so I guess you could say that subjectivity is part of objective truth.

    3. Deep respect for Mr Hoppe, but this is where discursive secularism is a dead-end. Refined arguments about arguments are all well and fine, but when no-one "repents", including changing tactics when it is noticed the angle one takes is good only for "preaching to the converted" (or having endless conversations with them), what then?

      This is where Jordan Peterson is close (even if he doesn't attend Church regularly like he knows he should...) The man staying calm and gently propounding on the Truth (which he never claims to be able to rest on), all while under so much fire in embodied person, turns people's hearts. His ability to do that speaks for his "authority", instead of mere Pharasaic knowledge (an easy hole to fall into via anonymous blog posts to be sure...) Instantiation convinces, and instantiated calls to instantiate inspires.

      Now Mr Peterson is no saint so doesn't do as well as a saint in that arena, but he at least points to the right direction again.

      Back to the point: in this understanding, objective vs subjective almost doesn't matter, except as a game perhaps one is caught in to avoid individual repentance. Repentance indeed could be seen as that which one must do in order to return and inspire return to God's Unity - individually and collectively.

    4. Repentance is necessary, true, but it is above and beyond the scope of the scientific inquiry we're having.

      I think Jordan Peterson is just as guilty as anyone in engaging in discursive secularism. His attempt to explain the sociological or psychological lessons of the Old Testament is an attempt at secularizing the Bible.

      He is no saint, as you say, and he often points in the wrong direction, like when he suggested that Kavanaugh should step down from his Supreme Court Justice appointment because of the obviously false accusations laid on him by Christine Ford.

      Peterson is someone who I'd probably regard as an intellectual enemy if we lived in a sane world. But, given that we live in Leftist clown world, Peterson, by comparison, seems like a breathe of fresh air.

      "he knows he should"

      I'm not so sure he knows he should. He's often avoided the question of whether or not he actually believes in God's existence. It's an easy question to answer.

      Having said all that, I understand he's going through some personal mental hardship right now. Here's hoping that he finds Jesus and a swift recovery.

      "game perhaps one is caught in to avoid individual repentance"

      We are concerned about intellectual inconsistency. Why subjective prices, but objective moral values? This is what is driving this discussion. Well, for me anyway.

    5. Well said, ATL. I guess I could just post one chapter of the Bible every day without comment and without allowing comments. Maybe this would be satisfactory for some.

      I seem to have gone from upsetting libertarians for writing about culture, tradition, and Christianity to upsetting Christians for writing about anything else - or anything that doesn't conform to their vision of Christianity.

    6. Everyone has their unexamined beliefs they don't like questioned. You're just talented at finding them!

      But I think, it's more of just the nature of being a libertarian and a Christian. You're going to piss off libertarians who think Christianity is repressive of individual liberty, and you're going to piss off Christians who think libertarianism is a license for moral anarchy. Both groups are mixing up the ideas of social license and political freedom.

      But more to your point, I remember the days when it was verboten to quote and debate scripture here. I for one like where you've taken this discussion. Maybe it's because I haven't fully formed my Christian dogma, or chosen which one I will without exception subscribe to, and so I appreciate the search. (I'm more or less Catholic, because the traditional wing is really the only serious resistance to the woke, PC, Progressive social drift towards moral anarchy. Eastern Orthodox is good too, but I just feel like they are too far removed from my heritage)

      I just base my faith on the foundation of the truth of the biblical account of the life of Jesus Christ. This is difficult enough for me to live up to. The rest is beyond me, but I do enjoy thinking about it! Is Revelation what is actually going to happen at the end of days? Maybe. Is the Trinity the correct way of thinking about God the Father, Jesus the Son, and the Holy Spirit? Maybe. Did God create the universe in 6 days and rest on the seventh? Maybe. Is God truly omniscient and omnipotent? It wouldn't shake my faith in Jesus if any of the above were somehow definitively found to be false.

    7. ATL, I certainly have evolved here. First, no Scripture. Then no debate about theology (which I still work to contain, but not prevent). I don't want such debates to take away from what are otherwise valuable conversations toward my ends - my purpose for the blog, at least in its current direction.

      To your questions / answers in the last paragraph, I am quite aligned. Peter preached only the Resurrection, and 3000 were added to their numbers. He didn't get into these questions or issues.

      Yes, we are to grow and learn. I have enough trouble with the two commandments given by Jesus. If I ever conquer these in my lifetime, maybe I can worry more about the age of the universe.

  3. Great article. Thank you so much for the thinking through this and taking the time to share.

    This morning I was listening to Matt Kibbe's interview with Vernon Smith (Kibbe on Liberty podcast...Sept 30/2020 episode). In that interview, Vernon Smith spoke about the tight relationship between Adam Smith's Moral Sentiments and his Wealth of Nations....and that economics is built on a foundation of morality (at least tht was one of my takeaways from the discussion). VS also spoke about the relationship between property and morality - the worst thing a person can do is take someone's life, the next worse thing is to take their belonging, and the next worst thing they can do is not keep their promise (break contract). There is also some discussion about the role that prices play in all of these things.

    The interview is less than an hour and there may be some ideas that help contribute to what you have developed here. If pressed for time, it can be played at 1.5 times speed and be finished within 35 minutes.

  4. “What is appropriate in economic theory is not necessarily appropriate for ethics.” - Rothbard

    There’s a lot in this post, but a start would be to frame this as Marion does, differentiating the gift (ethics) from the economy. Marion and Derrida differ in their definition of the gift in a very important way (around min 25 is where Marion differentiates in the lecture below). Derrida (and likely many postmodernists as in your definition in your blog - not of the “theological turn” as Marion would be) don’t differentiate “the gift” from an economic exchange and hence can it be a gift (charity)? If you don’t understand the economy, economic realm, exchange (world), it’s pretty hard to come close to understanding the gift, (charitable realm) - maybe what Rothbard is hinting at? Much of this differentiation can be found in Augustine and Pascal (3rd order). It is significant that Saul/Paul (and Moses) exemplify this understanding of the world versus the charitable (spiritual) realm.

    Marion’s book Negative Certainties thoroughly discusses the gift and the economy. Here’s a lecture on the topic:

    Dr. Jean-Luc Marion - Part 1: "The Gift and the Economy"

    The exchange, economics of things (i.e. private property) at best approaches the charitable realm of the gift because individual subjects act in relationship to value things. The charitable realm involves relationships (you might say of subjects of God, living things - where we get the logos, the proportion, mean, between/amongst living people - not things/objects). This is where the gift shows up and exchange of things (economics) turns into charity (“ethics”) logos of relationships - if one understands the difference. The the best of the state (man’s justice) transforming into the church (mercy). Argumentation ethics and the work on intellectual property fantastically brought clarity to the worldly exchange aspect of this, then barely scratched at the next step.

    Don’t take it from me: To my knowledge, Augustine, Pascal, and Marion (currently) are explore many of these themes and I am just trying to understand it better myself.

  5. BM, I think you understand the issue pretty well. There is objective and subjective realities and they both have their place in human life. It is hard to strictly delineate where they begin and end, but we know they exist. Why does one cry after watching a war movie and someone else only after a sad drama? Because emotions are subjective.

    Philosophically, I think it is important to understand and value both Plato and Aristotle. They emphasize important points about reality, universals vs particulars. It applies to mathematical theories, families, economy, and society. Too often we humans want to pick one and dismiss the other as "the opposite" when they are really complimentary. I don't address the specific points you bring up and ponder here about, why?, but these 3 articles are further thoughts on how particular/universal, individual/communal, subjective/objective work together not in opposition.

    1. Right on about the platonic tradition. I wish I had come across this less than 15 min. video years ago to help me understand arguably the most important aspect of Platonism/Mystery Theologia: Negative theology and it’s very Christian counterpart Apophatic Theology.

      Key to the approach.

    2. "these 3 articles are further thoughts on how particular/universal, individual/communal, subjective/objective work together not in opposition."

      This is really important. I would say "self/other" as well. Like how we need viruses and other pathogens to have an immune system that can both mount an effective defense when called for, and doesn't overreact and kill itself on non-lethal exposures to them. Perhaps at some point also (like our mitochondria and gut bacteria) to be able to assimilate as One with.

      To see this properly, liberation from the modern slavery to Kant (as Keynes might put it) is vital. 'Ding an sich' as a background framework makes grasping the essence of Aristotle and Plato impossible. They simply did not split objective and subjective. Arete exists before this split.

  6. re: marginal utility

    From the Wikipedia article you linked to, this:

    "Individuals will tend to obtain diminishing levels of satisfaction, or marginal utility from acquiring additional units of a good."

    Say I have two apples and you have two oranges. The utility of my first apple is 1 and the utility of my second apple is 0.5 because while I like apples, my second apple of the day does not provide as much utility as my first apple of the day. The same is true for you with oranges. Here, the total utility is (1.5 + 1.5 = 3.0).

    Now we trade on apple for one orange. For me, my first orange has more utility than my second apple, while your first apple has more utility than your second orange. Total utility is now (2.0 + 2.0 = 4.0).

    This explains how trade increases utility and why we trade.

  7. I just remembered something from Human Action. People make decisions based on subjective value. However, Mises recognizes that there was an objective reality behind the situation. Mises says that just because a person makes a decision it doesn't mean it is a correct decision. Everyone wants to improve their lives and over time does it is always trial and error. Their lives actually may become worse if the value placed on a decision is incorrect. So in a sense there is an objective value the person is trying to attain to, even if that is subjectively different for each person.

    1. We are all subjects of God - we have all received the ultimate Gift, the Gift of life.

      So far, and I do not (and cannot) claim to know or understand, the apophatic (negative) tradition, seems to offer the best approach beyond the economic/exchange/worldly realm to pursue what you called “objective reality?”

      I linked a short video on “Negative Theology” above that provides a good overview. Going to be brushing up on my Pseudo-Dionysius and Phenomenology (with the theological turn).

      The site with the negative theology video has a couple shorts on phenomenology and the theological turn.

    2. Per Bylund expands on what I was trying to say.

    3. RMB, I saw that same Bylund piece and thought it was quite timely and helpful. I hope to come back to it, this topic, and many of the comments here when I have some time to devote to it.

  8. It is a great place to start for sure. It would have been wonderful for Mises to have had a good conversation with a Wolfgang Smith, or someone else ensconced in both Christian Metaphysics and critique of Scientism. How we decide to split "subjective" and "objective" is extremely important. Also to note the split now between "value" in economic and ethical/Arete related terms. Both of these were not there classically. Kant's "the thing in itself" would have made no sense to Aristotle.

    The rejoinder Wilhelm Roepke gave to Mises, as he commented how inefficient it was for people to do small scale gardening in terms of food production came to mind. He said something like: "Perhaps, but it is highly efficient in terms of production of human happiness".

  9. "The acting man is free to pursue any one of innumerable subjectively-determined means to achieve such ends of fulfillment, but he cannot do so by violating the objectively derived ethics."

    Much cudos to you sir for taking this crack.

    The lynchpin (and great puritanical modern sharia-like danger) in your case appears to be how one derives objective ethics.  It makes sense that this is very desireable, would make life so much easier.  I don't think it is at all possible though.  

    It seems much wiser to have Faith that it exists, even as we know man can never completely express it, let alone codify it.  There are always Signs from God provided to us however, when we (individually or collectively) are on the right track or not... if we are willing to see them.

    This feels related to "Liberty from the law as fulfillment of the Law" that is at the base of Christianity's split with Judaism and Western Paganism.  It is one that I happen to believe in, but also can see is very easy to stray from the straight and narrow with if seen incorrectly.  It may be better for it to be legal for me to look at women other than my wife, but also that I heed strong guidance from the Sermon on the Mount that such action is as good as adultery.  Internalisation of the Law, NOT mere freedom from, as fulfillment of the Law.